The Centers for Medicare and Medicaid Services (CMS) is adding a new prescription drug category classification system to the 2018 risk adjustment model. Starting in 2018, a condition will be identified through a Hierarchical Condition Category with associated medical diagnosis codes, a prescribed medication, or both—each one affecting the final risk member score differently. This paper by Milliman consultants approximates the likely CMS mapping based on the publicly available information to date.
The risk adjustment program, a permanent feature of the Patient Protection and Affordable Care Act of 2010 (ACA), aims to mitigate issues in the commercially insured guaranteed issue individual and small group markets. Under the ACA risk adjustment program, a member’s risk is measured using the U.S. Department of Health and Human Services hierarchical condition categories (HHS-HCC) risk adjuster model. In this particular model, carriers are incentivized to capture all existing member diagnoses that trigger any of the predefined 146 HCCs and condition groupings. By doing so, the carrier will maximize its average plan liability risk score and thus optimize its revenue transfer position relative to the market. In this report, Milliman’s Doug Norris and Ksenia Whittal explore the crucial role of diagnosis coding by focusing on certain variables—including carrier size, market share, and market size—in the ACA risk adjustment formula.
Health insurers may increase their risk scores on the commercial health exchange by investing resources to ensure that their diagnosis coding efforts are accurate and complete. In this article, Milliman’s Corey Berger illustrates how the return on investment (ROI) associated with more comprehensive coding efforts is mostly independent of the actions taken by other carriers.