Building Managed Long-Term Services and Supports Risk-Adjustment Models: State Experiences Using Functional Data

Risk adjustment is an actuarial tool to predict expected health care costs based on beneficiary characteristics. In Medicaid managed long-term services and supports (MLTSS) programs, functional status is the biggest driver of LTSS resource use. Given the complexity of collecting and analyzing functional assessment data for Medicaid MLTSS programs, only a few states use risk-adjustment models that capture functional status of MLTSS beneficiaries. This brief, supported through the West Health Policy Center, examines the sophisticated risk-adjustment models developed by Wisconsin and New York for their MLTSS programs that reflect many variables, including functional status. States looking to develop a MLTSS risk-adjustment model using functional assessment data need to select variables that are most predictive of LTSS costs while ensuring that model variables are aligned with the state’s MLTSS policy goals.