Upcoding of Diagnoses in Medicare Advantage plans
Eric Roehm, MD March 2017
The financial incentives for Medicare Advantage plans to upcode diagnoses are substantial. Though there have been times when upcoding in Medicare Advantage plans has been fraudulent, the majority of the upcoding is simply driven by the strong financial incentive to maximally code to the greatest allowable extent.
The reimbursement that Medicare Advantage plans receive for an individual patient from the government is directly related to that patient’s diagnostic codes. Medicare risk adjustment factor is created for each patient using the patient’s diagnoses along with demographic data (age, sex, etc.). Since the reimbursement to private insurers of Medicare Advantage plans is directly tied to the Medicare risk adjustment factor (not the case in traditional Medicare), Medicare Advantage plans have strong incentives to report diagnostic information more completely than traditional fee-for-service Medicare.
The Medicare Payment Advisory Commission (MedPAC) has done studies indicating that the risk adjustment factor scores have increased 8-9% faster in recent years in Medicare Advantage plans compared to Medicare fee-for-service populations despite indicators that the disease severity of the two groups is the same. Hence, for similar populations, the coding was 8-9% higher. It has been estimated that the projected rise in coding intensity in Medicare Advantage plans could increase Medicare spending by $200 billion over 10 years.
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