In early May 2016, the Government Accountability Office (GAO) released a critical report on the inability of the Centers for Medicare and Medicaid Services (CMS) to recover overcharges from errant and aggressive payment coding in the Medicare Advantage (MA) Risk Adjustment Program. The GAO’s report noted numerous shortcomings in CMS’s oversight of MA risk adjustment practices, resulting in the likely overpayment of Medicare funds to the private plans that participate in Medicare Advantage.

Risk adjustment was built into the MA program more than a decade ago to fund private MA plans for the care of particularly sick, frail or otherwise expensive people covered by Medicare. The Risk Adjustment Program incentivizes MA plans to document the conditions of their members by assigning them diagnosis codes based on medical records, from which MA plans receive increased funding. Many MA plans have hired specialized vendors to increase their ability to assign diagnoses, but critics, including several whistleblower lawsuits, charge that some of these vendors have miscoded or up-coded diagnosis codes of members in order to boost funding.