Association Between Community-Level Social Risk and Spending Among Medicare Beneficiaries: Implications for Social...

Area of Science:

• Health Services Research
• Health Economics
• Social Determinants of Health

Background:

• Payers increasingly use community-level social risk measures to align value-based payments with health equity goals.
• Social risk adjustment aims to improve fairness in healthcare payment models.

Purpose of the Study:

• To examine the association between community-level social risk and healthcare spending.
• To explore how incorporating community-level social risk (Area Deprivation Index - ADI) influences risk adjustment for Medicare beneficiaries.

Main Methods:

• Cross-sectional study using Medicare Advantage plan data linked with survey data on social needs.
• Health care spending estimated using regression models with and without the inclusion of ADI.
• Model performance assessed by calibration (adjusted R2) and predictive accuracy.

Main Results:

• The Area Deprivation Index (ADI) explained little variation in healthcare spending (0.02%) and was weakly correlated with self-reported social needs (r=0.16).
• Each percentile increase in ADI was associated with a $11.08 decrease in annual spending, conditional on demographics and clinical factors.
• Directly incorporating ADI into risk adjustment models did not significantly improve calibration or reduce payment inequities for vulnerable subgroups.

Conclusions:

• The Area Deprivation Index (ADI) demonstrated limited utility in explaining healthcare spending variation and improving risk adjustment accuracy for Medicare beneficiaries.
• Findings suggest caution when using community-level social risk measures like ADI for social risk adjustment in Medicare value-based payment programs.