Risk adjustment for health plans disproportionately enrolling frail Medicare beneficiaries

There is concern about the adequacy of diagnosis-based risk adjusters for p aying health plans that disproportionately enroll fi ail Medicare beneficia ries. The Medicare Current Beneficiary Survey (MCBS) was used to examine th e ability of two risk-adjustment models to predict Medicare costs for group s defined by institutional status and difficulty with activities of daily l iving (ADLs). Both models underpredicted average costs for non-institutiona lized fi-ail beneficiaries; however the models slightly overpredicted expen ses for most frail individuals and severely underpredicted for a minority. Further refinements are needed if diagnosis-based models are used to pay pl ans that disproportionately enroll frail beneficiaries.