A recent editorial in the Annals of Internal Medicine by J. Michael McWilliams, the Warren Alpert Foundation Professor of Health Care Policy, highlights deep flaws in the Medicare Advantage (MA) payment model, pointing to how insurers exploit diagnosis coding rules to collect billions in extra taxpayer dollars—raising costs without reflecting true patient needs.

Instead of competing on care quality or efficiency, insurers are incentivized to compete on how aggressively they code diagnoses. This has led to substantial payment disparities between plans and growing market dominance by large insurers skilled at manipulating the system. New research shows wide variation in coding across the 20 largest MA insurers—differences unlikely to stem from real differences in population health. 

Fixing the system is possible through better data, machine learning, and oversight, but doing so could reduce extra benefits for plan enrollees and face political resistance. "Like many health policy issues," says McWilliams, "risk adjustment reform is complex and cannot be considered in isolation. But it is entirely doable if policymakers are willing to acknowledge and contend with the tradeoffs." 

Read the full article in the Annals of Internal Medicine.