Medicare Advantage (MA) has grown rapidly over the past decade, now covering more than half of all Medicare beneficiaries. But alongside that growth, a costly and often misunderstood problem has emerged: upcoding. Policymakers across the political spectrum increasingly agree that fixing upcoding is one of the most important steps Congress can take to slow the growth of federal healthcare spending.
What Is Upcoding?
Upcoding occurs when Medicare Advantage plans report that their enrollees have more—or more severe—diagnosed medical conditions than they actually do. These diagnoses are used to calculate a patient’s “risk score,” which determines how much the federal government pays the plan to cover that individual. The higher the risk score, the higher the payment.
Unfortunately for taxpayers, insurers have strong financial incentives to code as many diagnoses as possible. This can include aggressively searching medical records for additional conditions, encouraging physicians to document borderline diagnoses, or using vendor‑run “chart reviews” to add diagnoses after the fact. The result is that MA plans often appear to be serving patients who aren’t as sick as they appear to be, which means the providers receive higher payments than they should be getting.
How Upcoding Increases Medicare Costs
Upcoding has become one of the largest sources of overspending in Medicare. The Committee for a Responsible Federal Budget estimates that Medicare Advantage plans will be overpaid by more than $1 trillion over the next decade due to coding intensity and related practices. These inflated payments contribute directly to higher federal deficits and accelerate the long‑term growth of Medicare spending—costs ultimately borne by taxpayers.
Medicare is already projected to grow by roughly 3% of GDP over the next 25 years—a scale comparable to the entire current defense budget. Upcoding contributes to this pressure by increasing payments without improving patient outcomes. Every dollar spent on inflated MA payments is a dollar not available for other priorities: strengthening Medicare’s finances, reducing premiums, investing in public health, or addressing the national debt.
Current Proposals to Reform Upcoding
- Centers for Medicare and Medicaid Services (CMS) Efforts to Address Upcoding Problem Have Fallen Short
The Government Accountability Office’s (GAO) most recent review shows that Medicare Advantage still struggles with upcoding and improper payments, despite years of effort by CMS to get a handle on the problem. CMS has a process to identify why these payment errors happen, but the overall error rate hasn’t budged. The agency’s main tool for clawing back overpayments — Risk Adjustment Data Validation (RADV) audits — is badly backlogged, slowing recovery efforts for years. GAO also found that CMS’s corrective action plans are too vague and don’t track progress in a meaningful way. On top of that, CMS has never done a full fraud risk assessment of Medicare Advantage. The takeaway: without detailed plans, faster audits, and a serious look at fraud risks, CMS won’t be able to curb upcoding or reduce improper payments in this fast‑growing program.
- Proposed Legislation: The No Upcode Act
A bipartisan bill gaining traction in Congress, the No Upcode Act, would directly limit MA overpayments by reforming how diagnoses are counted and how risk scores are calculated. The bill seeks to:
- Standardize diagnosis reporting,
- Reduce incentives for excessive coding,
- Improve transparency in MA payment systems,
- Ensure payments more accurately reflect patient health status.
If enacted, the legislation could save more than $100 billion over ten years.
Here’s a neutral, balanced rewrite that frames MA reform as one option among many:
Moving forward
Medicare Advantage provides valuable coverage to millions of Americans, but persistent overpayments — including those driven by upcoding — remain a challenge for Medicare’s long‑term finances. Addressing these overpayments is one of several policy options that could help slow the growth of federal health care spending.
