What does a prospective risk adjustment model utilize to adjust payments?

A prospective risk adjustment model uses prior year diagnoses and demographic information to adjust payments because it relies on historical data to predict future healthcare costs for patients. This model evaluates the health status of individuals based on their previous medical history and demographic characteristics, such as age and sex, which are key indicators of potential future health care needs and expenditures.

By incorporating diagnoses from the previous year, the model can assess the complexity and severity of patients' conditions, thus creating a more accurate representation of their risk levels. This approach enables insurers and healthcare providers to allocate resources more effectively and ensure that payments align with the anticipated costs of care for various patient populations.

Other options are not accurate in this context; for instance, solely relying on future expenditures would not provide enough historical context to make informed predictions. Current medication usage alone does not provide a comprehensive view of a patient's overall health status, and limiting the model to only claims data from the past fails to incorporate critical demographic factors that influence health risks.