Government Watchdog Agency Finds that Every High-Risk Acute Stroke Diagnosis Submitted by Medicare Advantage Insurers in Audit Was Upcoded

A new federal audit found Medicare Advantage insurers received hundreds of millions in taxpayer dollars for stroke diagnoses that patients' medical records did not support.

The federal agency that investigates fraud in Medicare and Medicaid reported this week that the government likely overpaid Medicare Advantage (MA) insurers $462 million in 2021 alone due to unsupported acute stroke diagnoses submitted for risk adjustment purposes. Specifically, the Department of Health and Human Services Office of Inspector General (OIG) found that for all 97 enrollees included in a recent audit sample, MA insurers submitted an acute stroke diagnosis code that did not comply with federal requirements because the patient’s medical records did not support it.

Read the Department of Health and Human Services Office of Inspector General (OIG) report here.

To understand what’s going on here, we need to remember that private MA plans are paid a lump sum for all medical care their enrollees are expected to need throughout the year. This lump sum is adjusted based on the enrollee’s health, meaning an MA plan receives a higher payment for a sicker enrollee. The health of enrollees is determined through a risk-adjustment system, which assigns a risk score based on the medical diagnosis codes submitted by the MA insurer for each enrollee.

Unfortunately, as with almost every part of our health care system, insurance corporations that operate private MA plans have found ways to exploit this system to increase their profits. One way they do this is by adding diagnosis codes that increase payments from the government even when the patient’s medical record does not support those diagnoses, often called upcoding.

The OIG report is the latest example of this problem, but it is particularly disturbing because every acute stroke diagnosis reviewed in the audit sample was unsupported by the medical record. The report found that many beneficiaries coded as having an acute stroke did not have records supporting an active stroke during the payment year. Instead, the records often reflected a prior history of stroke or stroke-related conditions rather than an active acute stroke. This distinction matters because acute stroke diagnoses substantially increase Medicare Advantage risk-adjusted payments, while a history of stroke generally does not. As a result, submitting unsupported acute stroke diagnoses can significantly inflate payments to Medicare Advantage plans.

The report recommends that the Centers for Medicare and Medicaid Services (CMS) implement safeguards to improve the accuracy of acute stroke diagnosis codes submitted for risk adjustment. That would be a positive step, but a more appropriate response in light of the stunning results of this audit would be to take a closer look at the risks and benefits of involving private insurers in the Medicare program. This audit adds to a growing body of evidence that Medicare Advantage insurers receive billions of dollars in excess payments from the federal government through unsupported risk-adjustment diagnoses every year, costing taxpayers money that could otherwise be spent on patient care.

Insurers have corrupted the current risk-adjustment system, and this has largely gone unchanged despite years of warnings from federal watchdogs. Congress and CMS both have the authority to reform the system, yet unsupported diagnoses and inflated risk scores continue to drive excess payments, in large part because of the enormous amounts of our tax dollars that insurers spend on lobbying and campaign contributions to protect the status quo. If members of Congress and other policymakers are serious about addressing the health care affordability crisis, they must confront the reality that a system dependent on insurers accurately reporting diagnoses while simultaneously rewarding them financially for higher risk scores creates powerful incentives for abuse.

Rachel Madley, PhD, is the Executive Director of the Center for Health & Democracy. She previously worked for Congresswoman Pramila Jayapal. She received her PhD from Columbia University and has written for publications including The New York Times.