Using chronic disease risk factors to adjust Medicare capitation payments

This study evaluates the use of risk factors for chronic disease as health status adjusters for Medicare's capitation formula, the average adjusted per capita costs (AAPCC). Risk factor data for the surviving members of the Framingham Study cohort who were examined in 1982-83 were merged with 100 percent Medicare payment data for 1984 and 1985, matching on Social Security number and sex. Seven different AAPCC models were estimated to assess the independent contributions of risk factors and measures of prior utilization and disability in increasing the explanatory power of AAPCC. The findings suggest that inclusion of risk factors for chronic disease as health status adjusters can improve substantially the predictive accuracy of AAPCC.