Risk Adjustment 101: Protecting Access to High-Quality Health Care

Risk adjustment is a critical mechanism that works to ensure value-based care  payments account for the differences in patients’ health care costs and underlying health care needs. Using certain patient characteristics, like age, sex, medical diagnoses and sometimes even health-related social needs, the risk adjustment process helps to determine how much a health plan or health care provider is paid in a value-based payment arrangement.

The process of adjusting payment and financial resources based on the health care needs of a patient population is a critical tool in effectively allocating health care dollars to higher need populations. This helps to drive higher-value and more efficient health care payments throughout the health care system.

Alternative payment models rely heavily on risk adjustment as part of their core payment structure, yet many consumer health care advocates and other stakeholders may not fully understand the impact of risk adjustment on health and health care. This primer is designed to support those interested in engaging in policy discussions around value-based payment arrangements by outlining what risk adjustment is, how it is used, why accurate risk adjustment is so important, and what aspects of risk adjustment require oversight and improvement.