Despite its successes in diversifying government health care coverage for seniors over the past 15 years, the Medicare Advantage managed-care program increasingly has come under attack for excessive and unscrupulous billing practices that are costing taxpayers billions of dollars.
The Government Accountability Office (GAO), the premier non-partisan watchdog, has repeatedly complained of inadequate auditing by the Centers for Medicare & Medicaid Services (CMS) to ferret out wrongdoing or inaccurate billings by scores of for-profit health care insurers that take part in the program.
In 2014, Medicare paid about $160 billion to Medicare Advantage organizations to provide health care services for about 16 million beneficiaries, according to GAO. CMS, which administers the program, estimates that about 9.5 percent of its payments to Medicare Advantage organizations were improper, owing largely to unsupported diagnoses submitted by the private insurers.
That works out to roughly $15.2 billion a year in overbilling or bogus patient diagnoses by the insurance companies providing coverage through health maintenance organizations and other private medical practices.
Medicare Advantage was created to provide seniors with a private plan alternative to the original Medicare that reimburses doctors directly for procedures they perform.
Congress hoped that by privatizing a portion of the system, private insurers would provide better coverage for less money. Insurers are paid a predetermined monthly amount by Medicare for each enrolled beneficiary – an amount that reflects the enrollee’s health status and projected medical needs.
But the system hasn’t worked as lawmakers and government policymakers had hoped, and it is more expensive to operate than originally projected – and more susceptible to rip-offs. GAO complained in a report last May that CMS’s audits of risk-adjusted payments were woefully inadequate in teasing out excessive billings from insurers that were unsupported by medical records.
This is of growing concern because Medicare Advantage covers about 30 percent of all Medicare beneficiaries. “As the [Medicare Advantage] program continues to grow, safeguarding the program from loss is critical,” The GAO said in its report.
The GAO found that glaring limitations in CMS’s process for selecting contracts for audits, the time it takes to conduct the audit and go through the appeal process and the techniques used to ferret out excessive payments “suggest that CMS will likely recover a small portion of the billions of dollars in MA improper payments that occur every year.”
The GAO highlighted the costly problem of shoddy auditing practices and insurer abuses of the Medicare Advantage billing system in broad strokes, but precisely how are major insurance companies and HMOs gaming the system and in the process ripping off U.S. taxpayers?
Central to the problem, as The New York Times explained on Monday, is a mind-boggling billing system that encourages insurers to embellish or pump up the medical diagnoses on their billing statements. CMS pays insurers a bonus to enroll people with more serious medical problems, to discourage them from “cherry-picking” healthier people for their plans.
A billing code indicating treatment of a more serious illness commands a much bigger reimbursement than one suggesting a lesser problem. Figuring out ways to optimize the seriousness of the illness can mean bigger profits for the insurers. The higher payments are determined by a complicated “risk-scoring” system which has nothing to do with the medical treatment a beneficiary receives but rather the diagnosis made on the billing form.
A federal whistle-blower case brought by a former official at UnitedHealth Group alleges that UnitedHealth and other major insurers have been systematically bilking Medicare Advantage of billions of dollars for years by gaming the payment system. The whistle-blower, Benjamin Poehling, told The New York Times that as a finance director, he oversaw tactics that make patients look sicker than they were, by probing patients’ health records electronically to find ways to pump up the diagnosis codes.
For example, diabetes can raise risk scores by varying degrees, depending on a patient’s complications, so UnitedHealth Group “gave people with diabetes intensive scrutiny, to see if they had any other conditions diabetes might have caused,” according to the newspaper. So, the government might pay UnitedHealth $9,580 a year for enrolling a 76-year-old woman with diabetes and kidney failure, yet the payment rose to $12,902 if the company asserted that her diabetes actually caused her kidney failure.
“They’ve set up a perfect scheme here,” Poehling said. “It was rigged so there was no way they could lose.”
Since the 1970s, seniors have had the option to receive their Medicare benefits through private health plans, primarily health maintenance organizations (HMOs), as an alternative to the federally run Medicare program. While the Medicare Advantage plans generally enjoy strong backing on Capitol Hill, they have been the subject of at least six whistleblower lawsuits charging patterns of overbilling and fraud.
More details of this gamesmanship are certain to emerge in federal court. The Justice Department recently joined two consolidated whistleblower lawsuits that have accused UnitedHealth Group of fraud. The company disputed the allegations and vowed to “vigorously contest” them in court.
Matthew Burns, a UnitedHealth spokesman, said in a statement that the company had complied with relevant rules and was transparent "about how we interpreted the government's murky policies."