The new risk adjustment formula in Germany: implementation and first experiences.

In Germany risk adjustment is a core element of the regulatory framework of competition between sickness funds. It shall create a level playing field between funds with very heterogeneous risk structures. Prior to 2009 risk adjustment was mainly by a demographic model. In 2009 morbidity based risk adjustment was introduced, embedded in a broader reform of the statutory health insurance system. The new formula covers 80 "severe" or "costly and chronic" diseases structured in a system of hierarchical groups. The performance of the new system was evaluated by the Advisory Board of Scientific Experts on Risk Adjustment to the Federal Insurance Office. The evaluation is based on the data of the first year 2009. Individual level as well as group level performance improved considerably comparing to the old model. Also predictive accuracy on the sickness funds level improved. The evaluation analyzed coding and prescription patterns in a joint point analyses. No changes of coding behavior which can be ascribed to the introduction of the new system were found. Some issues for further improvement were identified: A systematic underpayment for higher age groups is observed due to not annualizing the costs of the deceased. Systematic underpayment for multi-morbidity and systematic over-payment for those without any medical conditions can also be observed, although the level of over-/underpayment was clearly reduced compared to the old model.