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Upcoding: Evidence from Medicare on Squishy Risk Adjustment

Michael Geruso and Timothy Layton ()

No 21222, NBER Working Papers from National Bureau of Economic Research, Inc

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 plans receive. We show that enrollees in private Medicare plans generate 6% to 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 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.

JEL-codes: H42 H51 I1 I13 I18 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-hea
Note: AG HC HE PE
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Published as Michael Geruso & Timothy Layton, 2020. "Upcoding: Evidence from Medicare on Squishy Risk Adjustment," Journal of Political Economy, vol 128(3), pages 984-1026.

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