Issue Brief

Understanding Risk Adjustment in Medicare Advantage: 2017

Risk adjustment is an essential mechanism used in health insurance programs to account for the overall health and expected medical costs of each individual enrolled in a health plan. Accurate documentation of diagnoses by clinicians is a critical component of the risk adjustment process. The Medicare Advantage program relies on risk adjustment to maintain predictable and actuarially sound payments to Medicare Advantage to provide benefits to all enrollees. A stable risk adjustment system is essential to ensure sustainability in benefits provided to enrollees and to the continued innovation in the delivery of high quality, coordinated, and affordable care to all Medicare Advantage beneficiaries.