Insurers Running Medicare Advantage Plans Overbill Taxpayers By Billions As Feds Struggle To Stop It


Health insurers that treat countless seniors have overcharged Medicare by nearly $30 billion the past three years alone, but federal officials say they are moving ahead with long-delayed plans to recoup at least area of the money.

Officials have known for years that some Medicare Advantage plans overbill the government by exaggerating how sick their patients are or by charging Medicare for the treatment of serious health conditions they can't prove their patients have.

Getting refunds from the health plans has proved daunting, however. Officials with the Centers for Medicare & Medicaid Services repeatedly have postponed, or backed off, efforts to crack down on billing abuses and mistakes by the ever more popular Medicare Advantage health plans provided by private health insurers under contract with Medicare. Today, such plans treat over 22 million seniors, more than 1 in 3 people on Medicare.

Now CMS is attempting again, proposing a series of enhanced audits tailored to claw back $1 billion in Medicare Advantage overpayments by 2021 – only a tenth of the items it estimates the plans overcharge the government in a given year.

At the same time frame, the Department of Health insurance and Human Services Inspector General's Office has launched a separate nationwide round of Medicare Advantage audits.

As in past years, such scrutiny faces an onslaught of criticism from the insurance industry, which argues the CMS audits especially are technically unsound and unfair and could jeopardize medical services for seniors.

America's Health Insurance Plans, an industry trade group, blasted the CMS audit design when details emerged last fall, calling it “fatally flawed.”

Insurer Cigna Corp. warned in a May financial filing: “If adopted in the current form, [the audits] will have a detrimental impact” on all Medicare Advantage plans and “affect ale intends to deliver high quality care.”

But former Sen. Claire McCaskill, a Missouri Democrat who now functions as a political analyst, said officials must move past powerful lobbying efforts to carry health insurers accountable and demand refunds for “inappropriate” billings.

“There's several things that could cause Medicare to visit broke. This would be among the contributing factors,” she said. “Ten billion dollars a year is real cash.”

Catching Overbilling With A Wider Net

In the overpayment dispute, health plans want CMS to lessen – otherwise kill off – an enhanced audit tool that, for the first time, could force insurers to cough up millions in improper payments they’ve received.

For over a decade, audits happen to be little more than an irritant to insurers because most plans go years without being chosen for review and often pay only several hundred thousand dollars in refunds as a result. When auditors uncover errors in the medical records of patients they paid the companies to deal with, CMS has simply required a rebate for all those patients for just the year audited – relatively small sums for plans with thousands of members.

The latest CMS proposal would raise those stakes enormously by extrapolating error rates found in a random sample of 200 patients to the plan's full membership – a method likely to trigger many multimillion-dollar penalties. Though controversial, extrapolation is common in medical fraud investigations – aside from investigations into Medicare Advantage. Since 2007, the industry has successfully challenged the extrapolation method and, as a result, largely avoided accountability for pervasive billing errors.

“The public has a substantial curiosity about the recoupment of huge amount of money of public money improperly paid to health insurers,” CMS wrote inside a Federal Register notice late last year announcing its renewed attempt at using extrapolation.

Penalties In Limbo

In a written reaction to questions resulting from Kaiser Health News, CMS officials said the agency has already conducted 90 of those enhanced audits for payments made in 2011, 2012 and 2021 – and expects to gather $650 million in extrapolated penalties as a result.

Though that figure reflects merely a minute percentage of actual losses to taxpayers from overpayments, it might be a huge escalation for CMS. Previous Medicare Advantage audits have recouped a total of about $14 million, far less of computer cost to conduct them, federal records show.

Though CMS has disclosed the names of the health plans in the crossfire, it's not yet told them just how much each owes, officials said. CMS declined to state when, or maybe, they'd make the results public.

This year, CMS is beginning audits for 2021 and 2021, 30 each year, targeting about 5% from the 600 plans annually.

This spring, CMS announced it might extend until the end of August the audit proposal's public comment period, which was designed to end in April. That may be a signal the agency may be looking more closely at industry objections.

Health care industry consultant Jessica Smith said CMS might be taking more hours to make sure the audit protocol can pass muster. “Once they've their ducks in a row, CMS will come back hard at the health plans. There's a lot money associated with this.”

But Sean Creighton, a former senior CMS official who now advises the for healthcare consultant Avalere Health, said payment error rates have been dropping because many health plans “are trying as hard as they can being compliant.”

Still, audits are continuing to find mistakes. The very first HHS inspector general audit, released in late April, discovered that Missouri-based Essence Healthcare Inc. had didn't justify fees for a large number of patients it had treated for strokes or depression. Essence denied any wrongdoing but agreed it should refund $158,904 in overcharges for those patients and ferret out every other errors.

Essence also faces a pending whistleblower suit filed by Charles Rasmussen, a Branson, Mo., doctor who alleges the plan illegally boosted profits by overstating the severity of patients' health conditions. Essence has called the allegations “wholly without merit” and “baseless.”

Essence started like a St. Louis physician group, then grew into a broader holding company in 2007 backed by prominent Silicon Valley venture capitalist John Doerr with his brother, St. Louis doctor and software designer Thomas Doerr. Neither would comment on the allegations.

How We Got Here

CMS uses a billing formula called a “risk score” to cover each Medicare Advantage member. The formula pays higher rates for sicker patients compared to people in a healthy body.

Congress approved risk scoring in 2003 to ensure health plans didn't be put off by taking sick patients who could incur higher-than-usual costs from hospitals and other medical facilities. However, many insurers quickly found ways to boost risk scores – and their revenues.

In 2007, after many years of running Medicare Advantage as what one CMS official dubbed an “honor system,” the company launched “Risk Adjustment Data Validation,” or RADV, audits. The concept ended up being to cut down on undeserved payments that cost CMS nearly $30 billion over the past three years.

The audits of 37 health plans revealed that typically auditors could confirm just 60% of the a lot more than 20,000 health conditions CMS had paid the plans to treat.

Extra payments to plans which had claimed a number of its diabetics had complications, such as eye or kidney problems, were reduced or invalidated in up to 50 % the cases. The overpayments exceeded $10,000 a year for more than 150 patients, though health plans disputed a few of the findings.

But CMS kept the findings under wraps until the Center for Public Integrity, an investigative journalism group, sued the agency underneath the Freedom of knowledge Act to ensure they are public.

Despite the alarming results, CMS conducted no audits for payments made during 2008, 2009 and 2010 because they faced industry backlash over CMS' authority to conduct them, and also the threat of extrapolated repayments. Some within the agency also worried that health plans would abandon the Medicare Advantage program if CMS pressed them too hard, records released with the FOIA lawsuit show.

CMS officials resumed the audits for 2011 and likely to finish them and assess penalties after 2021. That has yet to happen amid the continuing protests from the industry. Insurers want CMS to regulate downward any extrapolated penalties to take into account coding errors that exist in standard Medicare. CMS stands behind its method – for now at least.

At the absolute minimum, argues AHIP, the insurers association, CMS should back away extrapolation for that 90 audits for 2011-13. Should CMS agree, it might discount more than half a billion dollars that could be recovered for that U.S. Treasury.