On March 27, 2023, two United States Senators, Bill Cassidy, MD (R-LA) and Jeff Merkley (D-OR) introduced the bipartisan No Unreasonable Payments, Coding, or Diagnoses for the Elderly (“No UPCODE”) Act to address perceived financial incentives inherent in the Medicare Advantage patient risk scoring reimbursement methodology. Senator Merkley alleges that the current reimbursement methodology has resulted in billions in overpayments on an annual basis.

Under the current compensation methodology, providers are reimbursed at a risk-adjusted standard rate per patient based on the patient’s health and reported diagnoses. The base capitated rate per beneficiary is determined on annual basis based on data from inpatient hospital and ambulatory settings. That base rate can be adjusted, however, to account for a beneficiary’s diagnosed medical conditions that are likely to increase that particular beneficiary’s use and cost of care. Because of that risk adjustment process, the Senators allege that providers and Medicare Advantage organizations are incentivized to take unnecessary medical conditions into account when calculating risk scores to increase Medicare reimbursement.

The No UPCODE Act proposes revisions to the Social Security Act (42 U.S.C. 1395w–23(a)) to eliminate these perceived incentives. Of note, starting in 2024 and going forward, the No UPCODE Act would require Center for Medicare & Medicaid Services (“CMS”) to:

  • Use two years of diagnostic data in in calculating the risk-adjusted payment rates, rather than the one year reviewed currently;
  • Not consider diagnoses collected from a chart review or health risk assessment when making risk adjustments for health status, a common risk adjustment approach of plans;
  • Establish procedures to provide for identification and verification of diagnoses collected from chart reviews and health risk assessments; and
  • Review the differences in coding patterns between traditional Medicare and Medicare Advantage, evaluate the impact on risk scores for Medicare Advantage beneficiaries, and issue a report on the same.

The proposed legislation comes on the heels of the CMS’ release of the Calendar Year 2024 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (“Advance Notice”) on February 1, 2023. The Advance Notice proposes a 1.03% increase in reimbursement rates to Medicare Advantage and Medicare Part D plans and changes to the risk adjustment-based payment model. Health insurers and other stakeholders claim that the changes in the Advance Notice are likely to result in a 2.27% decrease in payments to plans overall. CMS accepted comments on the Advance Notice until March 3, 2023 and plans to issue a final rate announcement by April 3, 2023.

Reed Smith will continue to track developments regarding the NO UPCODE Act, the Advance Notice, and their impact on Medicare Advantage reimbursement considerations. Should you have any questions about the No UPCODE Act or the Advance Notice, or have other health care compliance concerns, please do not hesitate to reach out to the authors of this post or the other health care attorneys at Reed Smith.