title: Improvements in Medicare Part D risk adjustment: beneficiary access and payment accuracy.
abstract: BACKGROUND
  The continued success of the Medicare Part D program is contingent on appropriate Medicare payment adjustments for the projected drug costs of Part D plan enrollees. This article describes a major revision of these "risk adjustments," intended to more accurately match payments to costs, especially for high-cost, disadvantaged populations.
  
  
  METHODS
  For the first time actual Part D data are used to calibrate risk adjustment. The sample is Medicare beneficiaries with fee-for-service enrollment in 2007 and Part D standalone prescription drug plan enrollment in 2008 (N = 14,224,301). Part D plan liability expenditures are predicted using demographic and diagnostic factors in a weighted least squares regression. Models for Medicare subpopulations are analyzed. The predictive accuracy of risk adjustment models is evaluated using R and predictive ratio statistics.
  
  
  RESULTS
  Based on differences in both mean expenditures and incremental expenditures by diagnosis, separate Part D risk adjustment models are calibrated for 5 Medicare subpopulations: aged not low income; aged low income; nonaged not low income; nonaged low income; and institutionalized. The variation in plan liability drug expenditures (R) explained by these models ranges from 13% to 29%. The 5 separate models accurately predict mean plan liability expenditures ranging from $967 to $1762 across subpopulations and account for differences in incremental disease coefficients by subpopulation.
  
  
  CONCLUSIONS
  The refined Part D risk adjustment model represents a significant improvement in the accuracy and fairness of payment to Part D plans. The new model provides greater incentives for drug plans to compete for low-income and institutionalized enrollees.
authors.affiliation: RTI International, Waltham, MA 02451-1623, USA. jkautter@rti.org
authors.forename: John
authors.initials: J
authors.lastname: Kautter
authors.forename: Melvin
authors.initials: M
authors.lastname: Ingber
authors.forename: Gregory C
authors.initials: GC
authors.lastname: Pope
authors.forename: Sara
authors.initials: S
authors.lastname: Freeman
mesh_terms: D000368:Aged; D000369:Aged, 80 and over; D002138:Calibration; D016527:Drug Costs; D005260:Female; D005102:Health Expenditures / Q000706:statistics & numerical data*; D006801:Humans; D008297:Male; D054524:Medicare Part D / Q000191:economics* / Q000706:statistics & numerical data; D008875:Middle Aged; D020379:Risk Adjustment / Q000592:standards*; D014481:United States