Heterogeneous Responses to Risk Adjustment Reform: Evidence from Dementia Diagnosis in Medicare Advantage

Abstract Introduction In 2020, Alzheimer’s Disease and Related Dementias (ADRD) diagnoses were reintroduced into the Medicare Advantage (MA) risk adjustment model creating financial incentives that may increase diagnostic coding and plan payments. This effect may vary across plans depending on provider integration, administrative capacity, and geographic context, with implications for payments and potential ‘upcoding’. Methods Using 100% Medicare data from 2016–2021, we estimated event study and difference-in-differences models comparing adjusted trends in incident ADRD diagnoses in MA relative to traditional Medicare before and after the policy change. Results Incident dementia diagnoses increased in MA relative to traditional Medicare, despite an overall downward trend in diagnosis rates. Increases were larger among enrollees in Medicare Advantage health management organization plans (20.8%) than in preferred provider organization plans (7.6%) and varied across insurers, ranging from a 7.2% (UnitedHealthcare) to 21.6% (Kaiser Permanente). Increases were more pronounced in urban than in rural areas. Conclusion Reintroducing ADRD into the MA risk adjustment model was associated with increased diagnostic coding, with substantial variation across plan types, insurers, and geographic contexts. Because ADRD diagnoses increase risk-adjusted payments, larger increases across some plans may reflect coding practices rather than true disease prevalence, highlighting the need for closer monitoring.