Upcoding in Medicare Advantage: Transparency can clean the mess

That the government overpays sellers of Medicare Advantage plans is well known in Beltway circles even if much of the public remains unaware. Recently, two Department of Health and Human Services (HHS) researchers posted new findings on the Medicare and Medicaid Research Review, a peer-reviewed online journal supported by the Centers for Medicare and Medicaid Services (CMS), documenting how some insurance companies are overbilling the government and have been doing so for years.

Fred Schulte, a senior writer for the Center for Public Integrity who has been covering overbilling in the Medicare Advantage program, told me he spotted the new study while he was just cruising around the CMS website. “Despite its broad implications for Medicare spending, the study by HHS researchers Richard Kronick and W. Pete Welch has attracted scant notice in Washington,” Schulte wrote.

The Medicare Advantage program, which is growing rapidly, costs the government some $160 billion a year, so waste in the program can add up to real money. Recall that Medicare Advantage plans were promoted as a way for private insurers to provide the basic Medicare benefits and to save the government money by providing care coordination, especially for seniors with multiple chronic conditions. Generous payments from the government have allowed insurers to offer low- or no-premium plans and lots of extras, like dental care and eyeglasses, which help account for their popularity. About 16 million seniors are enrolled in a Medicare Advantage plan, almost one-third of all Medicare beneficiaries.

In June, the Center for Public Integrity published the results of its investigation showing that billions of tax dollars are misspent each year because of billing errors linked to payment tools called risk scores, which are at the heart of the recently published HHS study. In order to prevent Medicare Advantage health plans from trying to avoid covering high-risk participants, Medicare has been using a payment scheme based on diagnostic codes and adjusting payments to the plans accordingly. Health plans get more money for beneficiaries who need more care.

But as the General Accounting Office has pointed out, this payment method designed to solve one problem has simply created another: Medicare Advantage plans have learned to game the system to pad their reimbursements, a process called upcoding. That’s hardly surprising given the history of fraud and other unsavory practices in the program on the part of providers and insurers.

The HHS researchers found unexpectedly high risk scores for Medicare Advantage beneficiaries for conditions such as alcohol and drug dependence, complications of diabetes, and depression. For example, they found that drug and alcohol dependence is as much as eight times more common in the Medicare Advantage health plans that upcode the most than it was among beneficiaries who remained in traditional Medicare. The researchers also concluded that people who join Medicare Advantage plans are generally healthier than those who remain in the traditional fee-for-service program.

Will the HHS researchers’ study be a wake-up call for CMS and the Obama administration to finally crack down on the overpayments to Medicare Advantage plans? Remember, that was something the president vowed to do when he was campaigning for office. But in the last two years, each time the agency proposed cutting payments to Medicare Advantage plans, lobbying campaigns by the industry won out and those proposed cuts turned into payment increases.

Maybe there’s another route to cleaning up this mess: transparency. The researchers did not name the companies noted for upcoding the health risks and conditions of beneficiaries, but suggest that these are insurers with lots of Medicare customers. One of the highest billers had more than 200,000 policyholders. There’s always a chance public shame will help do the trick.

Trudy Lieberman is a journalist and an adjunct associate professor of public health, Hunter College, New York, NY. She blogs on the Prepared Patient blog.

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  • QQQ

    “Will the HHS researchers’ study be a wake-up call for CMS and the Obama administration to finally crack down on the overpayments to Medicare Advantage plans?”
    But in the not too distant future the regional monopoly owned PCMH/ACO will have you seeing a random PA/NP for your medical care, unless you have the resources for concierge care, or a doc sets up an affordable direct care practice.

    The era of the of personal physician in the United States is ending encouraged by the very medical societies that should be fighting with patients to preserve it. Medicine is losing its soul, the doctor/patient relationship. Instead you will be part of a population that will be “managed.”

    • ninguem

      You do realize, that when that formerly private doctor becomes a hospital employee, the fee doubles.

      The doc’s formerly private office, is now part of the hospital. The hospital charges accordingly. There is a pass-through charge of office overhead, called a “facility fee” tacked onto your bill.

      From the MANY news articles on the subject, as well as my own personal experience with my own healthcare, when that doctor becomes a hospital employee, the fees added on by the hospital will double what you paid when that doctor was private.

      Not that the physician is bringing that home. That extra profit goes straight to the administration’s million-dollar salaries.

      Courtesy of a system that is rigged (both political parties are equally guilty) the hospitals simply extract more money from the system, and then claim they are better business managers.

      What they are, is better extortionists.

      • QQQ

        “Not that the physician is bringing that home. That extra profit goes straight to the administration’s million-dollar salaries.”

        So you literally become a slave working for someone else now! While they reap the rewards!

        That’s the problem when your a salaried employee! No such thing as job security and as long as your an employee, you’ll be overworked, underpaid, and you ARE replaceable!

        • ninguem

          And they hit you with a noncompete to make sure you can’t work for a nearby competitor, or set up on your own.

          That way they can literally throw you away.

          • QQQ

            Amazing they have a noncompete clause and get away with it for doctors! How the heck can they support themselves if they have that until their contract expires?

            I knew a female doctor that had a noncompete clause on her and couldn’t work for at least 2 years in a hospital! The only thing she could’ve done for income was working as a adjunct professor at a CUNY college in NYC! It was tough because she was also pay her college & medical school loans, a mortgage,, children, etc. I didn’t know what the husband did for a living, but it wasn’t in healthcare though!

          • ninguem

            They take the position that the employer is giving the new doctor “trade” or “proprietary” or “business secrets”. It’s contemptible. There are no trade secrets in medicine, and in fact the medical boards have filed ethics charges against physicians who try to claim a medical technique is “proprietary”.

            There is no Bar Association in the country that allows them.

          • QQQ

            The challenges for physicians in this country is unbelievable! Its more like the doctor gets attack everyday from the media, government, patients, you name it! Its just outrageous that a person that decades him/herself to the field gets bombarded for trying to do the job!

          • SarahJ89

            My friends in mental health have to sign two-year non-compete contracts with our local mental health clinic. Here’s what they get in return: the right to draw clients from the common intake pool and a room in which to see them. They are paid only for the contact hours, not for the related paperwork and administrative time and effort. The last time I looked they got paid twenty bucks an hour. The clients were billed $90 per hour. That was quite a while ago so obviously it’s gone up, but the gap hasn’t changed.

            So clients pay top dollar to see newbie Ph.D’s who leave as quickly as they can. And agency’s highly paid administrators are constantly lamenting how desperate they are for funds.

          • QQQ

            So that’s what the field has come to. Just to make sure you won’t betray your employer, you have to sign a contract ,take orders from others, and get paid only for contact, and see providers that want to get out faster than they got in!


  • ninguem

    Off-topic, just including this as a suggestion for a future column.


    It’s about hospitals taking over private physicians, charging the public twice as much for the same outpatient service from the formerly private doctor, then portraying the independent private doctor as somehow inferior.

    …….hijack over, carry on…….

    • QQQ

      So salaried doctors work for hospitals because they want less burdensome work from private practice and think they get a good deal! But instead they get more than what they’re bargaining for, and get screwed by big hospitals!

      They just do all the dirty work and hospitals reap the rewards from docs!

  • betsynicoletti

    Patients love Medicare Advantage plans because of lower co-pays. I’ve always been skeptical that it saves CMS any money, but I don’t have data one way or another.
    However, these Medicare replacement plans cost physician offices money. Each plan is different and (within basic rules) can set their own criteria for coverage and medical necessity. Pre-authorization is often required for items that don’t require pre-auth in fee-for-service Medicare. What this means: any savings is based on increased cost and complexity for physician practices. It costs us more to treat these patients because we have to research the rules for numerous plans, instead of just knowing fee-for-service Medicare. If they were saving the government (us) money, that would be one thing. But if they’re not….

    • http://byrondennis.typepad.com/theabcsofmedicare/ Dennis Byron


      A major presumption is that if a physician is losing money by accepting an insurance plan, that physician will not accept that insurance. My doctor dropped my favored Medicare Advantage plan last year. I then had to make a choice — favored doctor or favored insurance. I chose the doctor and changed insurers. Is your experience with patients different?

      (As for lower co-pays, yes public Part C Medicare Advantage plan co-pays and co-insurance are almost always less than vanilla fee for service Original Medicare. But almost no one has just vanilla fee for service Original Medicare. Over 95% of us on Original Medicare supplement it with public Part C or Medicaid or VA, or private retiree or Medigap insurance (and increasingly by continuing to work so we can get employer insurance). Of these supplemental options, Part C has the highest co-pays. But in many states it is the only way to get an annual out of pocket spending limit, which is the reason one buys insurance after all.)

      • betsynicoletti

        I don’t know why your physician dropped the plan, or if the plan dropped the physician. Sometimes, it is not payment, it is the difficulty of working with a payer.
        Of course, many beneficiaries in ffs Medicare have a supplemental policy.

  • betsynicoletti

    I didn’t mean to avoid your question.
    I am not in a physician practice; I’m a consultant. When I present to groups of physicians, I find few practices that are willing to drop a particular insurance because of low rates. Mostly, these are general surgeons and they do after hours coverage, so participating seems the best option in many cases. In some markets, being out of network is an option, but not most markets.
    For Medicare Advantage, what I hear is: a) sometimes the rates are lower than ffs Medicare b) there is added complexity and cost to figuring out what is covered and what needs pre-authorization.

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