Upcoding: Evidence from Medicare on Squishy Risk Adjustment

Michael Geruso and Timothy Layton

Journal of Political Economy, 2020, vol. 128, issue 3, 984 - 1026

Abstract: In most US health insurance markets, plans face strong incentives to upcode the patient diagnoses they report to the regulator, as these affect the risk-adjusted payments that plans receive. We show that enrollees in private Medicare plans generate 6%–16% higher diagnosis-based risk scores than they would under fee-for-service Medicare, where diagnoses do not affect most provider payments. Our estimates imply that upcoding generates billions in excess public spending and significant distortions to firm and consumer behavior. We show that coding intensity increases with vertical integration, suggesting a principal-agent problem faced by insurers, who desire more intense coding from the providers with whom they contract.

Date: 2020
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Citations: View citations in EconPapers (27)

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Working Paper: Upcoding: Evidence from Medicare on Squishy Risk Adjustment (2015)
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