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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