Controlling Risk Factors

Question 1

What 3 factors are typically used to predict the use of health services?

Answer 1

1. Individual demographic characteristics
2. Health Status
3. Prior Utilization

Question 2

What is the best predictor of individual use of health services?

Answer 2

Prior Utilization

Question 3

Discuss three key points that emerge from the process of risk adjustment for the purpose of setting health insurance premiums

Answer 3

1. Even the most complete set of measures explains only a small proportion of the variance in an individual’s use of services
2. Some sets of measures are better predictors of health services use than are others
3. Statistical modeling has its limits

Question 4

The presumption in risk adjustment is that statistical methods will eliminate the:

Answer 4

Least costly efforts to attract low utilizers and avoid high utilizers

Question 5

Describe the development of the Medicare payment methodology known as the Adjusted Per Capita Cost (AAPCC) to reimburse Medicare Advantage plans.

Answer 5

Because HMOs were thought to be more efficient than traditional care providers, the legislation prescribed that the capitated rate should be 95% of the average Medicare Part A (hospital) plus Part B (ambulatory) expenditures per beneficiary, adjusted by various factors including age, gender and Medicaid status.

Question 6

What was the objective of the RAND Health Insurance Experiment

Answer 6

examine the effects of insurance co-payment arrangements on expenditures with the hope of improving the AAPCC model used by Medicare.

Question 7

This study has been used to examine alternative predictive models of utilization based on demographic characteristics, subjective and physiological measures of health status, and prior utilization

Answer 7

RAND Health Insurance Experiment study

Question 8

Which of the following measures has the greatest explanatory power relative to the others?

Answer 8

The RAND study findings show that when “prior utilization” was added to AAPCC demographic variables, the approach explained 6.4% of total expenditures, 2.8% of inpatient claims and 21.2% of outpatient expenditures.

Question 9

Balanced Budget Act of 1997

Answer 9

Required Medicare to phase in a new risk adjustment methodology to better incorporate health status into their capitation rates and to reimburse Medicare Advantage plans higher amounts for “sicker” beneficiaries.

Question 10

Is a risk adjusted payment system based on patient status measures?

Answer 10

Yes

Question 11

The balanced budget act (BBA) requires Medicare HMOs and other providers to supply encounter data to the:

Answer 11

Centers for Medicare & Medicaid Services (CMS)

Question 12

CMS Hierarchical Condition Categories

Answer 12

Estimates used from CMS to adjust the Medicare capitation payment. Also assigns diagnoses to hierarchical medical condition categories.

Question 13

What are the ten guiding principles in Medicare’s risk adjustment approach?

Answer 13

1. The health status-related measures should be clinically meaningful. Difficult for plans to assign a beneficiary with vaguely defined condition into a high payment group.
2. Predict both current and future medical expenditures
3. Based on large enough sample sizes
4. Related clinical conditions should be treated hierarchically
5. Vague measures should be grouped with low paying diagnoses to encourage specific coding of health conditions
6. Should not encourage multiple reporting of the same related diagnoses
7. Providers should not be penalized for reporting many conditions
8. Transitivity must hold
9. All diagnoses that clinicians use have to map into the payment system
10. Discretionary diagnostic codes should be excluded to prevent intentional or unintentional gaming of the system

Question 14

How is the annual Medicare Advantage payment under the CMS-HCC model determined?

Answer 14

A base rate (average annual Medicare cost) for a particular county is multiplied by factors associated with the member’s demographics and also with the member’s medical diagnoses (HCCs).

Question 15

What happens if the Medicare Advantage plans bid to partially determine the Medicare payments they receive is BELOW the CMS established benchmark

Answer 15

The managed care plan keeps a portion of the difference to apply to reduced cost sharing or expanded benefits for enrolled beneficiaries.

Question 16

What happens if the Medicare Advantage plans bid to partially determine the Medicare payments they receive is ABOVE the CMS established benchmark

Answer 16

The managed care plan charges enrollees an additional premium.

Question 17

Is the CMS-HCC model used in all cases to adjust the payments for beneficiaries enrolled by the plan to reflect their demographics and health status.

Answer 17

Yes

Question 18

Which three provisions of ACA aimed to address concerns over possible substantial differences in claims experience across insurers leading to premium volatility?

Answer 18

1. Risk Adjustment (permanent)
2. Reinsurance
3. Risk Corridors

Question 19

Why does the ACA’s guaranteed availability of insurance raise concerns of adverse selection?

Answer 19

Because consumers who are in need of health care may be more likely to purchase insurance

Question 20

How does the ACA discourage behavior that could lead to adverse selection

Answer 20

1. Makes is difficult for people to wait until they are sick to purchase insurance
2. Limits on open enrollment periods
3. Requiring most people to have insurance coverage or pay a penalty
4. Provide subsidies to help with the cost of insurance

Question 21

What is “risk selection”

Answer 21

Occurs when insurers have an incentive to avoid enrolling people who are in worse health and likely to require costly medical care.

Question 22

Risk adjustment program (nongrandfathered individual and small group market plans, in/out of exchanges)

Answer 22

Redistributes funds from plans with lower risk enrollees to plans with higher risk enrollees. The goal is to encourage insurers to compete based on the value and efficiency of their plans rather than by attracting healthier enrollees.

Question 23

Reinsurance program (all health insurers and self insured plans contributed funds)

Answer 23

Provided payment to plans that enrolled higher cost individuals. Reduce incentive for insurers to charge higher premiums

Question 24

Risk corridor program (Qualified health plans)

Answer 24

Limited losses and gains beyond an allowable range. Aim was to cushion insurers participating in exchanges and marketplaces from extreme gains/losses

Question 25

The Department of Health and Human Services (HHS) developed a federally certified risk adjustment methodology to be used by states or by HHS on behalf of states. States electing to use an ALTERNATIVE model must first seek federal approval and must submit yearly reports

Answer 25

Risk adjustment program

Question 26

States had option to operate their own reinsurance program or allow HHS to run one for the state

Answer 26

Reinsurance program

Question 27

Federally administered. HHS charged plans with larger-than-expected gains and made payments to plans with larger-than-expected losses

Answer 27

Risk corridor program

Question 28

How is the calculation of payments accomplished under the risk adjustment program

Answer 28

Plans average actuarial risk will be determined based on enrollees’ individual risk scores. Plans with lower risk will make payments to higher risk plans. Payments net to zero

Question 29

How are data collected and consumer privacy protected under the risk adjustment program?

Answer 29

Insurers are responsible for providing HHS with de-identified data

Question 30

What is the methodology used by HHS under its risk adjustment program to determine individual risk scores?

Answer 30

Under HHS’s methodology, individual risk scores–based on each individual’s age, gender and diagnoses–are assigned to each enrollee.

Diagnoses are grouped into an HCC and assigned a numeric value that represents the relative expenditures a plan is likely to incur for an enrollee with a given category for medical diagnoses.

If the enrollee is receiving subsidies to reduce his or her cost sharing, an induced utilization factor would be applied to account for induced demand.

Question 31

How is a plan’s average risk score determined?

Answer 31

The average risk score, which is a weighted average of all enrollees’ individual risk scores, represents the plan’s predicted expenses (based on demographics or enrollees).

Under the HHS methodology, adjustments are made for a variety of factors

Under risk adjustment, plans with a relatively low average risk score will make payments into the system, while plans with relatively high average scores will receive payments.