Comparison of risk-adjustment systems for the medicaid-eligible disabled population

The objective of this study was to compare 2 approaches for subjecting capitation rates for disabled Medicaid-eligible patients in managed care plans to risk adjustment, the Disability Payment System (DPS) and the Ohio Prior Expenditure System (OPES).

This was a retrospective cohort.

The subjects were 157,142 nonelderly disabled individuals eligible for > or =1 month during state fiscal year 1995 (SFY95) for a 3-county Ohio Medicaid managed care demonstration project.

Data were from the Ohio Medicaid eligibility and fee-for-service claims files.

As per OPES policy, individuals were classified by the duration of their eligibility in SFY93 as "old" eligibles (> or =6 months) or "new" eligibles (<6 months). Published relative payment weights for each system were adjusted and used to predict SFY95 expenditures in a budget-neutral comparison. Measures were variance in SFY95 expenditures explained by predicted payments (R2) and predictive ratios (predicted payment/actual SFY95 expenditure). Individuals with HIV/AIDS and hematological conditions, who enrolled disproportionately across the demonstration counties, were analyzed separately.

Of the 157,142 individuals, 56.4% were new eligibles; 40.1% of the old eligibles had no claims-documented chronic disease diagnosis in the baseline year. The overall R2 was 0.091 with OPES and 0.057 with DPS. Neither system predicted >1% of individual-level expenditures for new eligibles. OPES severely underpaid for eligibles in the top percentile of predicted expenditures; DPS had mixed results. DPS predicted SFY95 expenditures substantially better than OPES for the enrollment bias categories.

Before Medicaid programs move to full-risk capitation for disabled populations, better risk-adjustment methods are needed, especially for eligible patients with little claims experience, high predicted expenditures, or enrollment-bias conditions.