For over 30 years, Medicare Advantage (MA) plans have had their federal revenue adjusted to reflect the expected costs of their enrollees. The risk adjustment mechanism currently used is the Hierarchical Condition Category (HCC) risk adjuster, which assigns a risk score to each beneficiary based on diagnoses and demographic characteristics. Currently, there are 83 HCCs in the Centers for Medicare and Medicaid Service (CMS)-HCC model. An individual’s risk score is the sum of the weights assigned to each category, although some of the categories interact. The current HCC model has distinct factors for each of seven subpopulations. The average HCC score across all beneficiaries is close to 1.0.
In December 2018, CMS released its proposed 2020 risk score methodology for MA plans. The proposal describes proposed updates to the existing HCC risk adjustment model and suggests an alternative model, which includes two additional HCCs for dementia. These categories were selected for inclusion by CMS because CMS considered them clinically meaningful, not discretionary, and good predictors of medical expenses.
Under the proposed alternative risk adjuster, dementia would be included in the risk adjustment calculation for all populations, except institutionalized beneficiaries.
The weights for the dementia disease categories range from about 0.2 to 0.5, depending on the individual’s subpopulation. These weights are similar in magnitude to other chronic conditions, such as congestive heart failure and diabetes.