Medicare Advantage Risk Adjustment

The law of the jungle known as “survival of the fittest” was a prevalent theme in the health insurance market in the twentieth century. Prior to 1997, some health plans would hand-pick the population’s healthiest members so that they wouldn’t have to assume significant risk. As a result, people with poor health who were likely to incur substantial medical costs had a difficult time getting insurance coverage. Hence, risk adjustment arose as a solution to improve the overall health of the U.S. population. Risk adjustment gives health plans the necessary incentives to enroll beneficiaries with a variety of health problems — from those who are generally healthy to those who have several chronic disorders.