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ASPE work on Drug Risk Adjustment

Report authors :
Claudia-Schur, Jack Hoadley, Chris Hogan

Office of the Assistant Secretary for Planning and Evaluation (ASPE)
U.S. Department of Health and Human Services

ASPE has contracted with the National Opinion Research Center (NORC) to assist the department in the initial development of a risk adjuster to adjust payment between Medicare drug plans.  The initial scope of work included three related tasks each of which is the subject of a web paper on this website.  The web papers themselves are shorter versions of the final report on the complete project which is also included in its entirety on the web site.  This allows the interested reader to explore each topic and to go further in depth, depending upon the amount of detailed desired.

 The first web paper, which also appeared as an article in the ASPE  Highlighter, describes the linked Medicaid and Medicare files that were used to supplement the data from the Federal Employees Health Benefits Program (FEHBP) in order to get a better picture of drug utilization among the over 65 population for subgroups not well-represented in the FEHBP data.  This included low-income, disabled, non-East Coast, and other subpopulations.  The results from this data convinced CMS analysts and the Office of the Actuary that adjustments were needed for the low income and institutionalized populations. Special payment factors were developed for the low-income and the institutionalized populations.  

The second webpaper explored geographic differences by state in drug prices and  drug utilization.  Price differences by state were small but utilization differences were larger.  ASPE is continuing work to explore the reasons for the geographic differences in drug utilization, which  is also a required future study under the Medicare modernization Act.

The third web paper explores the interaction of three concepts designed to protect drug plans during the initial start-up period: 1) drug risk adjustment, 2) drug risk corridors, and 3) reinsurance for high cost drug claims.   The paper finds that the three mechanisms working together reduce the risk of a drug plan to approximately 14 percent of full risk in the first year of operation. 

Evaluation of Data Bases for Drug Risk Adjustment

Developing A Risk Adjustment Methodology for Medicare Drug Plans

Impact of Policies to Limit Drug Plans’ Financial Risks

Geographic Variation in Prescription Drug Prices and Spending