Did Your Health Plan Rip Off Medicare?

Lambert here: I’d be shocked if that happened.

By Fred Schulte, Kaiser Health News. Originally published at Kaiser Health News.

Today, KHN has released details of 90 previously secret government audits that reveal millions of dollars in overpayments to Medicare Advantage health plans for seniors.

The audits, which cover billings from 2011 through 2013, are the most recent financial reviews available, even though enrollment in the health plans has exploded over the past decade to over 30 million and is expected to grow further.

KHN has published the audit spreadsheets as the industry girds for a final regulation that could order health plans to return hundreds of millions, if not billions, of dollars or more in overcharges to the Treasury Department — payments dating back a decade or more. The decision by the Centers for Medicare & Medicaid Services is expected by Feb 1.

KHN obtained the long-hidden audit summaries through a three-year Freedom of Information Act lawsuit against CMS, which was settled in late September.

In November, KHN reported that the audits uncovered about $12 million in net overpayments for the care of 18,090 patients sampled. In all, 71 of the 90 audits uncovered net overpayments, which topped $1,000 per patient on average in 23 audits. CMS paid the remaining plans too little on average, anywhere from $8 to $773 per patient.

The audit spreadsheets released today identify each health plan and summarize the findings. Medicare Advantage, a fast-growing alternative to original Medicare, is run primarily by major insurance companies. Contract numbers for the plans indicate where the insurers were based at the time.

Since 2018, CMS officials have said they would recoup an estimated $650 million in overpayments from the 90 audits, but the final amount is far from certain.

Spencer Perlman, an analyst with Veda Partners in Bethesda, Maryland, said he believes the data released by KHN indicates the government’s clawbacks for potential overpayments could reach as high as $3 billion.

“I don’t see government forgoing those dollars,” he said.

For nearly two decades, Medicare has paid the health plans using a billing formula that pays higher monthly rates for sicker patients and less for the healthiest ones.

Yet on the rare occasions that auditors examined medical files, they often could not confirm that patients had the listed diseases, or that the conditions were as serious as the health plans claimed.

Since 2010, CMS has argued that overpayments found while sampling patient records at each health plan should be extrapolated across the membership, a practice commonly used in government audits. Doing so can multiply the overpayment demand from a few thousand dollars to hundreds of millions for a large health plan.

But the industry has managed to fend off this regulation despite dozens of audits, investigations, and whistleblower lawsuits alleging widespread billing fraud and abuse in the program that costs taxpayers billions every year.

CMS is expected to clarify what it will do with the upcoming regulation, both for collecting on past audits and those to come. CMS is currently conducting audits for 2014 and 2015.

UnitedHealthcare and Humana, the two biggest Medicare Advantage insurers, accounted for 26 of the 90 contract audits over the three years.

Humana, one of the largest Medicare Advantage sponsors, had overpayments exceeding the $1,000 average in 10 of 11 audits, according to the records.

That could spell trouble for the Louisville, Kentucky-based insurer, which relies heavily on Medicare Advantage, according to Perlman. He said Humana’s liability could exceed $900 million.

Mark Taylor, Humana’s director of corporate and financial communications, had no comment on the overpayment estimates.

Commenting on the upcoming CMS rule, he said in an emailed statement: “Our primary focus will remain on our members and the potential impact any changes could have on their benefits. … We hope CMS will join us in protecting the integrity of Medicare Advantage.”

Eight audits of UnitedHealthcare plans found overpayments, while seven others found the government had underpaid.

In a conference call with reporters this week, Tim Noel, who leads UnitedHealthcare’s Medicare team, said the company wants CMS to make changes in the regulation but remains “very comfortable” with what the 2011-13 audit results will show.

“Like all government programs, taxpayers and beneficiaries need to know that the Medicare Advantage program is well managed,” he said.

He said the company supports annual auditing of Medicare Advantage plans.

But Perlman said the sheer size of the program makes annual audits “completely impractical.”

These audits are “incredibly time-consuming and labor-intensive” to conduct,” he said.

Print Friendly, PDF & Email
This entry was posted in Guest Post, Health care, Ridiculously obvious scams on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. none

    Most recent = 10 years ago, and the amounts mentioned are surprisingly low. I’d have expected 10s or 100s of billions. This sounds like the tip of the iceberg.

  2. Arizona Slim

    Thank you, NC, for giving me yet another reason to avoid these so-called Advantage plans. This part of the post really bopped me over the head:

    “For nearly two decades, Medicare has paid the health plans using a billing formula that pays higher monthly rates for sicker patients and less for the healthiest ones.”

    In short, people like me just wouldn’t be the cash cow that these plans are looking for. Not that they wouldn’t try. They’d be running all sorts of tests — or trying to.

    Yours Truly was taught to question all of these tests and other things by my mother, who was fond of asking what was truly necessary. Almost invariably, the answer would be something like, “Oh, you could probably get away with not having them. But just to be sure…”

    And then Mom would gather herself up — and me — and leave the doctor’s office. Testing and treatment gauntlet: Avoided.

    Thanks, Mom!

    1. Brunches with Cats

      Not tests, but surveys. They send a questionnaire (“to help us serve you better,” LOL) when you first enroll asking whether you’ve ever been diagnosed with xyz, are currently in chemo, etc. I vaguely recall one of them was four pages long.

      I enrolled in a new MA plan as of 1/1/2023, because after 3 years on the previous plan, I still have a hole in my mouth and need a crown. Long story for another time. Nutshell version is that new plan will cover the entire cost of the crown and also a filling for a broken tooth, no out-of-pocket cost to me. I have the work scheduled and am keeping fingers crossed that it will all be done by mid-March to give me time to switch to original Medicare before the enrollment period ends on 3/31 (evidently you have to do it in writing).

      1. Arizona Slim

        BTW, I recently turned 65. And I was pummeled with Medicare Advantage advertising.

        In the midst of this pummeling, I didn’t get a single piece of correspondence from Medicare. A simple one-page letter telling me how to sign up online, via phone, or in person would have sufficed.

        It was as if Medicare was ceding the market to these so-called Advantage plans.

        1. Brunches with Cats

          I do get correspondence from CMS, including their annual “Medicare and You” booklet. However, I agree that Medicare/CMS appears to be pushing us all into MA. The VA definitely is pushing veterans into it. The really sinister thing about this is that the VA then denies certain benefits on the grounds that the veteran has “private health insurance.” I found that out when I got an ambulance bill that was supposed to have been covered as part of a medical emergency in October 2021. All of my VA providers assumed it would be.

          I had to do weeks of research, including reading eye-glazing regs going back to 1998, to find the one hair-splitting legal explanation, which would take a full article to explain in lay terms, as it applies only in certain circumstances (but apparently to millions of veterans). And, BTW, it’s not the VA or even Medicare that’s responsible for this very deliberate exclusion, but Congress.

          Bottom line is that if I switch to regular Medicare, I won’t get billed for the ambulance, if and when I need it again.

          1. Telee

            Traditional Medicare will be gone by 2030. The Biden administration is backing REACH, a plan which will see private equity backed firms and health insurers administering the disbursements of benefits to seniors for up to 80% of the Medicare funds. Wall Street is salivating. There is no choice. Patients will be enrolled in REACH without their knowledge or consent. See Physicians for a National Health Policy (PNHP) for details. This is such a major change and nobody seems to know a thing about it. Astonishing!

  3. harri

    Recently (mfj) signed up with Medicare A and B and added a high deductible G with a max cap circa 2,700/annual. The H_G is a just-in-case insurance and seems appropriate in that it kicks in after part B deductible has been satisfied.

    Also inundated with all sorts of advantage plan junk and just tossed into bin.

    1. Arizona Slim

      Precisely what I did, harri.

      As for all of that Advantage junk, most of it gets tossed into my recycle bin. (Ahhh, that feels good! It even improves my health!)

      OTOH, I do like to keep a scratch paper stash handy. So, if those Advantage mailings come with one side of the paper blank, boom. It gets added to the stash.

  4. Jorge

    1) This has nothing to do with Medicare Advantage.
    2) Here’s how it works:
    A) Medicare pays the hospital $1 for a healthy old patient, $2 for an old patient with mild diabetes, and $3 for an old patient with severe diabetes.
    B) The nurses and doctors don’t care about billing, so they neglect to add “mild diabetes” or “severe diabetes” to the chart.
    C) The hospital underbills Medicare.

    This happens a lot. I worked at a startup whose schtick was to scan all printed material for a patient (2000 PDFS for an old person!) and hunt for cases of “hey, patient has diabetes and nobody marked this in the database”. There’s a whole lot of underbilling for this case, and I’m sure overbilling as well. It is complicated by the fact that the law is totally unforgiving and demands utter and total accuracy: overbilling gets you massive fines if they catch you.

    So, yeah, there are these huge Medicare overbilling scandals like with Florida’s former governor, and they are somewhat overblown. There’s a major problem here, and the legal environment is not constructed sensibly about it. It’s not necessarily “giant hospitals ripping off the money press”. Big pharma, now, OMG.


  5. gcw919

    The simple solution is Medicare for All, but Joe, the Working Class Hero, will have none of it. Why do we keep electing these corporate hacks who care nothing for the average citizen?

Comments are closed.