Applications of health risk adjustment: what can be learned from experience to date?

Health-based payment is a key component of any strategy for health care reform. This paper summarizes four case studies describing "real-world" applications of health status risk adjustment to determine payments to health plans and providers. For each case study, the context for risk adjustment, the data and methods employed, and the implementation experience are assessed. The experience shows that the tools and methods required for determining health-based payments are available, and in many cases, well developed. They have been applied with success in different settings for different populations. Although many operational issues need to be addressed, obstacles can be overcome and the implementation of health-based payments is a feasible objective.