The Centers for Medicare & Medicaid (CMS) make risk-adjusted payments by using beneficiaries’ diagnoses to pay higher capitated rates to Medicare Advantage Organizations (MAOs) for sicker beneficiaries with higher risk scores. It may create financial incentives for MAOs to make beneficiaries appear as sick as possible, however, to obtain higher payments. CMS estimates that from 2013 through 2016, Medicare paid $40 billion in overpayments that resulted from plan-submitted diagnoses that were not supported by beneficiaries’ medical records.
A report from the HHS Office of Inspector General can be obtained at https://oig.hhs.gov/oei/reports/oei-03-17-00470.pdf.