CMS Pub. 100-11, ch. 13, § 30.3

For the final payment rate, the county rate for the PACE organization is multiplied by the

individual participant risk score. Risk adjustment allows CMS to pay plans for the risk of

the beneficiaries they enroll, instead of an average amount for Medicare beneficiaries.

The individual participant risk score for Medicare Advantage and PACE is calculated

using the CMS–HCC model (community, long-term institutionalized, End-Stage Renal

Disease (ESRD) or new enrollee) published in the Announcement of Calendar Year (CY)

2012 Medicare Advantage Capitation Rates and Medicare Advantage and Part D

Payment Policies and Final Call Letter (Rate Announcement).

A frailty factor is added to each individual’s risk score for PACE plan payment. 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. The frailty score added to the

beneficiary’s risk score is calculated at the contract-level, using the aggregate counts of

ADLs among HOS-M survey respondents enrolled in a specific organization. More

information regarding the HOS-M can be found in Chapter 10, Section 30.7. Because the

CMS-HCC model has been designed to pay appropriately for the long-term

institutionalized population, frailty adjustments are added to the risk scores only for

community-based and short-term institutionalized enrollees (i.e., the frailty adjustment

for long-term institutionalized enrollees is zero). Updated frailty factors are published in

the Rate Announcement for the payment year in which they are first used.