A May 2016 report from the United States Government Accountability Office (GAO) is harshly critical of Private Medicare Advantage plans, stating that the plans have overbilled the government by billions of dollars, but have rarely been forced to repay the money or face other consequences for their actions. The report, “Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments,” called for “fundamental improvements” to curb overbilling by the health plans, which are paid more than $160 billion annually. The privately run health plans, an alternative to traditional fee-for-service Medicare, have proven popular with seniors and have enrolled more than 17 million people. The plans, which were the subject of a Center for Public Integrity investigation, also enjoy strong support in Congress.
This report follows an October 2014 audit by the GAO that was prompted by the Center for Public Integrity’s “Medicare Advantage Money Grab” series. The series documented nearly $70 billion in improper payments to health plans, most of which were inflated fees from overstating patients’ health risks, from 2008 through 2013 alone.
The investigation performed by the Center for Public Integrity traced the overpayments to abuse of a billing formula known as a risk score, which pays higher rates for sicker patients and less for people in good health. Since 2004, that risk score has been used on the “honor system,” despite criticism that many health plans have overstated how sick some patients are to boost their revenues. Such a practice is referred to as “upcoding.”
CMS also released records to the Center for Public Integrity through a court order in a Freedom of Information (FOIA) lawsuit that showed overbilling has wasted tax dollars almost since risk scores were introduced in 2004. As an example, one review of 2005 payments determined that almost one-third of patients that were enrolled in 22 health plans were not actually as sick as was claimed; as a result, the audit projected overpayments of $4.2 billion.
In the report, the GAO noted that CMS had failed to target health plans with “known improper payment risk,” thereby allowing the worst performers to continue escaping the net. The GAO also criticized the agency for allowing audits and appeals to drag on for years: i.e., some audits of 2007 payments to health plans are still under appeal.
America’s Health Insurance Plans, an industry trade organization, responded to the GAO report by stating that an “unconfirmed diagnosis” in an audit does not mean that the patient doesn’t have the disease. The trade group also also been known to criticize the audit review as not yet complete or “fully tested,” to ensure stability and reliability.
David Lipschuz, an attorney with the Center for Medicare Advocacy, noted that his group is “troubled” by the extent of the improper payments to Medicare Advantage plans and the government’s “lack of progress on recouping and deterring such payments.” He further noted that he is hopeful that policymakers who focus on protecting Medicare Advantage profit take heed of this GAO report to ensure that the recommendations are implemented.
CMS officials have begun to audit Medicare Advantage payments from 2011 and 2012, and have set a goal to have all Medicare Advantage contracts audited on an annual basis. According to the agency, “HHS is strongly committed to program integrity in the Medicare Advantage program and takes seriously our responsibility to protect taxpayer dollars by identifying and correcting improper payments.”
GAO officials noted that while CMS is stepping up their RADV audits, much more needs to be done: the upcoming audits are expected to recover around $370 million; however, that is only around 3% of the total estimated annual overpayment. HHS concurred with all five recommendations made in the report, which also included: modifying CMS’s calculation of coding intensity; modifying CMS’s selection of contracts for contract-level RADV audits to focus on those contracts most likely to have high rates of improper payments; enhancing the timeliness of CMS’s contract-level RADV process; improving the timeliness of CMS’s contract-level RADV appeal process by requiring that reconsideration decisions be rendered within a specified number of days comparable to other medical record review and first-level appeal time frames in the Medicare program; and ensuring that CMS develops specific plans and a timetable for incorporating a RAC into the program as mandated by the Affordable Care Act.