Not necessarily. When I'm interviewing new grads, I'll hold their hand firmly when walking through requirement extraction, but hit their rating like a ton of bricks for any failure in algorithm design and code mixups. When I'm interviewing seniors, I'll tell them "implement me a Shopify", but won't care that much if they get the unordered_multimap signature wrong.
I've been in a senior role for 5 years and I somewhat recently interviewed at Google for an SRE/SW position with basically no prep (did maybe two practice exercises) and passed it no problem. I turned them down for a variety of reasons, but if I were to interview again I might even spend less time practicing.
It's true, however, that at some companies, performance impacts leveling and compensation, so there's surely value in being (possibly even over-) prepared.
You sound like an outlier, I routinely interview senior engineers applying to Google and a massive majority do not pass the coding test. I would say half are not even in the ballpark of passing.
Well in SV all you have to do is work at a startup for more than a year to get "promoted" to senior/lead developer, so it's not surprising that many people applying for those roles aren't actually at that level.
Looking at the content it seems like I will have to basically jump through all the hoops that are required for a new grad interview.