The Government Accountability Office recently released a report finding that Medicare paid out $14.1 billion to private insurance companies for improper claims in 2013 alone. The report, entitled “Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments,” discusses audits conducted by the Centers for Medicare and Medicaid Services on payments to select “Medicare Advantage” plans.
Medicare Advantage plans are private health plans available to senior citizens who qualify for both Medicare Part A and Part B. In lieu of “traditional” Medicare, one can enroll in a Medicare Advantage plan managed by a private insurance company. CMS then pays the private insurer a fixed monthly sum per person enrolled to provide care, regardless of the actual healthcare expenses incurred by the patient. Put another way, rather than pay health care expenses as they are incurred, CMS pays a fixed “premium” every month to the private insurers, who then fund a senior’s health care expenses as they come due.
Medicare Advantage plans are big business for private insurance companies. In 2014 alone, CMS paid roughly $160 billion to private insurers offering Medicare Advantage plans to 15.8 million seniors. In total, about 30% of Medicare recipients have elected to enroll in Medicare Advantage plans.
Periodically, the amount of the “premium” CMS pays for a particular patient gets adjusted up or down based on the beneficiary’s health and the projected future risks of health problems. CMS’s audits – and the focus of the GAO’s recent report – focused on these periodic “risk adjustments.” Each patient is assigned a “risk score,” based on their age, health diagnoses, and other factors. The amount of CMS’s payment fluctuates annually, based on the perceived risk. The audit revealed that several Medicare Advantage plans were submitting beneficiary diagnoses for risk adjustment purposes that were not supported by any available medical evidence, leading to massive government overpayments.
CMS conducts contract-level audits of various Medicare Advantage plans on a yearly basis, but the audits are cumbersome and time consuming. For instance, the report discusses that CMS just last year started contract-level audits of 2011 and 2012 payments. Moreover, the reward is relatively small, as CMS expects to recover only $370 million in overpayments for 2011.
GAO initiated its review of CMS’s audits after a private organization, the Center for Public Integrity, found evidence of nearly $70 billion in overpayments by CMS to Medicare Advantage plans from 2008 to 2013. Like the CMS study, this private investigation found that the overpayments were largely the result of Medicare Advantage plans exaggerating patient diagnoses, in order to inflate “risk adjustment” payments.
If a Medicare Advantage plan intentionally submits a false patient diagnosis to CMS, with the goal of increasing the amount of CMS’s monthly payment to the insurer, it would likely be a form of fraud under the False Claims Act. If you are aware of this kind of practice by a Medicare Advantage plan, contact one of our lawyers for a consultation – you might be able to serve as a whistleblower and could be entitled to receive a portion of any money recovered by the government.