Mining for risk adjustment: Solution eludes experts
Mining for risk adjustment: Solution eludes experts
MedPAC: Need outpaces ability to deliver
Just as the early explorers tirelessly set sail for the New World, today's health economists continue to search for new ground - only their goal is to discover intellectual property, rather than the tree-laden kind.
The intellectual property health care financial experts seek is a workable method of risk adjustment - the golden mean they hope will make capitation a statistically elegant and demonstrably fair financial model for health care coverage. They haven't gotten there yet, but they are making some headway, according to Jack Ashby and his team of policy analysts at the Washington, DC-based Medicare Payment Advisory Commission (MedPAC). Ashby and colleagues made a plea to Congress to continue funding in this area in MedPAC's March 1998 Report to Congress: Medicare Payment Policy.
Payment disparities due to ineffective risk adjustment tools are clear, Ashby says. (See chart at right for an example of how payment for congestive heart failure can vary from $5,000 to $10,000.) "Risk adjustment is the process of setting capitation rates that reflect health status, paying plans more to care for ill beneficiaries and less to care for healthy ones," he writes in the report. "The payment rates might be based on the average cost of caring for patients with specific diagnoses, for example, $10,000 for a beneficiary with congestive heart failure, but only $2,500 for one with no medical conditions. Plans disproportionately attracting healthy beneficiaries would see payments fall, while plans attracting the less healthy would see payments rise."
This would be the ideal, but the best way to reach that ideal has yet to be determined. "Medicare's current payment methods are widely acknowledged to do a poor job of risk adjustment," he writes. Medicare pays varying rates based on locality and age, but that does little to ward off selection bias among plans.
Three risk-adjustment models currently are in the forefront, MedPAC officials say:
· diagnostic cost groups (DCGs), which rely on inpatient diagnosis information and place a beneficiary in one diagnosis category;
· hierarchical coexisting conditions (HCCs), which use inpatient and ambulatory care records and allow for several diagnosis categories simultaneously;
· ambulatory care groups (ACGs), which take information from all sites of care but only place beneficiaries in one diagnostic category.
Because of the lack of ambulatory care data, MedPAC is recommending further research based on the DCG model. How long it will take for completion and implementation, however, is anyone's guess. MedPAC's report uses language like "as quickly as feasible" and "a reasonable phase-in period." Hospitals will likely be required to contribute diagnosis data on Medicare risk plans, but when that will start also is not addressed.
Ultimately, Medicare-HMO enrollees might be assigned a higher PMPM if they have diabetes, and lower one if they are healthy. Each year, these PMPMs would be adjusted based on clinical condition, or health status, as well as the patient's past history of resource use.
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