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and create insurance claims for any health procedure or diagnosis. They hold an individual’s medical record, which doctors use to bill the patients insurance company or government.

Currently the United States is facing a major problem of upcoding for Medicare Advantage. Upcoding is the tactic of purposefully sending a bill to Medicare or Medicare Advantage for a higher paying service than was actually performed. It can dramatically increase reimbursement to the medical provider. Upcoding may increase reimbursement, but it is considered fraud and is highly illegal. 

University of Texas Professor Michael Geruso and Harvard Medical School research fellow Timothy Layton’s paper posted in the National Bureau of Economic Research estimates that the upcoding of Medicare Advantage is costing the government an extra $2 billion a year. It estimates enrollees in private Medicare Advantage have inflated diagnosis-based risk scores. It is costing taxpayers more and allows Medicare Advantage to offer better benefits or even rebates to enrollees. Patients are now favoring Medicare Advantage over traditional Medicare.

“The manipulability of the risk adjustment system via diagnosis coding is an issue of significant practical importance, given the large and growing role of risk adjustment in regulated insurance markets for Medicare, Medicaid, and Exchange plans,” according to the paper. Upcoding may cause consumer to choose integrated plans because of the transfer of money from plans with more intense coding to plans with less intense coding.

At the moment the CMS is not doing enough to fix the problem. Their only solution was to decrease Medicare Advantage risk scores, but that was back in 2010. The adjustment made was not quite as effective as the CMS intended.

Improvements to the risk adjustment system are necessary. One proposed adjustment would be to make factors such as age and gender more important when calculating risk in certain diagnosis because they are not easy to manipulate. 

Another improvement would be to increase look back time, which could increase risk score in traditional Medicare causing a decrease in Medicare Advantage risk scores.

The United States Department of Health and Human services is taking the situation very seriously. They intend to review medical record documentation to ensure that all risk-score calculations comply with federal requirements.