Impact of health-based risk adjustment is topic of landmark study
Health-based risk adjustment means adjusting payment to health plans based on the health status of their enrollees. This new, three-year study, in partnership with The Robert Wood Johnson Foundation, will address fundamental issues regarding the effects of implementing health-based risk adjustment. "Ultimately, we believe our work will increase the likelihood of a more equitable care delivery system for people with chronic illnesses," said David Knutson, principal investigator.
Effects of risk segmentation
Risk segmentation, which affects equity in care delivery, occurs when consumers have choices among managed care organizations (MCOs). Sicker consumers tend to select MCOs with such attributes as open access to specialists, while healthier consumers often are attracted to MCOs with low premiums.
When a health plan or provider is reimbursed an amount unadjusted for the health risk status of the consumer, dollars are distributed incorrectly. MCOs that attract a higher share of sicker consumers will be underpaid and not profitable; plans that attract a larger share of healthier consumers will be overpaid and reap excess profits. MCOs and providers thus have a financial incentive to recruit and retain low-risk, or healthier, patients. The people who will suffer the most in such a market are those with the greatest need for care – individuals with chronic illnesses.
Study components
First, the study will document the health-based risk adjustment (HBRA) implementation process used by employer groups including: Buyers Health Care Action Group in Minnesota; the Health Insurance Plan of California; the State of Washington Health Care Authority; Medicaid managed care programs in Colorado, Maryland, Oregon, and Minnesota; and Medicare+Choice programs in Miami and Phoenix.
"We see risk adjustment as an essential policy option to ensure a level playing field for competition among employer groups and MCOs, and to assure access for people with chronic conditions. Our aim, through this project, is to facilitate the development and best application of risk adjustment," Knutson noted.
The study will examine and analyze the experience of the purchasers who implement HBRA and document the degree to which risk adjustment affects payments to participating MCOs. It will also assess the effect of this new, comparative information on MCO efficiency and quality.
Knutson said that issues surrounding risk adjustment implementation are analytical and pragmatic, and involve trade-offs among practicality and political judgments. A panel made of implementation experts from each site will help identify these key issues. "We'll be able to provide unique and valuable information on the practical application of health-based risk adjustment by comparing and contrasting experiences from the multiple markets," he said.
Another focus of the study is to assess the impact of HBRA on managed care organizations' perceptions about recruiting and retaining populations with high-cost chronic conditions through interviews with MCO managers and actuarial consultants. Emphasis will be given to assessing factors related to the enrollment of a disproportionately higher or lower number of high-risk individuals.
Reporting results
Findings will be posted regularly at riskadjustment.org (a web site currently under construction), that will facilitate ongoing communication within the local and national health policy communities. Case reports and policy white papers on implementation issues will be submitted to peer-reviewed journals. The findings will also be the basis of a curriculum that can be used by purchasing groups and other organizations and communities interested in implementing risk adjustment in their own populations.
