Exposure to the new Medicare Advantage risk adjustment model varies across insurers

Medicare Advantage plan payment depends on the health of enrolled patients. As a result, the extent to which beneficiary clinical severity is documented administratively-known as coding intensity-is greater in Medicare Advantage (MA) than in traditional Medicare, which inflates payment to plans. In 2024, the Centers for Medicare and Medicaid Services began phasing in a new risk adjustment model intended to reduce the susceptibility of MA payments to higher coding intensity.

Using 2021 data, we compared average MA contract risk scores under the new model and the old model.

Risk scores were 5.8% lower under the new risk adjustment model. Differences between average risks scores under the new and old model varied substantially across contracts and insurers. For example, 1 large insurer's risk scores were essentially unchanged across models while another large insurer's risk score was 18% lower under the new model. Contracts with higher estimated coding intensity had greater exposure to the new risk adjustment model.

Our results suggest that the new risk adjustment model will likely reduce MA payments due to enhanced coding intensity, with these reductions appropriately targeting insurers that code more intensely.