Recent media reports shine a spotlight on pervasive fraud against the Medicare Advantage Program, the privately run alternative to traditional Medicare, and efforts to rein in those abuses. Those efforts are critical because almost half of all Medicare beneficiaries have chosen to enroll in Medicare Advantage plans, which cover, at least, the same services as traditional Medicare. Medicare Advantage Plans are operated by private insurers with the costs being largely covered by the government.
Unlike traditional Medicare, where the government pays providers for each service they perform, under the Medicare Advantage model, the government pays private insurance plans a base rate per patient and adjusts the payment based on beneficiaries’ health status and demographics. The government generally pays higher premiums for Medicare Advantage plans to cover beneficiaries who are sicker or older, with the goal of accounting for the higher potential cost to care for those beneficiaries.
Many Medicare Advantage insurers have been accused of abusing this “risk adjustment” system by falsifying beneficiaries’ diagnoses to make them appear sicker than they are, or by submitting diagnoses that are not properly supported in the beneficiaries’ medical records, as required by law. As a result, the plans receive higher premiums from the government than they are entitled to.
The loss to taxpayers is massive. The government estimates that it improperly paid Medicare Advantage plans over $11 billion in 2022 alone.
As the New York Times reported, “Four of the largest five insurers have either settled or are currently facing lawsuits claiming fraudulent coding.” The cases against three of those insurers—United Health Group, Humana, and Kaiser Permanente—were brought by whistleblowers under the False Claims Act, a law that empowers private individuals who are aware of fraud against the government to file lawsuits on the government’s behalf to recover the funds lost to fraud. The law is a critical tool to supplement the government’s enforcement efforts, often detecting frauds that might otherwise be difficult to identify or prove.
Ironically, the same insurers that are facing Medicare Advantage fraud allegations are pushing back against a February 2023 proposal by the Centers for Medicare and Medicaid Services (the agency that oversees Medicare Advantage) to combat waste on the program. Among other changes, CMS plans to eliminate certain diagnosis codes from affecting premium amounts paid to Medicare Advantage plans. That includes diagnoses codes that are not associated with more treatment, are used disproportionately for Medicare Advantage patients compared to traditional Medicare patients, and are prone to abuse.
It’s not surprising that Medicare Advantage plans balk at efforts to rein in premiums paid by the government. While Medicare Advantage was supposed to be a less expensive alternative to traditional fee-for-service Medicare, it’s turned out to be more expensive. In fact, private insurers’ profits on Medicare Advantage plans are at least double what they earn for other types of plans.
Members of Congress has taken notice. While 80% of members of the House last year signed a letter to CMS asking for a “stable pay rate and policy environment for Medicare Advantage,” the Times reported that the Medicare Advantage lobby did not even circulate such a letter this year because of “growing awareness” by Congress members “of overbilling” and other problems with the Medicare Advantage program.
Combating Medicare Advantage fraud will require an all hands on deck approach, including regulatory changes like those that CMS has proposed, fraud prosecutions by the government, and the whistleblowers who have spurred much of the enforcement in this area, and, in some instances, prosecuted cases on the government’s behalf.
John Tremblay is an Associate at Phillips & Cohen LLP