Subscribe
Share
Share
Embed
Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
Hello and welcome to Health Affairs This Week. I'm your host, Beyers. We are recording on 03/10/2026. Before we get started, I wanted to quickly plug our insider March event with Ben Rome. It's on PBM reform.
Jeff Byers:It's on March 24. Check it out. Today on the pod to talk about Medicare Advantage and coding intensity, we have Ben Ippolito from the American Enterprise Institute. This one's for the wonks. Ben, welcome to the program.
Benedic Ippolito:Thanks very much for having me.
Jeff Byers:Real quick. This could be someone's first introduction to the topic. It might be someone's first introduction to the world of health policy. Can you start giving us a macro level of the general debate over Medicare Advantage?
Benedic Ippolito:Yeah. Sure. So when people sign up for Medicare, they basically have two big choices to make. They can either enroll in so called traditional Medicare, which is essentially run by the government, or they can enroll in something called Medicare Advantage, which is regulated by the government, but it's actually run by private private companies. And there is this long standing, I would say simmering debate that has since turned into maybe more of a boil over how much the federal government actually pays those Medicare Advantage plans to administer and run and offer services.
Benedic Ippolito:And that really is what this is all about. How much is the federal government paying those plans? Is it the right amount? And if it is not the quote, unquote right amount, how do we think about changing that? What policy should we introduce?
Jeff Byers:So there was an article in our sister publication, Health Affairs Scholar, from my apologies if I get your name wrong, Joe. From Joe Albanese and colleagues that concludes the intensity of diagnostic coding in Medicare Advantage relative to original Medicare suggests prior policy actions may have affected federal spending. So for individuals that may have not checked out this study, can you give us, like, a layman's view of what these authors found?
Benedic Ippolito:Yeah. So I think it's helpful to back up just a little bit. Alright. So so the the state of the world is that the federal government currently spends more money if somebody enrolls in a Medicare Advantage Plan than if they enroll in traditional kind of government run Medicare. And the difference is really quite large.
Benedic Ippolito:It's about 14% higher. Used to be over 20% higher. That translates to tens of billions of dollars every year. Alright? There are many reasons that that's true.
Benedic Ippolito:Two of the big reasons are that Medicare Advantage plans tend to attract people who have a little bit lower spending conditional and otherwise looking the same. We call that favorable selection. And the second is that they tend to code more intensely, and that is really the key thing that we're talking about, this so called coding intensity issue. And the idea there is that if you enroll in a Medicare Advantage plan, those plans have a reason to write down all of the codes, the diagnoses about you. And the reason is that that affects how they get paid by the federal government.
Benedic Ippolito:There's a heated debate about whether that just reflects the fact that these plans are accurately coding everything, they're accurately writing everything down, or maybe they're they're fudging things. They're trying to make you look sicker than you really are. We're not really focused on that as much, but the idea of this paper is to think about this coding intensity issue. And the federal government has been keyed in on this for a while now. And what they were trying to do is essentially say that, hey.
Benedic Ippolito:A few years ago, the federal government actually did change how it approached this issue. And it introduced this policy that was designed to try and make it a lot harder for plans to inflate your sort of sickness on paper. And the way they did that was to make several change. Probably the most notable is that they just get rid of about 2,000 diagnoses codes that they thought were more likely than not to simply raise costs rather than tell them anything meaningful. So, basically, it made it harder to do this.
Benedic Ippolito:And so what what the Albanese paper is doing is saying, well, suppose we actually had that policy in effect in 2022 several years ago. How much would this coding intensity have been reduced? And they basically conclude that it would have been reduced a lot. And and, in fact, we would have, in combination with some other policies, we would have basically gotten rid of almost all of the all of the the problem. And so some ways, it's it's sort of a provocative finding.
Benedic Ippolito:We'll talk about there's some caveats that are very important, but but that's what triggered this this debate.
Jeff Byers:Yeah. Yeah. So, a debate was triggered, in the pages of Wall Street Journal and Forefront and elsewhere in policy spaces. So it sparked a little bit of debate, where the Wall Street Journal editorial board published an opinion piece, targeting MEDPAC, ultimately calling for, at the very end of the article, defund MEDPAC. Know, I don't know if that's gonna be as catchy as some other defund, platforms.
Jeff Byers:Anyways, but for for people without a Wall Street Journal subscription, what are they arguing here?
Benedic Ippolito:Yeah. So the their article included several several lines of argument. I'll I'll focus on the most relevant one, I think. Basically, they argued that, you know, if you read this this paper you just referenced, that they came away saying that, wait a minute. Medpac, this organization that advises congress on what to do about Medicare, they've been over they've been sort of exaggerating the problem with Medicare Advantage.
Benedic Ippolito:They've been claiming them getting sort of wildly overpaid, and lo and behold, these folks from from CMS, the the authors of this article, are saying they're not really actually getting paid all that much. It looks like we've kind of solved the so called problem. You know, the the problem the problem is The Wall Street Journal didn't quite understand the paper, I think, that they were citing, at least entirely. And so it it it kind of triggered some back and forth. And I'll try to help maybe adjudicate, like, what is actually true and and what is perhaps not.
Benedic Ippolito:The Wall Street Journal made some legitimate points, which is that Medicare Advantage plans, they do save money. Part of the reason they have this kind of ex quote, unquote, excess payments is that they do things like they restrict which hospitals you can go to. They try to control which care you receive in ways that traditional Medicare doesn't and and sort of saves money. And they put a lot of emphasis on this saying that that's where they're getting all this savings from. It's not this so called upcoding behavior.
Benedic Ippolito:What they didn't quite understand is that that paper we're talking about is only looking at one piece of the puzzle. It ignores the fact that Medicare Advantage plans have this other source of sort of potential advantage to sort of repeat myself. They they tend to enroll people who, even if they look similar on paper, they tend to be a little bit less costly. That's a real that that really helps you when it comes to the total cost facing these these insurers. It also ignored a really important piece of that CMS study.
Benedic Ippolito:That was a really static study in the sense that they just said, what if this had been in effect five years ago or four years ago, whatever it was? In reality, we know that every time we set up new rules for these insurers, they reoptimize. They reoptimize to the new rules that we set up for them, and they try to sort of increase payments under the the new regime. And so that's going to happen. We don't know how much that is going to happen, but it is very likely to be important.
Benedic Ippolito:And so I think they were probably a little premature to sort of conclude that, well, the so called issue has been resolved here, and this is this is kind of an attack on Medicare Advantage.
Jeff Byers:Well, yeah. One of the things, if I was playing devil's advocate, would say is tempered takes don't, drive advertising revenue
Benedic Ippolito:Yeah. From clicks.
Jeff Byers:Yeah. But so in response, you published a piece in Wall Street Journal. You don't need to repeat yourself if you've already, you know, discussed what you wrote, but it was titled the higher price tag on Medicare Advantage. What were you arguing?
Benedic Ippolito:I think there's sort of two things can be true at the same time. You know, on one hand, The Wall Street Journal basically argued that Medicare Advantage simply don't get paid more than, if people enrolled in in traditional Medicare. That is the federal government doesn't spend more money if people enroll in Medicare Advantage plans. That's just empirically not true. It is it is empirical reality of the world that if people enroll in Medicare Advantage Plans, the federal government does end up spending more money.
Benedic Ippolito:That doesn't answer a second question, which is, is that good or bad? And that, in some ways, is where all of the debate, I think all of the substance debate debate is about this issue. People who enroll in Medicare Advantage, they make trade offs. They accept the fact that they can't go to every hospital. They accept the fact that their plans are gonna make them get prior authorization, for example, for certain services.
Benedic Ippolito:And in exchange, that saves money, and that allows these Medicare Advantage plans to offer more benefits. Right? The federal government is is sort of subsidizing on top of that, and and the net result is that those plans in certain dimensions are pretty generous. Whether that's good or bad is a separate question. What we were arguing in our response is to say that's really where the debate is.
Benedic Ippolito:The debate is not over this empirical question of is more money flowing to one or or the other plan. That part is pretty much settled at this point.
Jeff Byers:And, Michael Chernew, who's been a guest on the pod before, and colleagues also published, we're at the end of talking about what's been published about it, these articles. Chernu and colleagues published an article in Forefront, we'll put it in the show notes. The title of that article is called Aligning the MedPack and CMS Estimates of Coding Intensity. It's all very wonky, but what is it about coding intensity that brings out the, intellectual sparring matches?
Benedic Ippolito:Yeah. I think in some ways, the that that last piece you referenced was sort of notable in the sense that he said, you know, look. If you actually understand these estimates, that paper that Albanese and these folks from CMS published, actually pretty consistent with what MedPack already published themselves. And so in many ways, the main thrust of the story is sort of similar. This stuff matters because there is so much money at stake, and it embodies this sort of different views on the right the so called right way to run a federal program.
Benedic Ippolito:Is the right way to run this to have the federal government really actually design and and functionally kind of specify and run the plan themselves, or is the right way to essentially determine how much you're willing to spend and then contract this out to some private entity? And so we've long had this debate. I think the what's interesting about this is that, for a long time, the debate over Medicare Advantage was a very politically driven one. Conservative Republicans tended to like Medicare Advantage because it it had more of a semblance of a market. Democrats tended to like traditional Medicare because they tended to like the federal government simply running the plans themselves.
Benedic Ippolito:I think one of the things that's happened and one of the reasons the the temperature in the room is so high is that Medicare Advantage is now very set in its way. It is over half of the population of Medicare. It's not going anywhere. And there is so much money in the program that I think even Republicans who are generally supportive of it are open to reforms in a way that they historically were not. And that reality, I think, has spurned a lot of people to pay attention thinking, wow.
Benedic Ippolito:This may be actually a more active policy environment than I thought it was going to be, and therefore, we've got to really really make our stances quite clear.
Jeff Byers:Yeah. So on that, you know, there's been talks about potentially flat rates going into 2027 and some MA plans taking a step back from Medicare Advantage in 2026. So when you look at the arguments over coding intensity and then look out into what's happening in the market, you know, what does the Medicare Advantage market have going forward? Like, in in if you were to put on, like, your predictions hat.
Benedic Ippolito:Yeah. I think one of the things that's very interesting about this point in time is that there is so much going on with Medicare Advantage. So we talked about it. The federal government already did a pretty big change to how they try to deal with this so called risk adjustment issue or this coding intensity challenge. Right?
Benedic Ippolito:That's one big policy that's happened. You're referring to the fact that there's also been relatively small updates, relatively small payment increases for Medicare Advantage plans for next year from the Trump administration. I think the net effect of of those policies with some other policies that are either in the works or or being implemented is that Medicare Advantage plans are probably facing more headwinds than they have been in the past. I think a lot of people would have characterized the last five plus years, even certainly more than that, actually, as being pretty positive for Medicare Advantage plans. Payment rates were going up.
Benedic Ippolito:They were receiving larger and larger so called rebate dollars, essentially payments from the federal government to offer more services. And so things were looking pretty rosy. I think there's a lot of observers who look at the current world and say, well, maybe that is shifting. Maybe maybe even a Republican administration or a congress that that is currently Republican majority, maybe they're not gonna be open to sort of as generous of a future set of policies as they once were. And so, you know, we're talking in to a health affairs audience.
Benedic Ippolito:I think this is a great moment for us to sort of take stock of what are we learning from this. We've seen payments change a lot to Medicare Advantage plans. This is, like, you know, a a rare opportunity to ask questions like, well, what happened to the plans that are offered? How many plans left the market? What happened to the generosity of the plans that remained on the market?
Benedic Ippolito:How important is that to enrollees? Have we seen a lot of enrollees leave Medicare Advantage? Like, those are really important questions about informing the next set of policies. Because what we care about at the federal level ultimately is trying to design something that sort of increases welfare as much as we can. And so we need to learn something about what actually changes when we do these policy changes.
Benedic Ippolito:So we're in a rare moment where we've got a lot of things happening, and so it's a good time to take stock.
Jeff Byers:So as we wrap up, final question, is this the last we've heard, regarding Medicare Advantage and coding intensity?
Benedic Ippolito:No. No. As long as as long as the federal government will try to, employ so called risk adjustment firms, will try to optimize to new risk adjustment models, and so there's inevitably gonna be a back and forth moving forward. But perhaps for the next year or two, I think maybe we'll stick with this current model and see how it goes.
Jeff Byers:Ben Ippolito, thanks again for joining us today on Health Affairs This Week. If you, the listener, enjoyed this episode, please send it to, the risk adjuster in your life, and we will see you next week. Thanks all.