Through the years, the Centers for Medicare and Medicaid Services (CMS) has changed its payment adjustment method for Medicare Advantage (MA) plans. These adjustments are made based on a calculated risk score per beneficiary, which should be consistent among individuals in similar demographics and with a comparable health status.

Following policymaker concerns about possible inflated risk scores and higher plan payments resulting from Medicare Advantage plan and Medicare fee-for-service (FFS) diagnostic coding differences, GAO initiated research into the actual impact. GAO also studied the evaluation methodology CMS uses to measure the impact of those adjustments.

GAO’s 28-page report to Congress, Medicare Advantage CMS: Should Improve the Accuracy of Risk Score Adjustments for Diagnostic Coding Practices, concluded:

  • MA plan risk adjustments offer a financial incentive for enrollment and beneficiary care regardless of health conditions or resource needs;
  • MA plan risk adjustments balance health status disparities among beneficiaries;
  • Appropriate MA plan payment adjustments require similar MA plan and Medicare FFS diagnostic coding patterns;
  • MA beneficiary risk scores were higher in 2010 compared to Medicare FFS due to diagnostic coding variances;
  • CMS could have underestimated the impact of coding difference in 2011 and 2012 by leaving its methodology unchanged; and,
  • Excess payments due to coding differences could rise unless CMS updates its methodology.

As a result, GAO recommended improvements to the accuracy of CMS MA risk score adjustments. To reach this objective, CMS could incorporate adjustments for additional beneficiary characteristics using up-to-date information, while taking into account coding differences through the years and incorporating the effects of those trends into its figures.

To read or download the full report, click here  (PDF).