1. 1 A Risk Adjustment System for the Medicare Capitated ESRD Program

2. 2 Jesse Levy John Robst Melvin Ingber Office of Research, Development, and Information Centers for Medicare & Medicaid Services Baltimore, MD

3. 3 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.

4. 4 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.

5. 5 Capitation payments better correlated with patient costs than current payments are needed. This paper describes the risk adjustment system developed to meet this need.

6. 6 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

7. 7 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

8. 8 Dialysis Average annualized expenditures: $59,003 R-square:.0767 Selected coefficients: Female, age 4539,492 CHF4440 Diabetes5628 Vascular disease w/ complications7747 COPD3839

9. 9 Transplant KidneyKidney + onlyPancreas Month 13342450136 Month 245236785 Month 345236785 Total4247063705

10. 10 Functioning Graft Average annualized expenditures: $20,092 R-square:.2745 Additional payment: Age lt 65 _Duration4-915,853 Age ge 65_Duration4-917,569 Age lt 65_Duration10+8,310 Age ge 65_Duration10+8,671

11. 11 Predictive Ratios Age-sexRisk Dialysis1.041.00 Transplant0.5491.00 Functioning graft2.8461.00

12. 12 Example: 2004, Female, age 45, San Diego COPD, CHF, Vascular Disease, Diabetes Risk $Dem $ Dialysis$6,861$4,345 Transplant $57,223 $13,035 Functioning $2,869$4,345 Graft (3 yrs) >3 years $2,869$504

13. 13 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.