Washington, D.C. — A bipartisan group of U.S. senators is demanding that federal health officials do more to stop Medicare Advantage insurers from inflating how sick their members appear on paper — a practice that costs the government tens of billions of dollars each year and ultimately tightens the financial squeeze on nursing homes nationwide.
In a letter sent to the Centers for Medicare & Medicaid Services on Monday, four senators — Jeff Merkley of Oregon, Bill Cassidy of Louisiana, Tina Smith of Minnesota, and Roger Marshall of Kansas — praised a recent CMS proposal aimed at limiting how diagnoses from chart reviews can be used in the risk-adjustment formula that determines insurer payments. But they argued that what CMS is proposing doesn’t go nearly far enough.
“Insurers may seek to recapture lost diagnoses by linking chart reviews to specific encounters, potentially dampening the effect of the proposed change,” the senators wrote to CMS Administrator Dr. Mehmet Oz.
How the Billing Game Works
In Medicare Advantage, the federal government pays private insurers a flat monthly fee that’s adjusted based on how sick each enrollee appears to be. The sicker the member on paper, the higher the payment. That structure has created a financial incentive for insurers to systematically dig through medical records — a process known as chart review — to find diagnoses that boost the risk scores of their members, often without any corresponding treatment or patient contact.
The Medicare Payment Advisory Commission, which advises Congress on Medicare policy, estimated the federal government will pay roughly $76 billion more this year to cover MA beneficiaries than it would if those same people were in traditional fee-for-service Medicare. That gap is driven largely by upcoding and the favorable selection of healthier enrollees.
The problem has real consequences for post-acute providers. As industry reports have long noted, the rate compression coming from CMS’s near-zero MA payment growth proposals puts nursing homes in a bind — they’re already fighting MA plans over prior authorizations and delayed payments, and any systemic distortion in how risk adjustment is calculated only deepens those tensions.
What the Senators Are Asking For
The senators want Congress to go further than CMS’s proposed rule. Their letter backs several provisions from the No Unreasonable Payments, Coding, or Diagnoses for the Elderly Act — known as the No UPCODE Act — which was introduced last year by Cassidy and Merkley. That bill would exclude all diagnoses from both unlinked and linked chart reviews, as well as health risk assessments, from the risk-adjustment formula entirely.
The lawmakers also want to see CMS adjust payments based on known differences in coding patterns between MA and traditional Medicare. And they’re pushing for the agency to use two years of diagnostic data rather than one when calculating risk scores — a change designed to capture chronic conditions that aren’t always reported consistently year to year.
In February, CMS announced plans to accelerate audits of MA plans even after a federal judge threw out an earlier rule that would have allowed the government to recoup billions in overpayments. The senators are now pushing legislators to codify these changes rather than leave them vulnerable to future court challenges.
What It Means for Nursing Homes
MA now covers more than half of all Medicare-eligible beneficiaries, according to MedPAC. For nursing homes, that market share is the source of constant friction — from prior authorization denials to slow reimbursements to abrupt coverage terminations for residents mid-stay.
Operators and industry groups have argued for years that the administrative burden and payment risk associated with MA plans is unsustainable. A crackdown on overpayments could, in theory, help rebalance the program — reducing the windfall that insurers currently capture while leaving providers with tighter margins. Whether that money would ever flow back to providers remains a genuine open question.
CMS is expected to finalize its proposed MA payment rule in the coming days. The bipartisan letter signals that regardless of what CMS decides administratively, Congress may move to lock in further changes through legislation — potentially reshaping the financial architecture of a program that now touches nearly every nursing home in the country.
