Introduction

A recent in-depth analysis has revealed alarming disparities in coding practices between Medicare Advantage (MA) plans and Traditional Medicare (TM), uncovering that these differences have resulted in a staggering $33 billion in excess revenue for insurers in 2021 alone.

Study Findings

The study, published in the Annals of Internal Medicine, indicates that the average risk score for MA plans was 0.19 points higher than that of TM plans in 2021. This considerable gap has translated into financial windfalls for insurers, with UnitedHealth Group raking in approximately $13.9 billion—representing 42% of the total excess revenue.

Incentives and Reimbursement Models

At the crux of the matter is the reimbursement model for MA plans, which allocates more funds for sicker patients and less for healthier ones. This structure creates an incentive for insurers to report a higher number of diagnoses, leading to more robust revenue streams. Previous investigations have highlighted that MA plans often report a greater intensity of diagnoses compared to TM, and the present study underscores significant variations in coding practices among different insurers.

Research Methodology

Researchers from the University of California San Diego, alongside their colleagues, leveraged comprehensive data from the Centers for Medicare and Medicaid Services (CMS) Chronic Conditions Data Warehouse and the Master Beneficiary Summary Files. Their study sample encompassed 697 contracts active in 2021, meticulously assessing how coding variations influenced individual insurer risk scores and revenues.

Quantifying Coding Discrepancies

To quantify these coding discrepancies, the researchers examined the concepts of "persistence" and "new incidence." "Persistence" measures the percentage of members who were coded with a specific diagnosis in one year and retained that diagnosis in the following year. Conversely, "new incidence" tracks the percentage of members who were diagnosed in the second year but had no record of such a diagnosis in the first. The findings revealed that, on average, MA plans exhibited 78.1% persistence compared to 72% in TM, while the cumulative new incidence for MA was 46%, versus 33% for TM.

Impact on Risk Scores

The findings indicate that the average MA risk score was inflated by 18.5% due to these coding differences. Notably, the research highlighted that the UnitedHealth Group's average risk score surpassed what would be expected at TM levels by 0.28—a significant deviation from the MA industry average of 0.19.

Financial Implications

As insurers capitalize on this differential coding, MA plans benefited from an estimated additional $33 billion in payments, significantly boosting revenue per member for UnitedHealth to $1,863—far exceeding the industry average of $1,220.

Conclusion and Future Directions

This disparity raises critical questions about fairness and regulatory oversight in Medicare payment policies. Any reform aimed at addressing differential coding will likely have varied impacts across the industry, making it essential for stakeholders to scrutinize these practices closely.

As the debate over health care funding intensifies, this eye-opening study undoubtedly complicates the already convoluted relationship between insurers and the Medicare system, calling for urgent action and policy reform. How will regulators respond to this alarming trend? Stay tuned for the latest updates!