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Risk Adjustment Factor and CMS-HCC Model
The Centers for Medicare & Medicaid Services (CMS) utilize Hierarchical Condition Category (HCC) risk adjustment models to predict forthcoming healthcare costs for Medicare Advantage patients, considering health status and demographic factors. The Risk Adjustment Factor (RAF) score determines CMS payments to health plans per patient. Medicare Advantage Organizations (MAOs) receive higher rates for patients with multiple or severe conditions due to elevated RAF scores and anticipated care costs. Currently, MA plans are based on the 2020 version, V24, derived from ICD-9-CM claims coded data. CMS has finalized revisions for the Part C risk adjustment model for 2024, incorporating recalibration and clinical reclassification of HCCs. Recalibration updates data to 2018 diagnoses and 2019 expenditures from the previous 2014 diagnoses and 2015 expenditures used in V24. The denominator year used for risk score calculation shifts to 2020 in V28 from the current 2015 in V24.