Health Affairs June 30, 2023
The Medicare Advantage (MA) risk-adjustment system increases and decreases MA plan payments based on the health risks of their enrollees. The current system assesses health risk based on Hierarchical Condition Categories (HCCs). This diagnosis-based approach has reduced favorable selection into MA. However, it has also created incentives to maximize risk-adjustment payments by coding as many diagnoses as possible at the highest-possible severity level (also called upcoding).
To partially correct for overpayments due to coding, the Centers for Medicare and Medicaid Services (CMS) applies a coding intensity adjustment of 5.9 percent to MA risk scores. However, this coding intensity adjustment has remained at 5.9 percent since 2018, despite the costs of coding intensity continuing to grow. Additionally, the uniform adjustment does...
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