Risk-Adjustment : Using Data to Personalize Insurance Payments

The widespread adoption of risk-adjustment methodologies is among the most interesting aspects of health reform. Risk-adjustment refers to the process of matching payment for patient care to expected costs, factoring in information about the patient’s demographics, diagnoses and previous utilization. By providing greater payments for sicker, more costly patients, these methodologies better balance the payment and cost of patient care. While Medicare Advantage and certain Medicaid plans have used risk-adjustment for years, these methodologies are primed for widespread adoption in health insurance exchanges and commercial plans.


Risk adjustment depends crucially on an objective assessment of the patient’s health, usually gleaned from electronic health data. Individuals with expected health spending significantly higher than average are considered to be “high risks”. Data sources commonly include pharmacy, outpatient and inpatient claims.


Risk adjustment depends crucially on accurate data collection in order to appropriately calibrate payment : data manipulation breaks the balance between cost and payment and opens the door to gaming. Including diagnostic data significantly reduces the opportunity for gaming.


At CliniCast, we believe that comprehensive risk scores based on claims, medications, and laboratory data offer the greatest resolution on a patient’s expected costs, and therefore the best opportunity to balance potential payment. If you would like to know how our risk scores could support your risk adjustment efforts, please reach out to us at info@clinicast.net or visit our website at http://clinicast.net/.


To learn more:

 Health Affairs has an excellent policy brief that explains risk-adjustment in detail.


 The American Academy of Actuaries has a very intelligent article on the issue.


 Finally, the Center on Budget and Policy Priorities has an excellent writeup on the new horizons for risk-adjustment.