CMS Pub. 100-16, ch. 7, § 80

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:

• Bathing and showering

• Dressing

• Eating

• Getting in or out of bed or chairs

• Walking

• Using the toilet

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).

The MCBS is a face-to-face survey, while the FFS CAHPS data is a mail survey with a

telephone follow-up. By using the FFS CAHPS ADL results to calibrate the frailty

factors, CMS uses methodologically-similar surveys for both calibrating the frailty model

and for calculating annual frailty scores. The annual frailty scores are calculated using

results from the Health Outcomes Survey – Modified (HOS-M), which is an anonymous

mail-in survey with telephone follow-up.

In addition, the CAHPS frailty calibration sample is much larger than the MCBS sample.

The CAHPS data can better determine the relationship between frailty and costs given

Medicaid and non-Medicaid status in the general Medicare population. As a result,

starting in 2008, the frailty model includes separate factors for Medicaid and non-Medicaid beneficiaries. The result is more accurate payment because Medicaid and non-Medicaid frail populations show differences in the relationships between unexplained

expenditures (in the CMS-HCC model) and functional impairments.

Contract-level frailty scores are calculated by multiplying the proportion of respondents

in each ADL category by the factor for that category, and then summing the products

across each category. In some cases, a transition blend or phase out factor has been used

(see below) to transition from one frailty model to another. See below for examples of

calculations of frailty scores.

At payment, CMS adjusts the payment for an enrollee in an eligible organization, if that

beneficiary is age 55 and over, and living in the community. 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).

For PACE organizations and demonstrations between 2004 and 2011, the frailty score

that is added to the beneficiary’s risk score is calculated at the contract-level, using the

aggregate counts of ADLs among survey respondents enrolled in a specific organization.

Updated frailty factors are published in the Rate Announcement for the payment year in

which they are first used.

Example – how to calculate a frailty score:

CMS calculates PACE organizations’ frailty scores at the contract level. Below is an

example of the calculation of a PACE frailty score for payment year 2009.

Frailty factors used to calculate 2009 frailty scores for PACE organizations:

2007 2009

Non-Medicaid Medicaid

0 ADLs -0.141 -0.093 -0.180

1-2 ADLs 0.171 0.112 0.035

3-4 ADLs 0.344 0.201 0.155

5-6 ADLs 1.088 0.381 0.200

The following table provides an example of results from the Health Outcome Survey-Modified (HOS-M) for a sample PACE organization:

ADL count among

respondents to HOS-M

Medicaid Non-Medicaid Total

0 13 15 28

1-2 35 32 67

3-4 40 22 62

5-6 36 33 69

Total respondents 226

1. Calculate the organization’s frailty score using 2007 frailty factors

Frailty score =

28/226*(-0.141) + 67/226*(0.171) + 62/226*(0.344) + 69/226*(1.088)

=0.460

2. Calculate the organization’s frailty score using the 2009 frailty factors:

Frailty score =

13/226*(-0.180) + 15/226*(-0.093) + 35/226*(0.035) + 32/226*(0.112) +

40/226*(0.155) + 22/226*(0.201) + 36/226*(0.200) + 33/226*(0.381)

=0.139

3. Calculate blended frailty score for use in payment:

2009 blend: 70% of the frailty score calculated using pre-2008 frailty factors and

30% of the frailty score calculated using 2009 frailty factors

Frailty score for payment = 0.460*0.7 + 0.139 * 0.3 = 0.364

Example – how to calculate payment with a frailty adjustment

For calendar year 2009, a PACE member resides in the community and is aged 82. The

payment to the PACE organization will be calculated with a risk score that is the sum of

the regular CMS-HCC risk score plus the organization’s frailty score.

Beneficiary’s risk score = 2.3

PACE organization’s frailty score = 0.364

Risk score used in payment for the beneficiary = 2.664 = 2.3 + 0.364

Frailty Adjustment Transition for PACE Organizations

PACE Organizations are transitioning from the pre-2008 frailty model to the updated

frailty model from 2008-2012 payment years. Frailty adjustment will be applied to

payment to PACE organizations using the transition schedule published in the 2008 –

2011 Rate Announcements. The full transition schedule is as follows:

• In 2008 (year 1): 90% of the frailty score calculated using the pre-2008 frailty

factors and 10% of the frailty score calculated using the 2008 frailty factors.

• In 2009 (year 2): 70% of the frailty score calculated using the pre-2008 frailty

factors and 30% of the frailty score calculated using the 2009 frailty factors.

• In 2010 (year 3): 50% of the frailty score calculated using the pre-2008 frailty

factors and 50% of the frailty score calculated using the 2009 frailty factors.

• In 2011 (year 4): 25% of the frailty score calculated using the pre-2008 frailty

factors and 75% of the frailty score calculated using the 2009 frailty factors.

• In 2012 (year 5): 100% of the most recently calibrated frailty factors.

Frailty Adjustment Transition for Certain Demonstrations

Frailty adjustments will be applied to payments for certain MA plan types using a phase-out schedule between 2008 and 2012. For 2008 – 2010, plans that were participating in

the following demonstrations received frailty payments under the schedule below: Social

Health Maintenance Organizations (S/HMOs), Minnesota Senior Health Options

(MSHO)/ Minnesota Disability Health Options (MnDHO), Wisconsin Partnership

Program (WPP) and Massachusetts Senior Care Options (SCO) plans. For 2011, a subset

of these plans continued to receive frailty payments. The full phase out schedule is as

follows:

• In 2008: 75% of the frailty score calculated using the pre-2008 frailty factors.

• In 2009: 50% of the frailty score calculated using the pre-2008 frailty factors.

• In 2010: 25% of the frailty score calculated using the pre-2008 frailty factors.

• In 2011: 25% of the frailty score calculated using the pre-2008 frailty factors.

• In 2012: 0% paid under demonstration authority