SMDL# 01-028  
August 28, 2001 
Dear State Medicaid Director: 
In September 2000, the Centers for Medicare & Medicaid Services (CMS), the agency 
formerly known as the Health Care Financing Administration, awarded a contract to 
Actuarial Research Corporation (ARC), with a subcontract to the University of 
Maryland's Center for Health Program Development and Management (CHPDM), to 
provide technical assistance to states concerning health-based risk adjustment 
payment systems for Medicaid. Both organizations have experience consulting with 
organizations that have successfully developed and implemented risk adjustment 
payment models. The primary objective of the project is to assist states in creating 
equitable payment systems for their managed care organizations and prepaid health 
plans by risk adjusting payments using health status and other characteristics of 
Medicaid beneficiaries. 
On Sunday, October 14, 2001, from 3:00 p.m. to 5:00 p.m., CMS invites you, or a 
designee, to attend an executive level session on this topic for State Medicaid 
Directors at the fall American Public Human Services Association meeting at the 
Hyatt Regency Bethesda in Bethesda, Maryland. John Kaelin, executive director of 
CHPDM, will facilitate this session, which will include a reactor panel of your 
colleagues who have successfully implemented risk adjustment payment models. The 
discussion will provide practical information about the opportunities and risks of 
adopting a health-based risk adjustment payment system. 
Currently, 10 states have implemented comprehensive health based risk adjustment 
payment systems. The CHPDM surveyed these states about their experiences and, in 
April 2001, held the first of two intensive forums with these states. The second 
forum will be held in September 2001. The goal of the forums is to address key 
issues that states must tackle when moving to risk adjustment payment systems. 
State staff exchanged information on issues, challenges, experiences, tools, and the 
information systems capacity needed to implement risk adjustment payment models. 
The product of these forums will be a comprehensive guidance manual for states on 
choices and challenges they may face when developing and implementing these 
systems. 
If you want to learn more about risk adjustment and its principles or are preparing to 
implement a risk adjustment payment methodology, you will greatly benefit from 
this session. Please call John Mark Young, CMS Project Officer, at (410) 786-0505 by 
October 5, 2001, to confirm your, or a designee's attendance. Also, feel free to call 
John if you have questions about this session. 
Sincerely, 
/s/ 
Dennis G. Smith  
Center for Medicaid and State Operations  Enclosure 
cc: 
CMS Regional Administrators 
CMS Associate Regional Administrators for Medicaid and State Operations 
Lee Partridge  
Director, Health Policy Unit  
American Public Human Services Association 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures 
Matt Salo  
Director of Health Legislation  
National Governors' Association 
Brent Ewig  
Senior Director, Access Policy  
Association of State and Territorial Officials 
Sally McElroy  
Associate Legislative Director  
National Association of Counties