When the Centers for Medicare & Medicaid Services (CMS) pays Medicare Advantage (MA) organizations, they increase the payments when plans enroll sicker people. This is called risk adjustment, and it is an important guardrail to ensure that all people with Medicare have access to MA plans; without risk adjustment, plans would have reasons to avoid covering people in worse health.
But getting risk adjustment right is difficult, and the higher payments give MA organizations an incentive to make their enrollees look sicker than they really are. If plans can make a healthy person look unhealthy—a process called upcoding that involves recording paper-only diagnoses—they may be able to collect those higher payments without actually providing more care. Researchers have shown that MA plans tend to enroll people who are healthier than average and use upcoding to drive up payment for these healthy individuals. If allowed to continue, some estimates put these overpayments at over $1 trillion dollars for the next decade.
A new report from the Department of Human Services Office of Inspector General (OIG), a federal watchdog agency, points to the use of Health Risk Assessments (HRAs) in driving much of this upcoding-related overspending. HRAs are often performed by companies that the plans own, and this type of integration increases the likelihood they will drive up diagnoses and collect higher payment.
To conduct HRAs, plans send representatives to visit enrollees in their homes and collect information about their health and habits. In many cases, this information is then used to diagnose the individual with conditions that make them look sicker than they are, but without leading to any follow-up care or additional spending for the plans. OIG found that some diagnoses show up much more often on HRAs than provider visits, including diabetes with chronic complications and myasthenia gravis, a serious neuromuscular disease.
OIG estimates that HRAs with no additional spending led to $7.5 billion in increased MA payment in 2023. This work follows previous OIG findings that HRAs drive upcoding, and OIG recommends that CMS bar HRAs from being used to increase risk adjustment payments.
At Medicare Rights, we have long been concerned that HRAs and other upcoding are erroneously driving MA payment, and we agree with OIG that HRAs should not be used to do so. As OIG notes, diagnoses without follow-up care or treatments suggest those diagnoses are fictitious or that people are going without needed care. Neither is acceptable.
MA overpayment burdens people with Medicare and other taxpayers. More than half of people with Medicare get their coverage from MA. If enrollment continues to rise, more and more overpayments will happen every year.
We urge policymakers to rein in these practices, including a complete overhaul of MA payment. Private insurers must not be permitted to abuse and, in some cases, defraud beneficiaries and taxpayers.
Read more about Medicare Advantage history, trends, and overpayment.
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