Millions in Medicare Advantage overcharges revealed in audits

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Federal audits released last week show widespread overcharges and other errors in payments to Medicare Advantage health plans for seniors, with some plans overbilling the government more than $1,000 per patient a year on average, according to Kaiser Health News.

The government's audits – which examined billings from 2011 through 2013, and are the most recent reviews completed – uncovered about $12 million in net overpayments for the care of 18,090 patients sampled, though the actual losses to taxpayers are likely much higher, according to the report.

Medicare Advantage, a fast-growing alternative to original Medicare, is run primarily by major insurance companies.

Officials at the Centers for Medicare and Medicaid Services have said they intend to extrapolate the payment error rates from those samples across the total membership of each plan -- and recoup an estimated $650 million as a result, according to KHN. But after nearly a decade, that has yet to happen. CMS was set to unveil a final extrapolation rule on November 1, but put that decision off until February.

WHAT'S THE IMPACT?

The 90 audits are the only ones CMS has completed over the past decade – a time when Medicare Advantage has grown explosively. Enrollment in the plans more than doubled during that period, passing 28 million in 2022, at a cost to the government of $427 billion, according to KHN.

Seventy-one of the 90 audits uncovered net overpayments, which topped $1,000 per patient on average in 23 audits, according to the government's records. Humana, one of the largest Medicare Advantage sponsors, had overpayments exceeding that $1,000 average in 10 of 11 audits, according to the report.

CMS paid the remaining plans too little on average, anywhere from $8 to $773 per patient.

Auditors flag overpayments when a patient's records fail to document that the person had the medical condition the government paid the health plan to treat, or if medical reviewers judge the illness is less severe than claimed. That happened on average for just over 20% of medical conditions examined over the three-year period; rates of unconfirmed diseases were higher in some plans, according to the report.

Most of the audited plans fell into what CMS calls a "high coding intensity group." That means they were among the most aggressive in seeking extra payments for patients they claimed were sicker than average. The government pays the health plans using a formula called a risk score that is supposed to render higher rates for sicker patients and lower ones for healthier ones. But often medical records supplied by the health plans failed to support those claims. Unsupported conditions ranged from diabetes to congestive heart failure, according to KHN.

Overall, average overpayments to health plans ranged from a low of $10 to a high of $5,888 per patient, which was collected by Touchstone Health HMO, a New York health plan whose contract was terminated "by mutual consent" in 2015, according to CMS records.

Most of the audited health plans had 10,000 members or more, which sharply boosts the overpayment amount when the rates are extrapolated. In all, the plans received $22.5 million in overpayments, though these were offset by underpayments of $10.5 million.

Auditors scrutinize 30 contracts a year, a small sample of about 1,000 Medicare Advantage contracts nationwide. UnitedHealthcare and Humana, the two biggest Medicare Advantage insurers, accounted for 26 of the 90 contract audits over the three years. Eight audits of UnitedHealthcare plans found overpayments, while seven others found the government had underpaid.

THE LARGER TREND

Results of the 90 audits, though years old, mirror more recent findings of a slew of other government reports and whistleblower lawsuits alleging that Medicare Advantage plans routinely have inflated patient risk scores to overcharge the government by billions of dollars.

A report from the Brookings Institution indicates that the five major insurers, UnitedHealthcare, Humana, Aetna, Kaiser Permanente and Anthem (now Elevance), are allegedly padding their bottom lines by disguising profits as costs. 

The report points out that insurers are able to do this because profits accrued through related businesses are not regulated by medical loss ratio (MLR) requirements. In certain cases, spending on related businesses can reach more than 70%, the report noted.

The top five companies have related businesses, including pharmacy benefit managers (PBMs), post-acute providers, hospitals and physician practices.

"In each case, the prices charged to the MA plan can have a material effect on where profits and costs appear," the report said. "This creates potential to move earnings outside the reach of regulations."

With payments to MA plans totaling $350 billion in 2021, the MA payment structure allows for several ways for plans to earn profits.

"The implication is that for the health plans serving most MA beneficiaries, related businesses offer an opportunity for pricing practices within the parent firm umbrella that can shield profits from the terms of MLR regulations," the report said. "The extent to which parent companies engage in such practices is yet unknown."

The authors added that the potential to engage in such practices puts smaller plans without related businesses at a competitive disadvantage.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com