How Well Does Medicare Risk-Adjust?
The method: The [model] starts with over 14,000 ICD-9-CM codes which are grouped into 805 diagnostic groups and then aggregated to 189 condition categories (CCs). From the CC’s, CMS creates 70 hierarchical condition categories where hierarchies imposed. For instance, Angina pectoris/ old myocardial infarction is not included in the acute myocardial infarction HCC (#81) but the CC for AMI is included.
The model also includes demographic factors: 24 age-sex cells (e.g., male age 80-84); Medicaid dual eligible status; current disability status: [and] original Medicare entitlement status. There are three separate models used for the Medicare Advantage program: community, institutional, and new enrollee.
The HCC model is also used to adjust payments for beneficiaries with end-stage renal disease (ESRD), all of whom are enrolled in Medicare FFS. There are three models for the ESRD population: dialysis, transplant, and functioning graft. Physician QRUR uses age-disabled, community, new enrollee and ESRD models. HVBP uses a single model with indicators for whether the beneficiary has ESRD or is in long term care
How well does it work? The model can only moderately predict cost. The R-squared is about 12%.
More at Jason Shafrin’s blog.
These variables can only explain about 12% of the variation in medical costs? Wow!
Answer to your question: not very well.
Answer: poorly.
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