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(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The Balanced Budget Act of 1997 (BBA) mandated that Medicare capitated payments to Program of All-Inclusive Coverage for the Elderly (PACE) organizations be based on MA payment rates, adjusted to account for the comparative frailty of PACE enrollees. The frailty adjuster is included as part of risk adjusted payments for PACE organizations and, between 2004 and 2011, for certain demonstration organizations.
The frailty adjustment approach that was implemented in 2004 is to be applied in conjunction with the CMS-HCC risk adjustment model. Risk adjustment predicts (or explains) the future Medicare expenditures of individuals based on diagnoses and demographics. But risk adjustment may not explain all of the variation in expenditures for frail community populations. The purpose of frailty adjustment is to predict the Medicare expenditures of community populations with functional impairments that are unexplained by risk adjustment.
CMS calibrates the frailty factors by regressing the residual, or unexplained, costs from the CMS-HCC risk adjustment model on counts of activities of daily living (ADLs). CMS uses the number of functional limitations represented by the Activities of Daily Living (ADL) scale to calibrate the frailty model and then to determine the relative organization-level frailty of those in the community that are 55 years of age and older.
There are six ADLs:
CMS obtains ADLs from surveys of the general Medicare population. The frailty model used during payment years 2004-2007 was calibrated using ADLs from the Medicare Current Beneficiary Survey (MCBS). The frailty model used 2008 onward was calibrated using ADLs from the Fee-For-Service (FFS) Consumer Assessment of Health Providers & Systems (CAHPS).