Sec R Risk Adj Model, Disability Term Rates

Question 1

Definition, steps, and uses of health risk adjustment

Answer 1

1. Defn - the process of adjusting measures of healthcare utilization and cost to reflect the health status of members
2. The first step is risk assessment - the method used to assess the relative risk of each person in a group (may be referred to as a risk adjuster). Consists of:
   a) Risk classification - to group individuals into classes based on risk characteristics
   b) Risk measurement - to determine the level of risk for the classes
3. The second step is payment adjustment - the method used to adjust payments to reflect differences in risk
4. Risk assessment methods are used for provider profiling, case management, provider payment, and rating and underwriting
5. Risk adjustment is being used to adjust payments to Medicare and Medicaid plans. And the ACA includes a risk adjustment provision that will apply to most individual and small group plans

Question 2

Components of the Risk Management Economic Model

Answer 2

• These are factors that contribute to the financial outcomes of the program*
  1. Prevalence of different chronic diseases
  2. The cost of the chronic disease
  3. Payer risk - the most savings for the plan will come when the plan is at financial risk for all of the patient’s costs
  4. Targeting and risk - members should be prioritized based on the probability of experiencing the targeted event. Those with the highest risk ranks will be selected for the program
  5. Estimated cost of the targeted event
  6. Contact rate - the rate at which the company is able to make contact with targeted members
  7. Engagement (or enrollment) rate
  8. Member re-stratification rates - the initial risk rank of the member will be re-stratified after the nurse interacts with the member and assesses the member’s risk. Factors that affect whether the member should be re-stratified include the accuracy of the diagnosis, risk factors present, the ability of the DM program to intervene for the condition, the patient’s readiness to change, and the patient’s self-management skills

Question 3

Considerations in assessing trends in disability termination rates

Answer 3

1. Changes in the mix of disabilities by cause, by severity, or by geographical region
2. Changes in the level of benefits provided
3. Changes in claim administration practices
4. Economic cycles
5. Material change in inflation or benefit indexation
6. Changes in government plan definition of disability

Question 4

Considerations when preparing a claim termination rate study

Answer 4

1. Credibility - sufficient data is needed before conclusions can be drawn from the study
2. Types of teriminations included - only terminations due to recovery and death should be included (terminations due to benefit limitations should not be counted)
3. Exposure characteristics - if there is a disproportionate amount of one type of claim, adjustments may be needed
4. Voluntary claim settlements - claims that are voluntarily settled are commonly excluded when performing this study

Question 5

Risk assessment models in use today

Answer 5

1. Hierarchical Condition Category (HHC) models - ICD-9 diagnosis codes are classified into diagnostic groups, which are then aggregated into condition categories. Hierarchies are then applied so that an individual is indicated only for the most severe manifestation of a condition
   a) The Department of Health and Human Servies (HHS) uses the HHS-HCC model for risk adjustment in the individual and small group markets under the ACA
   b) CMS uses the CMS-HCC model for risk adjustment payments to Medicare Advantage and Part D plans
2. Adjusted Clinical Groups (ACGs) - groups diagnosis codes into Adjusted Diagnosis Groups (ADGs). Each member is assigned to only one ACG based on his or her age, gender, and ADGs
3. Chronic Illness and Disability Payment System (CDPS) - individuals are assigned to medical condition categories based on diagnosis codes. Medical costs are predicted based on medical condition and demographic categories
4. Clinical Risk Groups - uses diagnoses and some procedure codes to calculate a risk score for each member
5. Milliman Advanced Risk Adjusters - can be used with diagnosis-only data, pharmacy-only data, or a combination of the two
6. Diagnostic Cost Groups - medical costs are predicted based on medical condition and demographic categories
7. Episode Risk Groups (ERGs) - claims are grouped based on an episode of care concept. Individuals are assigned to medical condition categories based on their diagnosis codes and pharmacy data
8. Impact Pro - designed for underwriting and rating and for identifying potential high cost members for case management
9. Medicaid Rx - members are assigned to medical condition categories based on prescription drugs used. They are also assigned to a demographic category
10. Pharmacy Risk Groups - a score is computed for each member based on pharmacy risk groups (using a mapping of National Drug Codes (NDCs)) and demographic categories
11. RxGroups - uses a mapping of NDCs into mutually exclusive categories based on each drug’s therapeutic indication
12. RxRisk - a pharmacy-based model that assigns each member into medical condition categories and a demographic category
13. Wakely Risk Assessment Model - incorporates cost changes due to benefit and coverage changes newly required under the ACA

Question 6

Measures of predictive accuracy for risk assessment methods

Answer 6

• Individual Measures*
  1. Individual R-squared - the percentage of the variation in claim costs explained by the model. Is a standardized measure (results on a scale from 0 to 1), which helps in comparing results between studies. But can be overly sensitive to the prediction error for individuals with large claims.
  2. Mean absolute prediction error (MAPE) - the average of the absolute values of the prediction errors. Can be expressed as a percentage by dividing the result by the mean actual medical costs
• Group Measure*
  3. Predictive ratio = predicted claims for the group / actual claims for the group. Is the reciprocal of the common actual-to-expected ratio

Question 7

Key concepts for evaluating risk adjusters

Answer 7

1. Bias - risk adjusters should not be statistically biased. The factors used should be directly related to risk
2. Transparency - knowing how the methodology works helps parties understand why payment is being adjusted
3. Fairness and gaming - a risk adjuster needs to be accurate, practical, predictable, and not subject to gaming
4. Encourage specific coding - the diagnosis grouping used for payment adjustment should not be based on vague or unspecified diagnosis codes. And it should not reward proliferation of coding by assigning higher risk for several clinically-similar codes
5. Discourage upcoding - certain diagnosis or drugs that are subject to high coding variation due to their discretionary nature should be excluded
6. Data quality and credibility - if diagnosis codes are not captured consistently across insurers, then risk adjustment may produce biased estimates
7. Data availability - some types of data (such as treatment history and perceived health status) are difficult to collect
8. Clinical relevance - the grouping of individuals into risk classes should be clinically meaningful
9. Timing - insurers perfer an adjuster that allows them to determine what their payments will be at the time they set premiums. This criteria favors a prospective adjuster over a concurrent one

Question 8

Risk classification schemes

Answer 8

• These are the criteria that can be used to classify risks*
  1. Demographic - age, gender, family status, or geographic location
  2. Utilization measures or claim expenditures - these are generally viewed as inappropriate for health risk adjustment because they could reward an insurer for high historic costs resulting from inefficiencies
  3. Diagnosis and pharmacy codes - these codes are commonly used in health risk assessment
  4. Medical information or history - based on biomedical measurements (such as blood pressure, cholesterol, height, and weight) or medical history questionnaires (to determine prior medical conditions)
  5. Perceived health status - based on answers to a health questionnaire
  6. Functional health status - based on ability to perform activities of daily living
  7. Lifestyle and behavior factors - such as smoking, fitness level, substance abuse, or diet
  8. Multiple classification criteria - it is common to use more than one of the above criteria simultaneously (common diagnosis and demographic information)

Question 9

Reasons for health risk adjustment

Answer 9

• These are the major goals and policy arguments for requiring risk adjustment*
  1. Require health plans and providers to compete on the basis of efficiency and quality, not on risk selection
  2. Preserve choice for consumers
  3. Have consumers pay an appropriate price for their choice of insurer or provider
  4. Under certain reforms (such as guaranteed issue and rating limitations), a health risk adjuster is needed to increase the premium for plans covering lower-than-average risks and decrease the premium for plans with higher-than-average risks