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Risk adjustment of Medicare capitation payments using the CMS-HCC model

Health Care Financing Review,  Summer, 2004  by Gregory C. Pope,  John Kautter,  Randall P. Ellis,  Arlene S. Ash,  John Z. Ayanian,  Lisa I. Iezzoni,  Melvin J. Ingber,  Jesse M. Levy,  John Robst

<< Page 1  Continued from page 14.  Previous | Next
Table 1
Predictive Ratios (1) for Alternative Risk-Adjustment Models

Category                             Model

Quintiles of Expenditures  Age/Sex  PIP-DCG  DCG/HCC
First (Lowest)              2.66     2.09     1.23
Second                      1.93     1.54     1.23
Third                       1.37     1.10     1.14
Fourth                      0.95     0.84     1.02
Fifth (Highest)             0.44     0.75     0.86
Top 5 Percent               0.28     0.61     0.77
Top 1 Percent               0.17     0.47     0.69

Hospitalizations
None                        1.33     1.07     1.03
1                           0.63     1.02     1.02
2                           0.44     0.91     0.98
3 or More                   0.26     0.69     0.82

Diagnoses (2)
Heart Failure               0.47     0.74     0.97
Heart Attack                0.45     0.78     0.98
COPD                        0.59     0.79     0.99
Hip Fracture                0.56     0.83     0.99
Depression                  0.54     0.77     0.92
Colorectal Cancer           0.60     0.78     0.98
Cerebral Hemorrhage         0.44     0.73     1.04

(1) Mean predicted cost divided by mean actual cost.

(2) From either inpatient or ambulatory setting.

NOTES: Expenditures, hospitalizations, and diagnoses are measured in
the base year. COPD is chronic obstructive pulmonary disease.
SOURCE: (Pope et al., 2000b.)

Table 2 Centers for Medicare & Medicaid Services-Hierarchical Condition
Categories (CMS-HCC) Combined, Community, and Institutional Models

                                       Models

                          Combined    Community   Institutional

Number of Observations    1,337,887   1,291,308      65,593
[R.sup.2]                  0.0977      0.0976        0.0596
Adjusted [R.sup.2]         0.0977      0.0976        0.0589
Dependent Variable Mean      5,352       5,213        8,937
Root Mean Square Error      13,407      13,337       15,954
Model Parameters             105         105           50

Variable                                  Parameter
                                          Estimate   t-ratio

Female
0-34 Years                                    678      3.81
35-44 Years                                 1,110      8.82
45-54 Years                                 1,177     11.20
55-59 Years                                 1,463     11.87
60-64 Years                                 1,996     17.26
65-69 Years                                 1,648     42.11
70-74 Years                                 2,061     60.25
75-79 Years                                 2,562     71.59
80-84 Years                                 2,998     71.39
85-89 Years                                 3,360     63.45
90-94 Years                                 3,683     46.81
95 Years or Over                            3,128     23.27

Male
0-34 Years                                    405      2.72
35-44 Years                                   701      6.63
45-54 Years                                 1,059     12.15
55-59 Years                                 1,460     13.42
60-64 Years                                 1,824     17.90
65-69 Years                                 1,827     41.47
70-74 Years                                 2,380     59.66
75-79 Years                                 3,031     69.04
80-84 Years                                 3,454     62.03
85-89 Years                                 4,129     52.24
90-94 Years                                 4,505     32.20
95 Years or Over                            4,753     15.83

Medicaid and Originally Disabled
 Interactions with Age and Sex
Medicaid-Female-Disabled                    1,141     11.31
Medicaid-Female-Aged                          616     12.91
Medicaid-Male-Disabled                        632      6.80
Medicaid-Male-Aged                            788     10.33

Originally Disabled-Female                  1,231     17.34
Originally Disabled-Male                      809     11.66

Disease Coefficients Label
HCC1       HIV/AIDS                         3,587     13.16
HCC2       Septicemia/Shock                 4,365     34.74
HCC5       Opportunistic Infections         3,643     10.43
HCC7       Metastatic Cancer and
            Acute Leukemia                  7,438     81.16
HCC8       Lung, Upper Digestive Tract,
            and Other Severe Cancers        7,438     81.16
HCC9       Lymphatic, Head and Neck,
            Brain, and Other
            Major Cancers                   3,540     35.91
HCC10      Breast, Prostate, Colorectal
            and Other Cancers
            and Tumors                      1,209     26.35
HCC15      Diabetes with Renal or
            Peripheral Circulatory
            Manifestation                   3,827     37.71
HCC16      Diabetes with Neurologic or
            Other Specified
            Manifestation                   2,931     30.09
HCC17      Diabetes with Acute
            Complications                   2,056      7.84
HCC18      Diabetes with
            Ophthalmologic or
            Unspecified Manifestation       1,839     18.35
HCC19      Diabetes without Complication    1,055     26.10
HCC21      Protein-Calorie Malnutrition     3,818     27.52
HCC25      End-Stage Liver Disease          4,496     14.91
HCC26      Cirrhosis of Liver               2,727     11.93
HCC27      Chronic Hepatitis                1,839      6.73
HCC31      Intestinal Obstruction/
            Perforation                     1,997     21.69
HCC32      Pancreatic Disease               2,336     17.30
HCC33      Inflammatory Bowel Disease       1,574     10.25
HCC37      Bone/Joint/Muscle Infections/
            Necrosis                        2,629     19.68
HCC38      Rheumatoid Arthritis and
            Inflammatory Connective
            Tissue Disease                  1,683     27.72
HCC44      Severe Hematological
            Disorders                       5,055     30.80
HCC45      Disorders of Immunity            4,224     26.77
HCC51      Drug/Alcohol Psychosis           1,571      6.57
HCC52      Drug/Alcohol Dependence          1,477      6.15
HCC54      Schizophrenia                    2,592     26.75
HCC55      Major Depressive, Bipolar,
            and Paranoid Disorders          2,024     30.00
HCC67      Quadriplegia, Other
            Extensive Paralysis             5,665     27.45
HCC68      Paraplegia                       5,665     27.45
HCC69      Spinal Cord Disorders/
            Injuries                        2,484     17.77
HCC70      Muscular Dystrophy               2,239      3.82
HCC71      Polyneuropathy                   1,480     19.74
HCC72      Multiple Sclerosis               2,329     11.44
HCC73      Parkinson's and Huntington's
            Diseases                        1,954     19.69
HCC74      Seizure Disorders and
            Convulsions                     1,334     17.25
HCC75      Coma, Brain Compression/
            Anoxic Damage                   2,396      7.88   C1
HCC77      Respirator Dependence/
            Tracheostomy Status            10,417     29.54
HCC78      Respiratory Arrest               7,543     20.23
HCC79      Cardio-Respiratory Failure
            and Shock                       3,451     42.70
HCC80      Congestive Heart Failure         2,055     38.48
HCC81      Acute Myocardial Infarction      1,885     31.23
HCC82      Unstable Angina and Other
            Acute Ischemic Heart
            Disease                         1,885     31.23
HCC83      Angina Pectoris/Old
            Myocardial                      1,246     22.82
            Infarction
HCC92      Specified Heart Arrhythmias      1,362     31.73
HCC95      Cerebral Hemorrhage              1,901     10.05
HCC96      Ischemic or Unspecified
            Stroke                          1,498     20.90
HCC100     Hemiplegia/Hemiparesis           1,678     13.96
HCC101     Cerebral Palsy and Other
            Paralytic Syndromes               767      3.34
HCC104     Vascular Disease with
            Complications                   3,432     36.22
HCC105     Vascular Disease                 1,662     39.94
HCC107     Cystic Fibrosis                  1,936     45.73
HCC108     Chronic Obstructive Pulmonary
            Disease                         1,936     45.73
HCC111     Aspiration and Specified
            Bacterial Pneumonias            3,010     20.47
HCC112     Pneumococcal Pneumonia,
            Empyema, Lung Abscess           1,151      6.55
HCC119     Proliferative Diabetic
            Retinopathy and
            Vitreous Hemorrhage             1,975     13.36
HCC130     Dialysis Status                 15,926     26.97
HCC131     Renal Failure                    2,908     23.20
HCC132     Nephritis                        1,541      6.95
HCC148     Decubitus Ulcer of Skin          3,888     32.32
HCC149     Chronic Ulcer of Skin, Except
            Decubitus                       2,381     26.76
HCC150     Extensive Third-Degree
            Burns                           4,427      2.36
HCC154     Severe Head Injury               2,396      7.88   C1
HCC155     Major Head Injury                1,211      8.43
HCC157     Vertebral Fractures w/o
            Spinal Cord Injury              2,462     20.64
HCC158     Hip Fracture/Dislocation         1,301     13.37
HCC161     Traumatic Amputation             3,965     17.86   C2
HCC164     Major Complications of
            Medical Care and Trauma         1,438     18.25
HCC174     Major Organ Transplant Status    3,790      8.55
HCC176     Artificial Openings for
            Feeding or Elimination          3,810     23.84
HCC177     Amputation Status, Lower
           Limb/Amputation Complications    3,965     17.86   C2

Disabled/Disease Interactions
D-HCC5     Disabled Opportunistic
            Infections                      3,965      5.49
D-HCC44    Disabled Severe
            Hematological Disorders         4,649      9.98
D-HCC51    Disabled Drug/Alcohol
            Psychosis                       2,830      7.12
D-HCC52    Disabled Drug/Alcohol
            Dependence                      2,160      6.90
D-HCC107   Disabled Cystic Fibrosis         9,691      6.70

Disease Interactions
INT1       DM-CHF1                          1,265     14.62
INT2       DM-CVD                             490      4.05
INT3       CHF-COPD                         1,261     14.82
INT4       COPD-CVD-CAD                       316      1.49
INT5       RF-CHF1                            857      3.94
INT6       RF-CHF-DM1                       4,185     18.48

Variable                                  Parameter
                                          Estimate   t-ratio

Female
0-34 Years                                    598      3.36
35-44 Years                                 1,012      8.03
45-54 Years                                 1,096     10.40
55-59 Years                                 1,360     11.00
60-64 Years                                 1,924     16.56
65-69 Years                                 1,572     40.15
70-74 Years                                 1,970     57.42
75-79 Years                                 2,475     68.56
80-84 Years                                 2,936     68.34
85-89 Years                                 3,408     61.01
90-94 Years                                 4,077     46.25
95 Years or Over                            4,130     25.32

Male
0-34 Years                                    346      2.32
35-44 Years                                   617      5.81
45-54 Years                                   973     11.14
55-59 Years                                 1,386     12.68
60-64 Years                                 1,755     17.13
65-69 Years                                 1,774     40.28
70-74 Years                                 2,323     58.17
75-79 Years                                 2,960     67.13
80-84 Years                                 3,372     59.83
85-89 Years                                 4,050     49.80
90-94 Years                                 4,620     31.08
95 Years or Over                            5,307     15.89

Medicaid and Originally Disabled
 Interactions with Age and Sex
Medicaid-Female-Disabled                    1,133     11.18
Medicaid-Female-Aged                          940     18.18
Medicaid-Male-Disabled                        592      6.31
Medicaid-Male-Aged                            944     11.62

Originally Disabled-Female                  1,213     16.44
Originally Disabled-Male                      757     10.73

Disease Coefficients Label
HCC1       HIV/AIDS                         3,514     12.88
HCC2       Septicemia/Shock                 4,563     32.92
HCC5       Opportunistic Infections         3,346      9.29
HCC7       Metastatic Cancer and
            Acute Leukemia                  7,510     81.00
HCC8       Lung, Upper Digestive Tract,
            and Other Severe Cancers        7,510     81.00
HCC9       Lymphatic, Head and Neck,
            Brain, and Other
            Major Cancers                   3,539     35.51
HCC10      Breast, Prostate, Colorectal
            and Other Cancers
            and Tumors                      1,194     25.79
HCC15      Diabetes with Renal or
            Peripheral Circulatory
            Manifestation                   3,921     36.90
HCC16      Diabetes with Neurologic or
            Other Specified
            Manifestation                   2,833     28.43
HCC17      Diabetes with Acute
            Complications                   2,008      7.41
HCC18      Diabetes with
            Ophthalmologic or
            Unspecified Manifestation       1,760     17.32
HCC19      Diabetes without Complication    1,024     25.02
HCC21      Protein-Calorie Malnutrition     4,727     29.77
HCC25      End-Stage Liver Disease          4,616     14.92
HCC26      Cirrhosis of Liver               2,645     11.37
HCC27      Chronic Hepatitis                1,841      6.71
HCC31      Intestinal Obstruction/
            Perforation                     2,094     21.62
HCC32      Pancreatic Disease               2,281     16.61
HCC33      Inflammatory Bowel Disease       1,575     10.16
HCC37      Bone/Joint/Muscle Infections/
            Necrosis                        2,546     18.41
HCC38      Rheumatoid Arthritis and
            Inflammatory Connective
            Tissue Disease                  1,653     26.93
HCC44      Severe Hematological
            Disorders                       5,188     30.69
HCC45      Disorders of Immunity            4,260     26.64
HCC51      Drug/Alcohol Psychosis           1,810      6.99
HCC52      Drug/Alcohol Dependence          1,361      5.44
HCC54      Schizophrenia                    2,786     27.04
HCC55      Major Depressive, Bipolar,
            and Paranoid Disorders          2,209     30.85
HCC67      Quadriplegia, Other
            Extensive Paralysis             6,059     27.20
HCC68      Paraplegia                       6,059     27.20
HCC69      Spinal Cord Disorders/
            Injuries                        2,526     17.45
HCC70      Muscular Dystrophy               1,981      3.27
HCC71      Polyneuropathy                   1,377     18.06
HCC72      Multiple Sclerosis               2,654     12.19
HCC73      Parkinson's and Huntington's
            Diseases                        2,436     22.04
HCC74      Seizure Disorders and
            Convulsions                     1,381     16.68
HCC75      Coma, Brain Compression/
            Anoxic Damage                   2,912      8.62   C1
HCC77      Respirator Dependence/
            Tracheostomy Status            10,783     28.46
HCC78      Respiratory Arrest               7,327     18.79
HCC79      Cardio-Respiratory Failure
            and Shock                       3,550     42.39
HCC80      Congestive Heart Failure         2,141     38.54
HCC81      Acute Myocardial Infarction      1,785     29.13
HCC82      Unstable Angina and Other
            Acute Ischemic Heart

            Disease                         1,785     29.13
HCC83      Angina Pectoris/Old
            Myocardial                      1,205     21.76
            Infarction
HCC92      Specified Heart Arrhythmias      1,363     30.95
HCC95      Cerebral Hemorrhage              2,011      9.88
HCC96      Ischemic or Unspecified
            Stroke                          1,569     20.34
HCC100     Hemiplegia/Hemiparesis           2,241     16.61
HCC101     Cerebral Palsy and Other
            Paralytic Syndromes               840      3.42
HCC104     Vascular Disease with
            Complications                   3,473     35.49
HCC105     Vascular Disease                 1,832     41.72
HCC107     Cystic Fibrosis                  1,929     44.87
HCC108     Chronic Obstructive Pulmonary
            Disease                         1,929     44.87
HCC111     Aspiration and Specified
            Bacterial Pneumonias            3,556     21.53
HCC112     Pneumococcal Pneumonia,
            Empyema, Lung Abscess           1,034      5.68
HCC119     Proliferative Diabetic
            Retinopathy and
            Vitreous Hemorrhage             1,791     11.96
HCC130     Dialysis Status                 15,778     25.96
HCC131     Renal Failure                    2,954     22.73
HCC132     Nephritis                        1,401      6.23
HCC148     Decubitus Ulcer of Skin          5,285     37.28
HCC149     Chronic Ulcer of Skin, Except
            Decubitus                       2,485     26.65
HCC150     Extensive Third-Degree
            Burns                           4,935      2.54
HCC154     Severe Head Injury               2,912      8.62   C1
HCC155     Major Head Injury                1,239      8.08
HCC157     Vertebral Fractures w/o
            Spinal Cord Injury              2,514     20.23
HCC158     Hip Fracture/Dislocation         2,010     18.51
HCC161     Traumatic Amputation             4,322     17.92   C2
HCC164     Major Complications of
            Medical Care and Trauma         1,346     16.60
HCC174     Major Organ Transplant Status    3,702      8.37
HCC176     Artificial Openings for
            Feeding or Elimination          4,054     22.39
HCC177     Amputation Status, Lower
           Limb/AmputationComplications     4,322     17.92   C2

Disabled/Disease Interactions
D-HCC5     Disabled Opportunistic
            Infections                      4,047      5.52
D-HCC44    Disabled Severe
            Hematological Disorders         4,580      9.72
D-HCC51    Disabled Drug/Alcohol
            Psychosis                       2,608      6.32
D-HCC52    Disabled Drug/Alcohol
            Dependence                      2,122      6.61
D-HCC107   Disabled Cystic Fibrosis         9,547      6.63

Disease interactions
INT1       DM-CHF1                          1,296     14.46
INT2       DM-CVD                            639       4.89
INT3       CHF-COPD                         1,238     14.06
INT4       COPD-CVD-CAD                      406       1.82
INT5       RF-CHF1                          1,202      5.24
INT6       RF-CHF-DM1                       4,433     18.71

Variable                                  Parameter
                                          Estimate   t-ratio

Female
0-34 Years                                  5,457     11.72
35-44 Years                                 5,457     11.72
45-54 Years                                 5,457     11.72
55-59 Years                                 5,457     11.72
60-64 Years                                 5,457     11.72
65-69 Years                                 5,970     11.73
70-74 Years                                 6,049     17.09
75-79 Years                                 5,089     19.63
80-84 Years                                 4,813     22.51
85-89 Years                                 4,515     23.28
90-94 Years                                 4,048     19.08
95 Years or Over                            2,980     10.34

Male
0-34 Years                                  5,664     13.77
35-44 Years                                 5,664     13.77
45-54 Years                                 5,664     13.77
55-59 Years                                 5,664     13.77
60-64 Years                                 5,664     13.77
65-69 Years                                 7,435     13.24
70-74 Years                                 6,350     14.34
75-79 Years                                 6,210     16.45
80-84 Years                                 6,201     17.67
85-89 Years                                 6,366     17.40
90-94 Years                                 5,378     11.29
95 Years or Over                            4,287      5.34

Medicaid and Originally Disabled
 Interactions with Age and Sex
Medicaid-Female-Disabled                     --        --
Medicaid-Female-Aged                         --        --
Medicaid-Male-Disabled                       --        --
Medicaid-Male-Aged                           --        --

Originally Disabled-Female                   --        --
Originally Disabled-Male                     --        --

Disease Coefficients Label
HCC1       HIV/AIDS                         6,893      5.42   C1
HCC2       Septicemia/Shock                 4,854     13.89
HCC5       Opportunistic Infections         6,893      5.42   C1
HCC7       Metastatic Cancer and
            Acute Leukemia                  2,771      4.54
HCC8       Lung, Upper Digestive Tract,
            and Other Severe Cancers        2,771      4.54
HCC9       Lymphatic, Head and Neck,
            Brain, and Other
            Major Cancers                   2,319      3.50
HCC10      Breast, Prostate, Colorectal
            and Other Cancers
            and Tumors                      1,330      4.01
HCC15      Diabetes with Renal or
            Peripheral Circulatory
            Manifestation                   3,137     10.49
HCC16      Diabetes with Neurologic or
            Other Specified
            Manifestation                   3,137     10.49
HCC17      Diabetes with Acute
            Complications                   3,137     10.49
HCC18      Diabetes with
            Ophthalmologic or
            Unspecified Manifestation       3,137     10.49
HCC19      Diabetes without Complication    1,308      5.32
HCC21      Protein-Calorie Malnutrition     2,193      6.49
HCC25      End-Stage Liver Disease          1,375      5.09
HCC26      Cirrhosis of Liver               1,375      5.09
HCC27      Chronic Hepatitis                1,375      5.09
HCC31      Intestinal Obstruction/
            Perforation                     1,375      5.09
HCC32      Pancreatic Disease               1,375      5.09
HCC33      Inflammatory Bowel Disease       1,375      5.09
HCC37      Bone/Joint/Muscle Infections/
            Necrosis                        2,539      4.42
HCC38      Rheumatoid Arthritis and
            Inflammatory Connective
            Tissue Disease                  1,463      3.61
HCC44      Severe Hematological
            Disorders                       2,299      4.08
HCC45      Disorders of Immunity            2,299      4.08
HCC51      Drug/Alcohol Psychosis           1,131      6.06
HCC52      Drug/Alcohol Dependence          1,131      6.06
HCC54      Schizophrenia                    1,131      6.06
HCC55      Major Depressive, Bipolar,
            and Paranoid Disorders          1,131      6.06
HCC67      Quadriplegia, Other
            Extensive Paralysis               504      3.94
HCC68      Paraplegia                         504      3.94
HCC69      Spinal Cord Disorders/
            Injuries                          504      3.94
HCC70      Muscular Dystrophy                 504      3.94
HCC71      Polyneuropathy                     504      3.94
HCC72      Multiple Sclerosis                 504      3.94
HCC73      Parkinson's and Huntington's
            Diseases                          504      3.94
HCC74      Seizure Disorders and
            Convulsions                       504      3.94
HCC75      Coma, Brain Compression/
            Anoxic Damage                     504      3.94   C2
HCC77      Respirator Dependence/
            Tracheostomy Status             7,259      8.19
HCC78      Respiratory Arrest               7,259      8.19
HCC79      Cardio-Respiratory Failure
            and Shock                       1,481      4.31
HCC80      Congestive Heart Failure           903      4.16
HCC81      Acute Myocardial Infarction      1,476      5.75
HCC82      Unstable Angina and Other
            Acute Ischemic Heart
            Disease                         1,476      5.75
HCC83      Angina Pectoris/Old
            Myocardial                      1,476      5.75
            Infarction
HCC92      Specified Heart Arrhythmias        961      4.62
HCC95      Cerebral Hemorrhage                774      4.01
HCC96      Ischemic or Unspecified
            Stroke                            774      4.01
HCC100     Hemiplegia/Hemiparesis             504      3.94
HCC101     Cerebral Palsy and Other
            Paralytic Syndromes               504      3.94   C2
HCC104     Vascular Disease with
            Complications                   2,612      6.30
HCC105     Vascular Disease                   583      3.72
HCC107     Cystic Fibrosis                  1,180      4.69
HCC108     Chronic Obstructive Pulmonary
            Disease                         1,180      4.69
HCC111     Aspiration and Specified
            Bacterial Pneumonias            2,377      6.82
HCC112     Pneumococcal Pneumonia,
            Empyema, Lung Abscess           2,377      6.82
HCC119     Proliferative Diabetic
            Retinopathy and
            Vitreous Hemorrhage             5,102      5.46
HCC130     Dialysis Status                 15,959      5.82
HCC131     Renal Failure                    2,152      6.26
HCC132     Nephritis                        2,152      6.26
HCC148     Decubitus Ulcer of Skin          1,628      5.98
HCC149     Chronic Ulcer of Skin, Except
            Decubitus                       1,346      3.98
HCC150     Extensive Third-Degree
            Burns                           1,274      3.37
HCC154     Severe Head Injury               1,274      3.37
HCC155     Major Head Injury                1,274      3.37   C3
HCC157     Vertebral Fractures w/o
            Spinal Cord Injury                504      3.94   C2
HCC158     Hip Fracture/Dislocation             0      --
HCC161     Traumatic Amputation             1,274      3.37   C3
HCC164     Major Complications of
            Medical Care and Trauma         1,347      3.66
HCC174     Major Organ Transplant Status    4,523     11.13
HCC176     Artificial Openings for
            Feeding or Elimination          4,523     11.13
HCC177     Amputation Status, Lower
           Limb/AmputationComplications     1,274      3.37   C3

Disabled/Disease Interactions
D-HCC5     Disabled Opportunistic
            Infections                       --        --
D-HCC44    Disabled Severe
            Hematological Disorders          --        --
D-HCC51    Disabled Drug/Alcohol
            Psychosis                        --        --
D-HCC52    Disabled Drug/Alcohol
            Dependence                       --        --
D-HCC107   Disabled Cystic Fibrosis          --        --

Disease interactions
INT1       DM-CHF1                          1,064     2.91
INT2       DM-CVD                            --        --
INT3       CHF-COPD                         1,906     4.95
INT4       COPD-CVD-CAD                      --        --
INT5       RF-CHF1                           --        --
INT6       RF-CHF-DM1                        --        --

NOTES: Beneficiaries with the three-way interaction RF-CHF-DM are
excluded from the two-way interactions DM-CHF and RF-CHF. DM is
diabetes mellitus (HCCs 15-19). CHF is congestive heart failure
(HCC 80). COPD is chronic obstructive pulmonary disease (HCC 108). CVD
is cerebrovascular disease (HCCs 95-96, 100-101). CAD is coronary
artery disease (HCCs 81-83). RF is renal failure (HCC 131). "I" means
coefficients of HCCs are constrained to be equal. C1, C2, and C3 denote
non-contiguous constraints.

SOURCE: Pope, G.C. and Kautter, J., RTI International, Ellis, R.P. and
Ash, A.S., Boston University, Ayanian, J.Z., Harvard Medical School and
Brigham and Women's Hospital, lezzoni, L.I., Harvard Medical School and
Beth Israel Deaconess Medical Center, Ingber, MA., Levy, J.M., and
Robst, J., Centers for Medicare 8 Medicaid Services, Analysis of
1999-2000 Medicare 5% Standard Analytic File (SAF).

Table 3
Descriptive Statistics for Community and Institutionalized
Residents

                                    Community

                                          Mean
                                       Annualized   Predictive
Variable               Observations   Expenditures   Ratio (1)

Overall                 1,291,308         5,213        0.99

Demographics

Female
0-34 Years                  7,007         3,623        1.00
35-44 Years                15,566         4,332        1.00
45-54 Years                22,077         4,692        1.00
55-59 Years                14,023         5,254        1.00
60-64 Years                15,793         5,993        1.00
65-69 Years               129,970         3,714        1.00
70-74 Years               171,775         4,372        1.00
75-79 Years               157,586         5,260        1.00
80-84 Years               111,303         6,101        0.99
85-89 Years                66,301         6,882        0.97
90-94 Years                26,852         7,606        0.92
95 Years or Over            8,074         7,338        0.83

Male
0-34 Years                 10,272         2,868        1.00
35-44 Years                22,913         3,666        1.00
45-54 Years                29,377         3,968        1.00
55-59 Years                16,391         4,651        1.00
60-64 Years                18,581         5,214        1.00
65-69 Years               105,856         4,018        1.00
70-74 Years               128,874         5,014        1.00
75-79 Years               106,402         6,207        1.00
80-84 Years                64,263         7,083        1.00
85-89 Years                30,765         8,144        0.99
90-94 Years                 9,343         8,731        0.97
95 Years or Over            1,944         9,062        0.92

Medicaid                  196,604         6,523        0.97
Originally-Disabled        81,894         7,614        0.99

                                   Institutional

                                          Mean
                                       Annualized   Predictive
Variable                Observations  Expenditures  Ratio (1)

Overall                    65,593         8,937        1.12

Demographics

Female
0-34 Years                     49         9,251        0.99
35-44 Years                   199         9,395        0.94
45-54 Years                   473         8,869        1.07
55-59 Years                   343        10,168        0.91
60-64 Years                   501         9,906        1.04
65-69 Years                 1,380        10,961        0.99
70-74 Years                 3,098        10,901        0.97
75-79 Years                 6,260         9,458        1.08
80-84 Years                 9,801         8,797        1.13
85-89 Years                12,294         8,054        1.19
90-94 Years                 9,535         7,146        1.29
95 Years or Over            4,729         5,734        1.42

Male
0-34 Years                    106        10,622        0.95
35-44 Years                   384         9,596        0.92
45-54 Years                   606        10,186        0.91
55-59 Years                   438        10,340        0.96
60-64 Years                   588        10,486        1.00
65-69 Years                 1,132        12,432        0.88
70-74 Years                 1,921        11,501        0.99
75-79 Years                 2,842        11,411        1.04
80-84 Years                 3,404        11,049        1.06
85-89 Years                 3,116        10,754        1.08
90-94 Years                 1,783         9,489        1.20
95 Years or Over              611         8,096        1.37

Medicaid                   33,074         8,895        1.17
Originally-Disabled         7,415        10,606        1.11

(1) Ratio of mean expenditures predicted by the Centers for Medicare
& Medicaid Services--Hierarchical Condition Categories (CMS-HCC) model
for combined community/institutional samples to mean actual
expenditures.

SOURCE: Pope, G.C. and Kautter, J., RTI International, Ellis, R.P
and Ash, A.S., Boston University, Ayanian, J.Z., Harvard Medical
School and Brigham and Women's Hospital, lezzoni, L.I., Harvard
Medical School and Beth Israel Deaconess Medical Center, Ingber,
M.J., Levy, J.M., and Robst, J., Centers for Medicare & Medicaid
Services, Analysis of 1999-2000 Medicare 5% Standard Analytic
File (SAF).

Table 4
Descriptive Statistics for New and Continuing Medicare Enrollees (1)

                  New Enrollees (2)      Continuing Enrollees (3)

                               Mean                        Mean
Age/Sex                     Annualized                  Annualized
Category     Observations  Expenditures  Observations  Expenditures

Female
0-34 Years          2,540         3,532         7,037         3,653
35-44 Years         3,685         4,341        15,717         4,385
45-54 Years         5,891         4,814        22,431         4,767
55-59 Years         4,029         4,903        14,277         5,354
60-64 Years         3,310         5,705        16,159         6,094
65 Years           58,946         2,729         3,336         6,952
66 Years            1,448         3,319        29,534         3,401
67 Years              845         3,349        31,560         3,684
68 Years              531         3,116        32,578         3,740
69 Years              504         3,608        33,893         3,905
70-74 Years         1,311         4,672       173,829         4,461
75-79 Years           471         5,063       161,843         5,387
80-84 Years           200         6,043       118,144         6,276
85-89 Years            95         8,111        75,186         7,035
90-94 Years            46         5,931        34,135         7,500
95 Years or
 Over                  15         6,457        11,886         6,795

Male
0-34 Years          3,434         3,089        10,342         2,934
35-44 Years         4,281         3,690        23,172         3,746
45-54 Years         5,820         4,099        29,814         4,074
55-59 Years         4,120         4,603        16,677         4,772
60-64 Years         4,196         4,775        18,986         5,346
65 Years           46,262         2,900         3,940         6,055
66 Years            1,546         3,205        24,472         3,644
67 Years              872         2,976        25,279         3,933
68 Years              570         3,501        25,915         4,145
69 Years              490         3,638        27,009         4,295
70-74 Years         1,223         5,700       130,148         5,087
75-79 Years           429         6,476       108,214         6,307
80-84 Years           144         5,916        66,505         7,231
85-89 Years            63         8,028        32,848         8,326
90-94 Years            19        13,027        10,601         8,827
95 Years or
 Over                   2         3,221         2,420         8,867

(1) Aged and disabled beneficiaries. Excludes working aged and
ESRD beneficiaries.

(2) Enrollees with less than 12 months of base year eligibility.

(3) Enrollees with 12 months of base year eligibility.

SOURCE: Pope, G.C. and Kautter, J., RTI International, Ellis, R.P.
and Ash, A.S., Boston University, Ayanian, J.Z., Harvard Medical School
and Brigham and Women's Hospital, lezzoni, L.I., Harvard Medical School
and Beth Israel Deaconess Medical Center, Ingber, M.J., Levy, J.M., and
Robst, J., Centers for Medicare & Medicaid Services, Analysis of
1999-2000 Medicare 5% Standard Analytic File (SAF).