Certified Risk Adjustment Coder (CRC)

Which statement is true regarding hierarchies?

1. Used exclusively by CMS for Medicare Advantage plans

2. Mandated to be used for all Medicaid payment models

3. Utilized by some private payers

4. All of the above

The correct answer is: Used exclusively by CMS for Medicare Advantage plans

The correct choice regarding hierarchies emphasizes their primary use by the Centers for Medicare and Medicaid Services (CMS) within Medicare Advantage plans. Hierarchical condition categories (HCCs) are a risk adjustment model used specifically to calculate payments for Medicare Advantage plans based on the health status and demographic characteristics of enrollees. These hierarchies enable CMS to account for the varying costs associated with members who have different health conditions, ultimately ensuring that plans providing coverage to sicker, higher-cost individuals receive adequate compensation. The focus on Medicare Advantage plans highlights the structured payment system intended to support and manage the healthcare needs of seniors enrolled in these plans. While there are some applications of risk adjustment methodologies in Medicaid and private insurance markets, they are not universally mandated for every payment model. This distinct focus reinforces the accuracy and appropriateness of the statement confirming that hierarchies are used largely in the context of Medicare Advantage, rather than across all payers or payment models.