Question By: Risk adjustment is an annual process that is used to appropriately compensate health plans for the costs associated with taking on members with chronic health conditions.
With risk adjustment, if your health plan serves a higher than average percentage of chronically ill patients, it will receive risk adjusted payments. If it has fewer than average members with chronic medical conditions, it may be required to make payments to the plan.
The key to successful risk adjustment, therefore, is to capture the plan’s full disease burden with accurate data and full documentation.
Payers that serve Medicare Advantage beneficiaries are paid a monthly, per-member payment in exchange for accepting the full responsibility (risk) for their enrollees’ healthcare costs.
Until 2011, when the Affordable Care Act (ACA) prohibited health plans from denying coverage to members with pre-existing conditions, many payers were able to mitigate their risk by attracting healthy members and avoiding those with chronic conditions. This meant that it may have been more difficult for individuals with chronic conditions to acquire health insurance coverage. These individuals may have then been uninsured and not had sufficient access to medical care.
Risk adjustment starts with gathering statistics—including patient demographics, diagnoses and professional encounter data. The data is used to assign each member in the plan a risk score.
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