Risk Adjustment for ADRD in Medicare Advantage and Health Care Experiences

Failure to account for the full complexity and costs of high-need populations in the risk-adjusted capitated payment model for Medicare Advantage (MA) plans may create financial disincentives for plans to invest in comprehensive care for affected beneficiaries, potentially exacerbating health disparities. This paper leverages the reinstatement of Alzheimer’s Disease and Related Dementias (ADRD) hierarchical condition category (HCC) into the MA risk-adjusted payment model in 2020 as a quasi-natural experiment to study how risk-adjustment model affects access, affordability, and quality of care. Using MA beneficiaries in the Medicare Current Beneficiary Survey (2015–2022), our DiD analysis compares beneficiaries with ADRD with those without ADRD but with similar neurologic conditions. We find that the revised risk-adjusted payment model is associated with a 6.6 pp decrease in reporting any troubles accessing needed care and a 9.2 pp decrease in reporting any medical financial burden among MA beneficiaries with ADRD. These findings suggest that refining risk adjustment to better capture the costs of chronic and complex conditions can help align MA plan incentives with the needs of vulnerable populations and promote care equity.