FutureFocus November 7, 2018: Functional Status Not Accounted For In Medicare Advantage Plans

Lisa Remington

In this week’s FutureFocus we provide our readers with information about how functional status is incorporated into Medicare Advantage (MA) Plans. While there is a risk adjustment model, the model does not account for a beneficiary’s functional status. This will see changes starting in 2019 and 2020.

Lisa Remington, President, Remington Health Strategy Group

The 21st Century Cures Act contains a provision for the General Accounting Office (GAO) to report on issues related to incorporating functional status into MA risk adjustment.

The Centers for Medicare & Medicaid Services (CMS) pays Medicare Advantage (MA) plans a monthly capitated amount to provide coverage for enrolled beneficiaries. This amount is adjusted to reflect beneficiary health status, a process known as risk adjustment. Beneficiaries in poorer health are generally expected to use more health care services than beneficiaries in better health; thus, risk adjustment pays more to MA plans for beneficiaries in poorer health to compensate. CMS’s risk adjustment model estimates health care spending based on beneficiary demographic characteristics and clinical diagnoses. However, this model does not account for functional status—the ability to perform routine daily activities such as bathing or dressing. GAO estimated that about 4 in 10 beneficiaries had functional limitations in 2016.

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