Washington State Develops and Tests New Predictor of Patient's Health Needs

Model for medical risk distribution among competing health plans

In 1997, the Washington Health Care Authority (HCA)—the state agency responsible for administering the benefit program for nearly 300,000 Washington public employees, retirees and dependents, and the largest health care purchaser in the state—implemented a health-status-based risk-adjusted payment system.

Researchers at the University of Washington School of Public Health developed the system and developed and tested its reimbursement calculations.

Reimbursement calculations take account of the health status (which focuses on the patient's health as a predictor of their yearly health care resource use) of insured individuals under this system.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO).

Key Results

  • After many discussions, issue papers and simulations, HCA implemented health-status-based risk adjustment in 1997 for enrollment beginning January 1, 1998.

    Key to the implementation was finding a balance between the science of developing the payment system and the art of implementing such a system within HCA's existing political environment and policy structure.

  • The payment system was phased in—with full health-status-based risk adjustment scheduled for the 2000 contract year. The payment system was derived from statistical risk-assessment models based on patients' health conditions that were created during Phase I.

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