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Higher category risk scores represent higher anticipated healthcare costs for Medicare Advantage health plans. This method puts related encounter data like medical diagnoses into groupings based on resource use. The Centers for Medicare & Medicaid Service (CMS) risk adjustment model uses the Hierarchical Condition Category (HCC) method to calculate risk scores for Medicare Advantage beneficiaries. There are many different models and financial incentives for medical risk adjustment within the health and human services system. Medicare risk adjustment is also intended to encourage health plans to enroll accurately represented beneficiaries of all types, including high risk enrollees with chronic medical conditions and those who are likely to need more expensive care.
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Medicare risk adjustment is designed to ensure that Medicare pays health plans fairly, and that plans are not unfairly penalized for enrolling sicker beneficiaries. Medicare risk scores are calculated using a formula that takes into account many different factors, including age, sex, race, health status, and use of Medicare services. Medicare pays health plans based on the number of Medicare beneficiaries enrolled in the plan, and the risk scores of those beneficiaries. To learn more about risk adjustment coding and HCCs, read the article “ FAQ: 10 Things You Need to Know about Risk Adjustment.” If you are interested in getting certified in risk adjustment, go to AAPC’s CRC Preparation Course webpage.Medicare risk adjustment is a process that Medicare uses to pay health plans. Remember: A simple list of diagnoses is not acceptable or valid per official coding guidelines, as it does not meet the definition of an assessment and plan.
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Hierarchical condition categories ( HCCs) group clinically related diagnoses ( ICD-10-CM codes) with similar risk adjustment cost implications. The more of a burden the disease is, the higher the risk adjustment score is. Healthier patients have a lower risk adjustment score. A patient’s health status reflects the costs associated with their healthcare needs. Risk adjustment helps to ensure accurate and adequate payment for Medicare Advantage (MA) patient conditions, based on expected medical costs.
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