Feds were advised of Medicare Advantage overcharges years ago

Federal health officials were advised in 2009 that a formula used to pay private Medicare plans triggered widespread billing errors and overcharges that have since wasted billions of tax dollars, newly released government records show.

Privately run Medicare Advantage plans offer an alternative to standard Medicare, which pays doctors for each service they render. Under Medicare Advantage, the federal government pays the private health plans a set monthly fee for each patient based on a formula known as a risk score, which is supposed to measure the state of their health. Sicker patients merit higher rates than those in good health.

The program is a good fit for many seniors. Some 16 million people have signed up — about a third of people eligible for Medicare — and more are expected to follow. Supporters argue that Medicare Advantage improves care while costing members less out of pocket than standard Medicare. The Medicare Advantage industry is lobbying hard to block budget cuts sought by the Obama administration.

Medicare Advantage plans are “clearly an important force to be reckoned with when it comes to making public policy,” said Dr. Robert Berenson, a former government health official, who is now at The Urban Institute.

But overspending tied to rising risk scores has cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series of articles published last year. Earlier this week, the Government Accountability Office estimated “improper payments” to Medicare Advantage plans at more than $12 billion in 2014.

Concerns that some health plans overstate how sick their patients are date back years, according to records recently released to the Center for Public Integrity under the Freedom of Information Act.

The documents include an unpublished study commissioned by the agency that runs Medicare, the Centers for Medicare and Medicaid Services, and dated Sept. 29, 2009; the study tracked growth in risk scores starting in 2004, the year after Congress created the billing tool.

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Copyright 2014 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.