Mike Geruso, member of rice’s board, was the presenter yesterday at Penn’s Business Economics and Public Policy seminar series. He presented his research on “Upcoding: Evidence from Medicare on Squishy Risk Adjustment”, co-authored with Timothy Layton. I have read Mike’s papers, but never heard him speak. The talk was a reminder for me of the extreme relevance Mike’s research, and how clear he is in his writing, presentation, figures and tables. Do check out his working paper here. I am posting the abstract below.
Upcoding — manipulation of patient diagnoses in order to game payment systems — has gained significant attention following the introduction of risk adjustment into US insurance markets. We provide new evidence that enrollees in private Medicare plans generate 6% to 16% higher diagnosis-based risk scores than they would generate under fee-for-service Medicare, where diagnoses do not affect payments. Our estimates imply upcoding generates billions of dollars in excess public spending annually and significant consumer choice distortions. We show that coding intensity increases with vertical integration, reflecting a principal-agent problem faced by insurers, who desire more intense coding from the physicians with whom they contract.