What is Risk Adjustment?

Risk Adjustment is a method by which Health and Human Services HHS and Centers for Medicare & Medicaid Services CMS offset the cost of providing health care for individuals with chronic health conditions. Health Plans are reimbursed by the government for the costs of providing care according to the conditions their members have.

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How is Risk Adjustment calculated?

The following model explains how Risk Adjustment is calculated:

risk adjustment calculation image


Terms and acronyms

  • ACA: Affordable Care Act
  • CMS: Centers for Medicare and Medicaid Services 
  • HCC: Hierarchical Condition Category
  • HHS: Department of Health and Human Services 
  • ICD-10: International Classification of Diseases, 10th Revision
  • MA: Medicare Advantage
  • QHP: Qualified Health Plan
  • RAF: Risk Adjustment Factor

Risk Adjustment training

Learn more about the Risk Adjustment program, hierarchical condition categories, and the member journey in this quick training.

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