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The authors document the development of the CMS frailty adjustment model, a Medicare payment approach that adjusts payments to a Medicare managed care organization (MCO) according to the functional impairment of its community-residing enrollees. Beginning in 2004, this approach is being applied to certain organizations, such as Program of All-Inclusive Care for the Elderly (PACE), that specialize in providing care to the community-residing frail elderly. In the future, frailty adjustment could be extended to more Medicare managed care organizations
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