In an analysis published this fall, the Alliance of Community Health Plans (ACHP) called out large national insurers for exploiting the Medicare Advantage (MA) risk adjustment system, costing taxpayers tens of billions of dollars every year. In late November, CMS specifically noted “the current risk adjustment system may disadvantage smaller, newer and less-resourced plans” and called for recommendations to address the widespread gaming occurring in the MA risk adjustment system. The agency issued a Request for Information on refocusing MA star ratings on clinical care, health outcomes and patient experiences, cutting outdated process measures and exploring AI-driven improvements to risk adjustment and bonus payments.
Background
The idea behind MA risk adjustment is simple: health plans should receive the resources needed to care for their sickest consumers. When done right, risk adjustment allows plans to deliver comprehensive, high-quality care to those who need it most. But in today’s MA landscape, risk adjustment has drifted far from its intended purpose.
Instead of promoting fairness, it’s become a tool for maximizing profits. Some insurers use aggressive coding tactics to inflate patients’ risk scores, meaning that on paper, consumers look sicker than they are—and plans get paid more as a result. ACHP’s analysis of CMS data found that in 2023, the two largest MA insurers had average risk scores 19.2% and 36.2% higher than ACHP nonprofit health plans — a gap translating to about $6 billion in excess payments that year. This kind of gaming drives up government spending, distorts competition and leaves seniors stuck in a system that rewards coding over care.
Risk adjustment was supposed to prevent this kind of abuse, but the system has been gamed. With the next MA and Part D cycle on the horizon, ACHP is urging the Trump Administration to use this moment to take action to fix risk adjustment and level the competitive playing field for consumers.
In issuing its recent Request for Information, CMS is formally inviting stakeholder feedback and insights on these key policies. ACHP and its member health plans now have a unique opportunity to work with the Trump Administration to refashion this vital program. As the agency seeks input on risk adjustment, chronic condition special needs plans and other policies, now is the time for stakeholders to help shape quality measures, plan design and beneficiary outcomes.
ACHP’s MA for Tomorrow Proposal
As part of its MA for Tomorrow initiative, ACHP has made bold recommendations to modernize risk adjustment. ACHP is the only national payer organization offering a framework to realign risk adjustment with its original intent: ensuring fair payment for real care. ACHP’s framework simplifies risk adjustment by focusing on demographics and a small set of substantiated health conditions rather than thousands of potential diagnoses. This approach ensures Medicare payments reflect true patient care costs, reduces administrative burden on providers, curbs opportunities for abusive coding and helps create a more competitive MA marketplace that rewards high-quality care.
Why does this matter? Because the future of Medicare Advantage depends on it.
Today, plans that play coding games often get higher rewards than those delivering high-quality care. That makes no sense. ACHP’s framework flips the script by realigning incentives to put patient care first, making MA more sustainable, equitable and effective. ACHP’s approach promotes fairness by rewarding plans for providing real, high-quality care, not just for documenting more diagnoses. It also protects taxpayer dollars by curbing overpayments driven by aggressive or inaccurate coding, ensuring Medicare funds are used appropriately. For seniors, this means better access to the care they truly need, with payments that more accurately reflect their health status. Ultimately, a more competitive MA market focused on what matters most: patient care.
