title: Incorporating new research into Medicare risk adjustment.
abstract: BACKGROUND
  The Medicare Advantage payment system underpays health plans that enroll beneficiaries with multiple and complex chronic conditions.
  
  
  OBJECTIVE
  This article addresses 3 major problems in the current payment system: (1) underreporting of chronic disease prevalence in fee-for-service (FFS) Medicare claims data, (2) overpayment of healthier and underpayment of sicker beneficiaries in the current payment system, and (3) underpayment for new beneficiaries in Medicare Advantage plans that require the beneficiaries to have at least one chronic disease to enroll.
  
  
  METHODS
  We incorporate 2 years of data and a count of chronic diseases in the current Medicare payment model. We develop a separate payment adjustment for new enrollees.
  
  
  METHODS
  A nationally representative sample of FFS beneficiaries in the 2004-2006 Medicare 5% claims data.
  
  
  METHODS
  We use predictive ratios to evaluate whether our enhanced model improves the predictive accuracy over the current model overall and for subsets of beneficiaries.
  
  
  RESULTS
  The underreporting of chronic disease prevalence in Medicare FFS by 20% leads to systematic bias in the disease coefficients and demographic adjusters. The enhanced model reduces the level of payment for healthy beneficiaries and increases the payment for beneficiaries with multiple and complex chronic conditions. It improves payment for plans that enroll new enrollees with specific chronic conditions.
  
  
  CONCLUSIONS
  Our enhanced model reduces financial incentives for health plans to engage in risk selection against beneficiaries with multiple chronic conditions.
authors.affiliation: Department of Health Services Management and Leadership, School of Public Health and Health Services, The George Washington University, Washington, DC 20037, USA. bfrogner@gwu.edu
authors.forename: Bianca K
authors.initials: BK
authors.lastname: Frogner
authors.forename: Gerard F
authors.initials: GF
authors.lastname: Anderson
authors.forename: Robb A
authors.initials: RA
authors.lastname: Cohen
authors.forename: Chad
authors.initials: C
authors.lastname: Abrams
mesh_terms: D000367:Age Factors; D000368:Aged; D000369:Aged, 80 and over; D002908:Chronic Disease / Q000191:economics / Q000453:epidemiology; D005260:Female; D005102:Health Expenditures / Q000706:statistics & numerical data; D006801:Humans; D016014:Linear Models; D008297:Male; D006278:Medicare / Q000191:economics; D017059:Models, Econometric; D020379:Risk Adjustment; D014481:United States