About 12 million Americans are dually enrolled in both Medicare and Medicaid. Dual enrollees (duals) have higher health care needs, utilization, and costs than other Medicare and Medicaid beneficiaries. Furthermore, because dual enrollees receive health coverage through two separate programs, they face a high risk of uncoordinated, fragmented care. Many Centers for Medicare and Medicaid Services (CMS) programs and models have sought to better integrate care for dual enrollees to improve health outcomes and reduce spending, with mixed success. In 2024, a bipartisan group of US senators introduced the Delivering Unified Access to Lifesaving Services (DUALS) Act to create new integrated Medicare–Medicaid care plans for full benefit dual enrollees and a new risk adjustment system for these plans.

This brief explores principles to help guide the development of the new risk adjustment system for dual enrollees envisioned in the DUALS Act (118th Congress). We present results of a literature review, key informant interviews, and illustrative analyses exploring key questions a new risk adjustment system for DUALS Act plans would need to address. Based on our qualitative and quantitative analyses, we propose four core principles for risk adjustment in integrated plans for dual enrollees under the DUALS Act:

1. DUALS Act risk adjustment should aim to minimize incentives for plans to select particular types of enrollees; pay plans adequately to provide high-quality care to all eligible populations; and create incentives for plans to provide care efficiently.
2. DUALS Act risk adjustment can be built starting from the existing CMS-HCC model used in Medicare Advantage (MA). Unlike the CMS-HCC model used in MA, however, DUALS Act risk adjustment will need to account for LTSS and behavioral health spending, which may require collecting new types of data like functional status.
3. Other risk mitigation approaches, such as a temporary or permanent two-sided reinsurance program, would help to stabilize the transition to integrated risk adjustment for Medicare and Medicaid services, reduce incentives for plans to avoid the most expensive dual enrollees, and reduce incentives for plans to upcode.
4. Policymakers will need to carefully consider how the payment and risk adjustment systems for DUALS Act plans will interact with other aspects of the Medicare and Medicaid managed care markets.

Additionally, we find practical implementation of a new risk adjustment system for dual enrollees should consider:

• Developing a national risk adjustment model for DUALS Act plans is a worthy goal, but state-specific components and flexibilities will likely be needed to account for state differences in eligibility, benefits, and plan designs.
• New data and new risk adjustment approaches, like incorporating electronic health record (EHR) data, could be considered if significant operational barriers can be overcome.
• Improvements to Medicaid data collection may be necessary to ensure accurate risk adjustment.