Decoding Medicare Advantage Coding Intensity
Doctors and other health care providers include diagnosis codes on claims they submit to payers (either Medicare Administrative Contractors for traditional Medicare or private insurers for Medicare Advantage) indicating a patient’s health conditions that support the health care services they delivered. The diagnosis codes for traditional Medicare beneficiaries are also used by CMS, along with other information, to develop a risk adjustment model estimating the relationship between a person’s health status and their projected health care spending. Medicare Advantage insurers submit the diagnosis codes documented by health care providers serving their enrollees to CMS for use in adjusting the payments the plans receive from the federal government using this risk adjustment model.
While the diagnosis codes used to develop the risk adjustment model only come from the claims providers submit for services rendered to traditional Medicare beneficiaries, those used to adjust payments to Medicare Advantage plans can be supplemented in two ways. First, Medicare Advantage plans may conduct health risk assessments and include the diagnosis codes for any conditions identified during this questionnaire in what is submitted to CMS – even when there are no related services delivered during the year to treat those conditions. KFF analysis finds that insurers often use rewards and incentives to encourage enrollees to complete HRAs. Second, Medicare Advantage plans may conduct chart reviews, which examine a person’s medical records, sometimes using AI tools, to determine if they are consistent with the information submitted by health care providers to the insurer. KFF analysis finds that chart reviews are used to add diagnosis codes that do not otherwise appear on a record for an encounter with a physician, increasing payments from CMS to Medicare Advantage insurers for one in six Medicare Advantage enrollees.
What is coding intensity?
Coding intensity is the degree to which a person’s health care conditions are documented through diagnosis codes. Differences in coding patterns across groups of beneficiaries, such as Medicare Advantage enrollees and traditional Medicare beneficiaries, or those in Medicare Advantage plans sponsored by different insurers, are described as differences in coding intensity. Higher coding intensity is not necessarily fraudulent, but fraud can contribute to higher coding intensity.
Because Medicare Advantage payments are generally higher for enrollees with more diagnosis codes (and therefore higher risk scores), private insurers have an incentive to document more health conditions, but there is no similar incentive in traditional Medicare. Recognizing this incentive, lawmakers have required CMS to reduce Medicare Advantage risk scores by at least 5.9% across the board before adjusting payments to private plans. However, that adjustment does not fully account for difference in coding patterns, and a number of studies have documented that risk scores are still higher in Medicare Advantage after applying the coding intensity adjustment than they would be if enrollees received their Medicare benefits under traditional Medicare. The magnitude of the uncorrected coding intensity after the adjustment has varied over time, ranging from as low as 2% in 2016 to 10% in 2023, and is estimated to be approximately 4% in 2026, according to MedPAC. The magnitude also varies by insurer and is larger for insurers comprising a larger share of enrollment.