Risk Adjustment in Medicare Part D Prescription Drug Benefit. Open Door Forum December 2004. Risk Adjuster Basics. Capitated payment is adjusted according to the expected cost of the enrollee. Expected cost is derived from enrollee characteristics:
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Open Door Forum December 2004
Payment = standardized bid enrollee’s risk factor – plan’s enrollee premium
Additive model: factors for demographic characteristics + factors for diagnoses
Coded Spending Relative
Female, age 76 $ 850 .283
Diabetes, w. complications 1,600 .533
Diabetes, uncomplicated 1,000.333
High cholesterol 450 .150
Congestive Heart Failure 650 .217
Osteoporosis 500 .167
Total Annual Pred. Spending $4,050 1.350
For implementation, dollar amounts are divided by the national mean (~ $3,000) to create relative factors that multiply base rates.
Coded Payment Relative
Female, age 76 $ 550 .500
Diabetes, w. complications 300 .273
Diabetes, uncomplicated 200.182
High cholesterol 150 .136
Congestive Heart Failure 250 .227
Osteoporosis 150 .136
Total Annual Pred. Spending $1,400 1.272
For implementation, dollar amounts are divided by the national mean (~ $1,100) to create relative factors that multiply base rates.