Aetna tones down Medicare Advantage ‘downcoding’ policy

Modern Healthcare – Friday, November 14, 2025
By Nona Tepper

Aetna is dialing back a policy to “downcode” some hospital inpatient claims after facing pushback.

The CVS Health subsidiary’s “level of severity inpatient payment policy” for its Medicare Advantage plans was due to take effect Saturday, but Aetna is pushing it back to Jan. 1 and reducing its scope, the insurer notified providers last Thursday.

Aetna rankled the hospital sector when it announced this new payment policy. Originally, the insurer planned to apply it to all urgent and emergent Medicare Advantage policyholder stays that span at least one midnight. Now, it’s limited to urgent or emergent inpatient stays of one to four midnights.

“Based on feedback we received regarding our level of severity inpatient payment policy, we identified ways for Aetna to simplify the process and minimize the impact on providers,” the company said in a statement Friday.

Aetna will use internal criteria to reimburse some Medicare Advantage members’ hospital inpatient stays under lower observation rates under this policy. Providers whose reimbursements are reduced may request reviews from an Aetna medical director, the company wrote in the notice.

​“Our goals are simple — faster reimbursement and less administrative burden for you, better care experience for members, and compliance with the evolving regulatory environment,” Aetna wrote.

The American Hospital Association has called on Aetna to rescind the payment change and argued that it undermines Medicare’s “two-midnight” rule and threatens access to care.

“The AHA appreciates Aetna’s decision to delay implementation of its level of severity policy for inpatient hospital admissions,” Molly Smith, group vice president for policy, said in a statement. “This pause provides additional time for hospitals and health systems to prepare, and for continued dialogue on the policy’s impact.”

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