CMS White Paper Examines The ACA Risk Adjustment Methodology

The Centers for Medicare and Medicaid Services released a white paper detailing the Centers for Medicare and Medicaid’s risk adjustment model Thursday, which suggests the risk adjustment program is working as intended, based on benefit year 2014.

On March 31, 2016, the Centers for Medicare and Medicaid Services (CMS) will hold a day-long public meeting in Baltimore to discuss potential changes to its Affordable Care Act (ACA) risk-adjustment program. On March 24, CMS published a White Paper describing its current risk adjustment program and options that it is considering for modifying that program.

The Affordable Care Act included three premium stabilization programs that went into effect in 2014 together with its market reforms — the reinsurance, risk corridor, and risk adjustment programs. These “3Rs” work in tandem but have different purposes.

The Medicare Payment Advisory Commission (MedPAC) met in early March to continue its discussions on developing a unified prospective payment system (PPS) spanning the post-acute care (PAC) settings. As mandated under the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014, MedPAC is required to develop a prototype PPS, using the uniform assessment data gathered previously during the Centers for Medicare & Medicaid Services (CMS) Post-Acute Care Payment Reform Demonstration completed in 2011. MedPAC previously discussed this topic during its January meeting (see previous NAHC Report article here).

According to MedPAC staff, the prototype predicted very similar relative costs of stays for most groups and explained similar shares of the variation in costs across stays. MedPAC also found that the administrative data can be used to establish accurate relative weights for most groups and estimate the impacts of a PAC PPS. However, MedPAC found certain groups had average predicted costs that deviated from average actual costs, which “may warrant payment adjustment,” including unusually short stays (to prevent large overpayments), and high-cost outliers (to protect providers from large losses). MedPAC also found differences that “may warrant further study” including low-volume, isolated providers (to ensure access) and extremely sick patients (to ensure access).


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  • Lexology: The CMS White Paper Addresses Risk Adjustment Methodology