A Risk Adjustment
System for the
Medicare Capitated
ESRD Program
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Jesse Levy
John Robst
Melvin Ingber
Office of Research, Development, and
Information
Centers for Medicare & Medicaid Services
Baltimore, MD
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Background
• Medicare is the principal payer for medical
services for those with End-Stage Renal
Disease.
• The Medicare ESRD program has grown
rapidly since 1972, increasing from 7,000
enrollees to over 300,000.
• The ESRD program now accounts for 9% of
Medicare expenditures though serving less
than 1% of Medicare beneficiaries.
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• A small portion is enrolled in Medicare
Advantage (MA) plans and ESRD
demonstration plans.
• MA program payment adjustments for
ESRD reflect only beneficiary
demographics
• The demographic adjustment system
cannot differentiate more costly from less
costly patients within each of the broad
payment cells.
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• Capitation payments better correlated
with patient costs than current payments
are needed.
• This paper describes the risk adjustment
system developed to meet this need.
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The CMS ESRD risk adjustment system is
based on the CMS-HCC model. The ESRD
population divided into three groups by
treatment modality.
1. Dialysis - Model estimated; CMS-HCC
specification
2. Transplant
- 3 months total Medicare
expenditures
- kidney-only and kidney-pancreas
3. Functioning graft - CMS HCC Model
plus payment for immunosuppressives
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Data
• 1999/2000 Medicare data
• 100% fee-for-service ESRD beneficiaries
• ESRD status of the beneficiary is determined
concurrently – a person is switched to the
appropriate part of the ESRD payment system
upon the occurrence of a triggering event
• Medicare costs (annualized) in 2000
• Diagnoses from inpatient, outpatient, and
physician claims in 1999
• Risk adjustable, new enrollees, MSP
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Dialysis
• Average annualized expenditures: $59,003
• R-square:
.0767
• Selected coefficients:
Female, age 45
39,492
CHF
4440
Diabetes
5628
Vascular disease w/ complications 7747
COPD
3839
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Transplant
Month 1
Month 2
Month 3
Total
Kidney
only
33424
4523
4523
42470
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Kidney +
Pancreas
50136
6785
6785
63705
Functioning Graft
• Average annualized expenditures: $20,092
• R-square:
.2745
• Additional payment:
Age lt 65_Duration4-9
15,853
Age ge 65_Duration4-9
17,569
Age lt 65_Duration10+
8,310
Age ge 65_Duration10+
8,671
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Predictive Ratios
Dialysis
Age-sex
1.04
Risk
1.00
Transplant
0.549
1.00
Functioning graft
2.846
1.00
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Example: 2004, Female, age 45, San Diego
COPD, CHF, Vascular Disease, Diabetes
Dialysis
Transplant
Functioning
Graft (3 yrs)
>3 years
Risk $
$6,861
$57,223
$2,869
Dem $
$4,345
$13,035
$4,345
$2,869
$504
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Conclusion
• Overall, the system has been designed to
meet the needs of legislation, to
minimize extra data collection, and to
improve accuracy of payment so that
both demonstrations and MA plans can
succeed in improving care for this
population. If successful, perhaps the
restrictions on ESRD enrollment in the
general capitated program can be
removed.
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