Risk Adjustment And Promoting Health Equity In Population-Based Payment: Concepts And Evidence

Abstract

The objective of risk adjustment is not to predict spending accurately but to support the social goals of a payment system, which include equity. Setting population-based payments at accurate predictions risks entrenching spending levels that are insufficient to mitigate the impact of social determinants on health care use and effectiveness. Instead, to advance equity, payments must be set above current levels of spending for historically disadvantaged groups. In analyses intended to guide such reallocations, we found that current risk adjustment for the community-dwelling Medicare population overpredicts annual spending for Black and Hispanic beneficiaries by $376–$1,264. The risk-adjusted spending for these populations is lower than spending for White beneficiaries...

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