Fact Sheet
January 12, 2021

Coding and Payment in Medicare Advantage

Medicare Advantage plans depend on stable payment and risk adjustment to ensure adequate resources are available to provide coverage for the care and treatment of enrollees.

Key Facts:

• Medicare Advantage plans are paid a capitated amount based on the average cost of FFS Medicare. That payment is risk adjusted for each enrollee based on health status.

• Medicare Advantage relies on diagnosis codes for payment. FFS Medicare relies on procedure codes for reimbursement.

• There are differences in coding patterns between Medicare Advantage and FFS Medicare, which are a function of the differences between the payment structure and care models.

• CMS reduces Medicare Advantage payments annually to account for coding differences between Medicare Advantage and FFS Medicare.

• The coding intensity adjustment is a 5.91% reduction per year in Medicare Advantage payments.

Policy Recommendation:

To achieve stability and predictability in payment to Medicare advantage, ensure adequacy of prospective, capitated payment, and enable plans and providers to have the data necessary for early intervention and care management, CMS should freeze the coding intensity adjustment at the current statutory minimum.

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