Incorporating Prescription Drugs Into Affordable Care Act Risk Adjustment

Abstract

Background: The 2010 Patient Protection and Affordable Care Act reformed the individual and small group health insurance markets and established a risk adjustment program to create a level playing field for competition. A new set of predictive models for measuring enrollee risk across plans was developed for the Patient Protection and Affordable Care Act-reformed markets, referred to as the Department of Health and Human Services Hierarchical Condition Category (HHS-HCC) models. Beginning in 2018, selected prescription drug classes were added to the models as risk markers. Objective: We describe the motivations, concerns, methodology, and results of adding prescription drug utilization to the HHS-HCC models. Methods: Separate HHS-HCC models are estimated by enrollee age and plan actuarial value. We defined and added 10 prescription drug classes, called RXCs, to the HHS-HCC adult models. Results: Using selected RXCs alongside demographic and diagnostic indicators yielded modest overall improvement in HHS-HCC models’ predictive power. Also, adding RXCs captures the higher costs of enrollees taking certain expensive pharmaceuticals and allows imputation of diagnoses for enrollees utilizing a drug but lacking the associated diagnosis. Conclusions: Including selected drugs in risk adjustment improved the models’ predictive power. In addition, inclusion of selected drugs may discourage insurers from using formulary and drug benefit design to avoid enrollment of patients taking high-cost drugs, such as for HIV, multiple sclerosis, and rheumatoid arthritis, and improve access for enrollees taking these drugs. Adding RXCs also may improve plan risk measurement for plans with less complete diagnosis reporting.

Assessment of the Effect of Adjustment for Patient Characteristics on Hospital Readmission Rates

“…From the Chronic Conditions Data Warehouse, which draws from Medicare claims since 1999 to measure beneficiaries’ cumulative chronic disease burden, we assessed the presence of 27 conditions reported prior to the index admission year. Using beneficiaries’ claims from the year prior to admission, we also constructed indicators for the condition categories included in the CMS Hierarchical Condition Categories risk score . We used claims from the year of admission to determine whether beneficiaries were long-term nursing home residents .…”

The Need to Incorporate Additional Patient Information Into Risk Adjustment for Medicare Beneficiaries

“…In the past, CMS has resisted incorporating additional diagnosis-based information on depression, dementia, frailty, and social risk, in addition to medical use–based information, into the CMS-HCC risk adjustment model . The rationale is that such information represents “discretionary” judgments made by clinicians and health plans that may be used to increase the risk profile of their patients and to thereby game the system and increase their reimbursement .…”

“…In the past, CMS has resisted incorporating additional diagnosis-based information on depression, dementia, frailty, and social risk, in addition to medical use–based information, into the CMS-HCC risk adjustment model . The rationale is that such information represents “discretionary” judgments made by clinicians and health plans that may be used to increase the risk profile of their patients and to thereby game the system and increase their reimbursement . For example, incorporating the measures above would result in adding points to patients’ risk profiles for diagnoses such as dementia, for receiving equipment such as wheelchairs and oxygen supplies, or for documentation of social risk factors such as poverty.…”

“…Since the early 2000s, CMS has attempted to accomplish these objectives using a system that adjusts performance and payment for differences in patient characteristics. This system is called the CMS hierarchical condition categories (CMS-HCC) risk adjustment model, and it assigns “points” for age, gender, original reason for Medicare eligibility, dual Medicaid enrollment (in some cases), institutionalization in long-term care, and 83 clinical conditions identified by diagnoses in Medicare claims . However, as more reimbursement is tied to the measurement of risk, there is increasing concern that this model fails to adequately account for differences in patient characteristics and may consequently create unintended consequences.…”

Association of Positive Delirium Screening with Incident Dementia in Skilled Nursing Facilities

“…The risk adjustment is a validated measure for controlling for confounding based on prescription drug use. 26…”