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

Risk adjustment is a critical mechanism to 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.

Value-based payment models, a cornerstone of efforts to transform the U.S. health care system, incentivize improved patient experience and outcomes while lowering costs, and are used on a large scale across public and private payers.

These 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.