About 28 million Medicare beneficiaries — 43 percent of those eligible for Medicare — are enrolled in a Medicare Advantage plan, and this number is projected to reach 50 percent by 2025.
Despite Medicare Advantage’s ability to deliver care more efficiently, the Medicare program pays more for Medicare Advantage enrollees than it does for similar beneficiaries enrolled in traditional Medicare. There is clear evidence that the Medicare program overpays Medicare Advantage plans in part as a result of plans’ coding intensity —that is, aggressively coding enrollees’ diagnoses to produce higher risk scores and generate higher payments to plans.
Federal law requires CMS to adjust Medicare Advantage risk scores by at least 5.9 percent to recapture excess spending due to “upcoding.” However, the coding intensity adjustment made by CMS is consistently smaller than estimates of upcoding by Medicare Advantage plans even though CMS has the authority to make a larger adjustment. The Medicare Payment Advisory Commission (MedPAC) found that even after accounting for CMS’ coding adjustment of 5.9 percent, Medicare Advantage plans’ risk scores were still an additional 3.6 percent higher than risk scores for similar beneficiaries enrolled in fee-for-service, costing taxpayers and beneficiaries $12 billion in excess payments to Medicare Advantage plans in a single year.
In response to CMS’ request for comments on the Calendar Year (CY) 2023 Medicare Advantage and Part D Advance Notice, Arnold Ventures outlined its support for CMS to increase the coding intensity factor beyond the minimum adjustment required by statue to more appropriately account for diagnostic coding intensity in Medicare Advantage plans. With the Medicare Hospital Insurance Trust Fund facing insolvency in 2026, the Medicare program cannot afford this level of overpayment. Increasing the coding intensity factor would ensure more accurate payments to Medicare Advantage plans and reduce Medicare program spending. In doing so, it would also extend the solvency of the Medicare Hospital Insurance Trust Fund.