IHS 4504 Lecture Notes - Lecture 7: Tax Credit, Managed Care, Prescription Drug
30 Jun 2018
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Chapter 7- Risk Adjustment
Medicare AAPCC: Adjusted Average Per Capita Costs
- Average Medicare Part A +Part B expenditures
oBy county
- Adjusted for:
oAge
oGender
oInstitutional Status
oMedicaid Status
oActive Worker Status
- 95 percent payment
“Adjusting Capitation Rates Using Objective Health Measures and Prior Utilization”
- Effort to explore the potential of enhancing the AAPCC to reflect health status
- Uses RAND Health Insurance Experiment Data, 1970-1974
Updating AAPCC: Guiding Principles
- Clinically meaningful measures
- Predictive of current and future medical expenditures
- Yield accurate and stable predictions
- Related conditions treated hierarchically
- Vague measures grouped with low-paying diagnoses
- Discourage multiple reporting of similar conditions
- No penalty for reporting many conditions
- Transitivity holds
- All diagnoses map to the payment system
- Discretionary diagnostic codes excluded.
Updating the AAPCC Comprehensive Model
- Funded development of several approaches but ultimately choose:
oPrincipal In-Patient Diagnostic Cost Group (PIP-DCG)
- Which, with refinement, became:
oHierarchical Coexisting Conditions
- And was renamed Hierarchical Condition Categories (HCCs)
Medicare Modernization Act of 2004
- Provided for prescription drug coverage (Part D)
- Modified payment for Medicare Advantage plans.
oPlans proffer a bid per enrollee per month to provide a basic set of benefits
consistent with traditional Medicare.
oIf this bid is below the CMS established “benchmark”, the managed care plan
keeps 75% of the difference to apply to reduced cost sharing or expanded
benefits for enrolled beneficiaries.
oIf it is above the benchmark, the plan charges enrollees an additional premium.
oCMS-HCC is used to adjust the payments for beneficiaries actually enrolled by
the plan to reflect their demographics and health status.
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Document Summary
Average medicare part a +part b expenditures: by county. Adjusted for: age, gender, institutional status, medicaid status, active worker status. Adjusting capitation rates using objective health measures and prior utilization . Effort to explore the potential of enhancing the aapcc to reflect health status. Uses rand health insurance experiment data, 1970-1974. Funded development of several approaches but ultimately choose: principal in-patient diagnostic cost group (pip-dcg) Which, with refinement, became: hierarchical coexisting conditions. Enrollment effects of phasing-in the hcc: large increases in enrollment, more switching-in & less switching-out, largest effects in largest markets. Selection effects: no statistically meaningful effects on switchers-in. Did not result in more sicker enrollees : much higher relative cost of switchers-out compared to traditional medicare. Concentrated in the far tail of the cost distribution. Use in adjusting risk across plans in state insurance exchanges. Tax credit for the purchase of health insurance: some argue of risk adjustment.
