Medicare Advantage and Diagnostic Accuracy

There have been recent suggestions that Medicare Advantage plans are receiving excessive reimbursement from CMS as a result of “up coding” in the risk adjustment system.  There are a number of reasons why these suggestions are inaccurate and counterproductive.

First, one must understand where the codes submitted for risk adjustment originate.  The majority of diagnostic codes that drive risk adjustment are captured from claims, and the majority of claims data originate from outpatient encounters generated by physician offices in which payments are a function of procedures rather than diagnoses.  For that reason, there is a high error rate in those submissions, and, since the risk adjustment model was built on fee for service Medicare claims, the error rate is built into the model as well.

Since Medicare Advantage plans are reimbursed based on diagnostic data, there has been an impetus to improve diagnostic coding. Accuracy and specificity in coding is very different from “up coding.” CMS has correctly taken the position that it is in the interest of Medicare beneficiaries to have a correct and complete record of their medical conditions, and the risk adjustment system provides a powerful incentive in that direction.

Conversion to encounter based submissions will have a defining effect on risk adjustment payments as well.  It is the stated intention of CMS to use the encounter data/RAPS submission overlap period to create a Medicare Advantage specific reference data base with which to recalibrate the risk adjustment model.  When that is done, the difference in coding accuracy between fee for service Medicare and Medicare Advantage cease to be a factor.

Finally, the risk adjustment system affords a unique value to Medicare Advantage members.  Because they are reimbursed for accurately documenting the members’ medical conditions, a number of forward thinking plans have instituted programs of detailed diagnostic evaluations of their members.  Since risk adjustment diagnoses cannot be submitted without a demonstrable link to care for those diagnoses, plans are collecting data on gaps in care and helping the members and their physicians address those gaps.  Plans are being rated and will be partially reimbursed based on their performance in this area. That kind of care coordination is not possible in a fee for service setting and is of undeniable benefit to the nation’s elderly.

Overall, the Medicare Advantage risk adjustment system is a striking example of using financial incentives to positively influence the delivery of health care.  It is yet another example of the Medicare system creating a model that can be productively exported to other government health care programs and to the private sector.