Diagnosis-based risk adjustment for Medicare capitation payments

Health Care Financ Rev. Spring 1996;17(3):101-28.


Using 1991-92 data for a 5-percent Medicare sample, we develop, estimate, and evaluate risk-adjustment models that utilize diagnostic information from both inpatient and ambulatory claims to adjust payments for aged and disabled Medicare enrollees. Hierarchical coexisting conditions (HCC) models achieve greater explanatory power than diagnostic cost group (DCG) models by taking account of multiple coexisting medical conditions. Prospective models predict average costs of individuals with chronic conditions nearly as well as concurrent models. All models predict medical costs far more accurately than the current health maintenance organization (HMO) payment formula.

Publication types

  • Research Support, U.S. Gov't, Non-P.H.S.

MeSH terms

  • Aged
  • Capitation Fee*
  • Diagnosis-Related Groups / economics
  • Disability Evaluation
  • Disabled Persons / classification
  • Female
  • Health Care Costs
  • Health Maintenance Organizations / classification
  • Health Maintenance Organizations / economics*
  • Humans
  • Male
  • Medicaid / classification
  • Medicaid / economics
  • Medicare / classification
  • Medicare / organization & administration*
  • Models, Economic
  • Rate Setting and Review / methods*
  • Regression Analysis
  • Risk Management
  • United States