Risk Adjustment for Dually Eligible Beneficiaries Using Long-Term Care

This study explores use of the principal inpatient diagnostic cost groups (PIPDCG) and hierarchical coexisting conditions (HCC) risk-adjustment methodologies for a population of dually eligible beneficiaries receiving chronic long-term care (LTC). Measures of individual predictive accuracy for this population compared with the total Medicare population were similar for the PIPDCG models but somewhat smaller for the HCC models. Incorporating measures of functional status increased the R² values by only a small amount for Medicare expenditures but by a somewhat larger amount for total expenditures. Addition of other variables, especially placement, further improved the predictive power.