Measuring coding intensity in the Medicare Advantage program

In 2004, Medicare implemented a system of paying Medicare Advantage (MA) plans that gave them greater incentive than fee-for-service (FFS) providers to report diagnoses.

Risk scores for all Medicare beneficiaries 2004-2013 and Medicare Current Beneficiary Survey (MCBS) data, 2006-2011.

Change in average risk score for all enrollees and for stayers (beneficiaries who were in either FFS or MA for two consecutive years). Prevalence rates by Hierarchical Condition Category (HCC).

Each year the average MA risk score increased faster than the average FFS score. Using the risk adjustment model in place in 2004, the average MA score as a ratio of the average FFS score would have increased from 90% in 2004 to 109% in 2013. Using the model partially implemented in 2014, the ratio would have increased from 88% to 102%. The increase in relative MA scores appears to largely reflect changes in diagnostic coding, not real increases in the morbidity of MA enrollees. In survey-based data for 2006-2011, the MA-FFS ratio of risk scores remained roughly constant at 96%. Intensity of coding varies widely by contract, with some contracts coding very similarly to FFS and others coding much more intensely than the MA average. Underpinning this relative growth in scores is particularly rapid relative growth in a subset of HCCs.

Medicare has taken significant steps to mitigate the effects of coding intensity in MA, including implementing a 3.4% coding intensity adjustment in 2010 and revising the risk adjustment model in 2013 and 2014. Given the continuous relative increase in the average MA risk score, further policy changes will likely be necessary.