Q. I heard recently that most of the largest Medicare Advantage insurers are submitting inflated bills. Is this why everything has gotten so expensive for seniors enrolling in these plans? Also, what is being done about this? Thanks for your help!
A. The New York Times recently published an article about how some Medicare Advantage plans are allegedly submitting inflated bills to make more money.
In one example, Anthem (now called Elevance Health), paid more to doctors who said their patients were sicker. And executives at UnitedHealth Group told their workers to mine old medical records for more illnesses — and when they couldn’t find enough, sent them back to try again! To view another example, click here to visit the Department of Justice website to see details of the lawsuit against the Medicare Advantage plan from the insurance company CIGNA. In this lawsuit, the government alleged that “CIGNA obtained tens of millions of dollars in Medicare funding by submitting to the Government false and invalid diagnoses for its Medicare Advantage plan members. CIGNA knew that, under the Medicare Advantage reimbursement system, it would be paid more if its plan members appeared to be sicker.”
The examples described above were among the “strategies” that were described by the Justice Department in lawsuits against the companies. These “elaborate systems to make patients appear as sick as possible, often without providing additional treatment,” let the insurers collect more money from the federal government’s Medicare Advantage program. Based on these lawsuits, it would appear that private Medicare Advantage programs, which were supposed to help lower government health care spending, have instead become substantially more costly to taxpayers than Original Medicare.
How Major Health Insurers Are Exploiting the Medicare Advantage Program
The New York Times review of dozens of fraud lawsuits, inspector general audits, and investigations by watchdogs shows how major health insurers exploited the program to inflate their profits by billions of dollars. Here are some of the findings:
- Eight of the 10 biggest Medicare Advantage insurers — representing more than two-thirds of the market — have submitted inflated bills.
- Four of the five largest companies — UnitedHealth, Humana, Elevance, and Kaiser Permanente — have faced federal lawsuits alleging that efforts to over-diagnose their customers were fraudulent.
- The fifth company, CVS Health, which owns Aetna, told investors its practices were being investigated by the Department of Justice.
- Kaiser Permanente, which both runs a health plan and provides medical care, is often seen as a model system. But its control over providers gave it additional leverage to demand additional diagnoses from the doctors themselves, according to the lawsuit.
- Original Medicare, also called Traditional Medicare, provides no financial incentive to doctors to document every diagnosis, so many records were incomplete. Under Medicare Advantage programs, insurers began rigorously documenting all of a patient’s health conditions. So, if a patient has depression or had a stroke many years ago, it was documented even when it had nothing to do with the patient’s current medical care.
- The additional diagnoses led to $12 billion in overpayments to Medicare Advantage plans in 2020. Another estimate, from a former top government health official, suggested the overpayments to Medicare Advantage plans in 2020 were double that, more than $25 billion. The projected excess payments to Medicare Advantage plans is $600 billion over ten years.
- Congress gave the Centers for Medicaid and Medicare Services (CMS) the power to reduce the insurers’ rates in response to evidence of systematic overbilling, but CMS has never chosen to do so.
- A regulation proposed to force the plans to refund the government for more of the incorrect payments has been in the works for four years, but has not been finalized.
- In statements, most of the insurers disputed the allegations in the lawsuits and said the federal audits were flawed. They said their aim in documenting more conditions was to improve care by accurately describing their patients’ health.
What Is Being Done to Remedy the Situation
Even before the first lawsuits were filed, regulators and government watchdogs could see the number of profitable diagnoses escalating. But Medicare has done little to halt the overcharging that is taking place. Some analysts don’t expect any major legislative or regulatory changes to the program.
“Medicare Advantage overpayments are a political third rail,” said Dr. Richard Gilfillan, a former hospital and insurance executive and a former top regulator at Medicare stated. “The big health care plans know it’s wrong, and they know how to fix it, but they’re making too much money to stop. Their CEOs should come to the table with Medicare as they did for the Affordable Care Act, end the coding frenzy, and let providers focus on better care, not more dollars for plans.”
Kaiser Family Foundation Study Confirms What is Happening and Says the MA Is NOT Better Than Traditional Medicare
A study from the Kaiser Family Foundation, a nonprofit research group unaffiliated with the health insurance company Kaiser Permanente, found that health insurance companies typically earn twice as much gross profit from their Medicare Advantage (“MA”) plans as from other types of insurance.
According to the study, “(n)ot surprisingly, the insurance industry often paints MA as ‘better’ for beneficiaries than traditional Medicare, issuing statements such as ‘(m)ore than 28 million seniors and people with disabilities choose Medicare Advantage (MA) because it delivers better services, better access to care, and better value,’ and MA is ‘delivering better health outcomes, through better quality care at a better cost for Medicare beneficiaries.’ But is Medicare Advantage really ‘better’ than traditional Medicare?” According to this Kaiser Family Foundation report and its analysis of recent studies, coupled with the experiences of Medicare beneficiaries who need care for significant illnesses or injuries, the answer is an unequivocal “no”.
We will provide any updates about this as they come available. For more details on Medicare Advantage and issues that affect seniors during open enrollment, please read my recent article on the subject.
Another very scary problem we have recently seen is Medicare Advantage plans simply dropping expensive patients from their plan. A person I met with recently received a disenrollment letter from her Medicare Advantage plan as soon as she needed very expensive skilled rehabilitation care in a nursing home. The letter she received telling her that she was being unceremoniously dropped from the plan gave no indication of why she was being dropped, and offered only a 30-day window to appeal the decision. At the time, she was not even able to read much less comprehend the letter and the 30-day window to appeal, and her family did not discover the letter until the 30-day appeal window was over. So this person is now stuck in a nursing home getting skilled nursing care that is over $20,000 per month, with no health insurance plan whatsoever. We do not know how often this occurs, but we will look into this more and possibly write a future article about this very troubling scenario.
Review Your Medicare Health Plan Every Year, and if You Have Medicare Advantage, Consider Switching Back to Original Medicare
Medicare Open Enrollment began October 15 and goes until December 7, 2022. Besides the issues discussed in this and my other recent article about rehabilitation coverage being cut short, another major problem we see with Medicare Advantage plans is that each plan is “in network” with only a few nursing homes and rehabilitation facilities, forcing people to choose a rehabilitation facility and/or nursing home that may not fully meet their needs.
The good news is that you can switch from a Medicare Advantage plan back to Original Medicare during the annual open enrollment period which runs from October 15 to December 7 each year. The reason we say switch “back to Original Medicare” is because when you first enroll in Medicare, you are always enrolled initially into Original Medicare, and you are then given the option to switch to a Medicare Advantage plan.
If you do switch back to Original Medicare from a Medicare Advantage plan, your coverage under Original Medicare will begin January 1 of the following year. You can also make this change during the Medicare Advantage Open Enrollment period, which runs from January 1 through March 31. If you make this change, be sure to sign up for a Medicare Part D stand-alone prescription drug plan (PDP), unless you have creditable drug coverage from another source. If you do not, and you decide to sign up for Part D PDP coverage later on, you may face a penalty for late enrollment.
Also, if you switch back to Original Medicare, you should always try to purchase a Medicare Supplement insurance policy, also known as Medigap. Medicare Supplement policies help to pay your cost-sharing requirements under Traditional Medicare. However, once you have been enrolled in a Medicare Advantage plan, Medicare Supplement insurers are not required to sell you a policy if you don’t meet the medical underwriting requirements. Therefore, you should contact a few Medicare Supplement insurers directly to see if you will be able to purchase a Medicare Supplement policy when you switch back to Traditional Medicare. Or, to make your life much easier, work with an experienced Medicare health insurance agent who can help you shop for a Medicare supplement policy, and help you get the best possible policy at the least possible cost.
At the Farr Law Firm, we work with Retirement & Medicare Together to serve the Medicare needs of our clients. Now is a perfect time to review your plan and start thinking about making any necessary changes. Click here to schedule your no-cost Medicare review today!
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About Evan H Farr, CELA, CAP
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