What is the Medicaid Chronic Illness and Disability Payment System (CDPS)?

Oct 30th, 2024

The Medicaid Chronic Illness and Disability Payment System (CDPS) is a diagnostic-based risk adjustment model used to calculate payments for Medicaid health plans, particularly for those covering individuals with chronic illnesses and disabilities. Developed at University of California (UC) San Diego, CDPS helps the states to allocate resources based on enrollees' health status, using diagnostic codes and, in the enhanced version CDPS+Rx, pharmacy data. This model ensures Medicaid payments to managed care organizations (MCOs) reflect the likely cost of care for enrollees with higher medical needs.

Resource: CLICK HERE to read information from the University of California about the CDPS payment system.

States use CDPS to make capitated payments that are adjusted for risk, meaning the payments to Medicaid MCOs are calibrated to reflect the predicted healthcare costs of beneficiaries with varying health conditions.

CDPS is diagnosis based, meaning that it uses International Classification of Disease (ICD-10-CM) codes which are grouped into categories for different levels of diseases and conditions (e.g., like psychiatric or cancer). These categories are then used to help ensure that there is more accurate funding allocated for complex care needs. The aim is to improve cost-efficiency and patient quality of care​.

Does this concept of diagnostically related groups sound familiar? CMS has been using Diagnosis Related Groups (DRGs) for many years as part of Medicare’s hospital reimbursement system.

Tip: CLICK HERE to learn about CMS’ risk-adjustment models.