Why Medicare Advantage costs taxpayers billions more than it should
First in a three-part series.
In South Florida, one of the nation’s top privately-run Medicare insurance plans faces a federal investigation into allegations that it overbilled the government by exaggerating how sick some of its patients were.
Related: Key findings from the first installment of 'Medicare Advantage Money Grab'
In the Las Vegas area, private health care plans for seniors ran up more than $100 million in added Medicare charges after asserting patients they signed up also were much sicker than normal — a claim many experts have challenged.
In Rochester, New York, a Medicare plan was paid $41 million to treat people with serious diseases — even though the plan couldn’t prove the patients in fact had those diseases.
Related: Risk score, defined
These health plans and hundreds of others are part of Medicare Advantage, a program created by Congress in 2003 to help stabilize health care spending on the elderly. But the plans have sharply driven up costs in many parts of the United States — larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are, an investigation by the Center for Public Integrity has found.
Dominated by private insurers, Medicare Advantage now covers nearly 16 million Americans at a cost expected to top $150 billion this year. Many seniors choose the managed-care Medicare Advantage option instead of the traditional government-run Medicare program because it fills gaps in coverage, can cost less in out-of-pocket expenses and offers extra benefits, such as dental and eye care.
Related: CMS, defined
But billions of tax dollars are misspent every year through billing errors linked to a payment tool called a “risk score,” which is supposed to pay Medicare Advantage plans higher rates for sicker patients and less for those in good health.
Government officials have struggled for years to halt health plans from running up patient risk scores and, in many cases, wresting higher Medicare payments than they deserve, records show.
Related: Scully on Medicare Advantage payments
The Center’s findings are based on an analysis of Medicare Advantage enrollment data from 2007 through 2011, as well as thousands of pages of government audits, research papers and other documents.
Federal officials who run the Medicare program repeatedly refused to be interviewed or answer written questions.
Related: Medicare Advantage, defined
Among the findings:
Some academic experts and researchers believe the increase in risk scores is more likely to reflect aggressive billing than a rapid deterioration in patients’ health.
Related: Whistleblower suit says health plan cheated government out of more than $1 billion
Industry executives don’t dispute that billing errors occur. But they deny that they charge too much, arguing they only want to be paid fairly for their services.
Clare Krusing, director of communications for America’s Health Insurance Plans, said that the industry trade group is “working together” with federal health officials to improve reporting of risk score data.
Related: How risk scores changed
In the South Florida case, government lawyers have been investigating Humana, Inc. for several years as they try to determine if the company and some of its medical clinics manipulated the complex Medicare Advantage billing system. Humana says it is cooperating with the investigation.
In a separate civil case, a former Bush administration health official alleges in a whistleblower lawsuit unsealed earlier this year that two Puerto Rico health plans cheated Medicare out of as much as $1 billion by inflating patient risk scores. The plans, which at the time were owned by a subsidiary of New-Jersey based Aveta, Inc., denied the allegations.
Related: Center sues in an effort to make Medicare Advantage files public
Government audits and research reports have warned for years that Medicare’s risk scoring formula breeds overbilling, but efforts to hold the industry accountable have met with little success. Federal officials have yet to recoup hundreds of millions of dollars in suspected overpayments to health plans that date back as far as 2007.
Excellus Health Plan, the Rochester, New York, health plan that federal auditors said may have overbilled by as much as $41 million in 2007 for treating patients with serious diseases, paid but a fraction of that amount back years later. A company spokesman said the plan settled the matter by paying the government $157,777 in December 2013.
Related: How risk scores work
Some critics expect little to change unless federal officials disclose Medicare Advantage plans’ full service and billing histories — as they have recently done with Medicare fees paid to more than 880,000 individual doctors and others.
“The [Medicare Advantage] plans don’t want the data out,” said Dr. Brian Biles, a professor in the Department of Health Policy at George Washington University, whose Freedom of Information Act lawsuits shook loose limited enrollment records used in this project. (Biles assisted Center for Public Integrity reporters with the analysis.)
Related: More in the 'Medicare Advantage Money Grab' series
Dr. David Wennberg, a Dartmouth Institute researcher who has studied the payment issue, said that with billions of tax dollars at stake federal officials need to hit the “reset button” on risk scoring.
Wennberg said Medicare Advantage “is a very large program with lots of money flowing through it. There are always vested interests in protecting the status quo.”
Related: Get involved: Help Medicare Advantage investigation go further with donations and news tips
Health care politics
The Affordable Care Act, or Obamacare, orders deep rate cuts in Medicare Advantage, partly to cover millions of uninsured people. That’s consistent with an early Obama administration promise to reduce payments to the health insurers.
But support for Medicare Advantage in Congress has snowballed as it has attracted more and more seniors who are happy with their care and the price they pay for it. Earlier this year, the insurance industry mounted a fierce media campaign to block the rate cuts, enlisting support from more than 200 members of Congress and forcing the administration to partially back off.
The debate over how best to pay Medicare Advantage health plans — and how to curb overcharging — has been contentious for years.
As far back as the 1980s, Congress hoped that carving a bigger role for managed care plans like Medicare Advantage would help curtail overall Medicare spending and ward off waste and fraud that can pop up when doctors and hospitals are paid for each and every service they perform.
To that end, Medicare decided to pay health plans a set monthly rate for patients regardless of how much care they needed. But some health plans stacked the deck by signing up people who were healthier than average, a marketing ploy known in insurance circles as “cherry picking.”
That led to a “lot of game playing” and “dumping patients who were ill,” said Laurence Bishoff, a Boston health care consultant.
Congress thought it saw a remedy in the Medicare Modernization Act of 2003. The law created Medicare Advantage and phased in “risk adjusted” payments starting a year later.
There’s more to this story. Click here to read the rest at the Center for Public Integrity.
This story is part of Medicare Advantage Money Grab. Billing errors cost taxpayers billions. Click here to read more stories in this investigation.
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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.
