Newly released federal revisions show widespread overcharging and other errors in payments to Medicare Advantage health plans, with some government plans overcharging an average of more than $1,000 per patient per year.
Summaries of the 90 audits examining accounts from 2011-2013, representing the latest reviews performed, were obtained exclusively from KHN in a three-year Freedom of Information Act litigation that was settled in late September.
The government’s audits uncovered about $12 million in net overpayments to care for 18,090 patients, although the actual losses to taxpayers are likely much higher. Medicare Advantage, a fast-growing alternative to the original Medicare, is operated primarily by large insurance companies.
Officials at the Centers for Medicare & Medicaid Services have said they plan to extrapolate payment failure rates from these samples to each plan’s total membership — thereby recovering an estimated $650 million from insurers.
But after nearly a decade, that hasn’t happened. CMS was due to unveil a final extrapolation rule on November 1, but recently postponed that decision until February.
Ted Doolittle, a former associate director of CMS’s Center for Program Integrity, which oversees Medicare’s efforts to combat fraud and billing abuse, said the agency has failed to hold Medicare Advantage plans accountable. “I think CMS failed at this job,” said Doolittle, now the public health attorney for the state of Connecticut.
Doolittle said CMS appears to be “carrying water” for the insurance industry, which is “making money with its fist” on Medicare Advantage plans. “It looks pretty smelly from the outside,” he said.
In an email response to written questions from KHN, Dara Corrigan, an assistant CMS administrator, said the agency hasn’t told health plans how much they owe because the calculations are “not yet complete.”
Corrigan declined to say when the agency would end its work. “We have a fiduciary and legal duty to address improper payments in all of our programs,” she said.
Enrollment in Medicare Advantage plans has more than doubled over the past decade
The 90 audits are the only ones CMS has conducted in the past decade, a time when Medicare Advantage has experienced explosive growth. Enrollments in the plans more than doubled during that period, topping 28 million in 2022, costing the government $427 billion.
Seventy-one of the 90 exams uncovered net overpayments, which government records showed averaged more than $1,000 per patient for 23 exams. Humana, one of Medicare Advantage’s largest sponsors, recorded overpayments of more than $1,000 in 10 out of 11 audits.
CMS underpaid the remaining plans, on average, ranging from $8 to $773 per patient.
What is an overpayment?
Comptrollers indicate overpayments when a patient’s records do not document that the person had the condition that the government paid for the health insurance plan to treat, or when medical assessors believe the condition is less severe than claimed.
On average, this happened in just over 20% of the diseases studied over the three-year period; Unconfirmed illness rates were higher in some plans.
As Medicare Advantage’s popularity among seniors has grown, CMS has struggled to keep its review processes and mounting losses to the government largely under wraps.
From the outside it seems quite smelly.
That approach has frustrated both the industry, which has branded the review process “fatally flawed” and hopes to torpedo it, and Medicare advocates, who fear some insurers will get away with ripping off the government.
“At the end of the day, it’s taxpayer money that’s been spent,” said David Lipschutz, senior insurance policy attorney at the Center for Medicare Advocacy. “The public deserves more information about this.”
At least three parties, including KHN, have sued CMS under the Freedom of Information Act for revealing details about the overpayment checks, which CMS calls Risk Adjustment Data Validation, or RADV.
KHN sued CMS in September 2019 after the agency failed to respond to a FOIA request about the audits. As part of the settlement, CMS agreed to turn over the audit summaries and other documents and to pay $63,000 in legal fees to Davis Wright Tremaine, the law firm representing KHN. CMS did not admit it wrongly withheld the records.
Some insurers often claimed patients were sicker than average without sufficient evidence
Most of the plans reviewed fell into what CMS calls a “high coding intensity group.” This means they have been among the most aggressive in seeking additional payments for patients they claim are sicker than average. The government pays for the health plans with a formula called a “risk score,” designed to lead sicker patients to higher rates and healthier ones to lower rates.
But often the medical records provided by the health plans could not support these claims. Unassisted conditions ranged from diabetes to congestive heart failure.
Overall, average overpayments to health plans ranged from a low of 10 to a high of $5,888 per patient, as collected by Touchstone Health HMO, a New York-based health plan whose 2015 contract was “mutual” according to CMS records. dismissed.
Two major insurers that audits found to overcharge Medicare: United Healthcare and Humana
Most of the health plans audited had 10,000 or more members, which greatly increases the overpayment amount when rates are extrapolated. UnitedHealthcare and Humana, the two largest Medicare Advantage insurers, were responsible for 26 of the 90 contract reviews over the three years.
Overall, the 90 audits found plans that received $22.5 million in overpayments, although this was offset by $10.5 million in underpayments.
Auditors review 30 contracts a year, a small sample of about 1,000 Medicare Advantage contracts nationwide.
Eight reviews of UnitedHealthcare plans found overpayments, while seven others found the government underpaid.
UnitedHealthcare spokeswoman Heather Soule said the company welcomes “the program oversight that RADV audits provide.” However, she said the audit process must compare Medicare Advantage to the original Medicare to provide a “complete picture” of overpayments. “Three years ago, we recommended that CMS conduct RADV audits on every plan every year,” Soule said.
Humana’s 11 audits with overpayments included plans in Florida and Puerto Rico, which CMS had audited twice in three years.
The Florida Humana plan was also the target of an April 2021 independent review by the Inspector General of Health and Human Services. That audit, which covered billings in 2015, concluded that Humana had wrongly earned nearly $200 million that year by overstating how ill some patients on its Medicare Advantage plans were . Officials have not yet received any of that money back.
In an email, Humana spokeswoman Jahna Lindsay-Jones called the CMS audit results “preliminary,” noting that they were based on a sample of years-long claims.
“While we continue to have significant concerns about conducting CMS audits, Humana remains committed to working closely with regulators to improve the Medicare Advantage program to improve seniors’ access to quality, affordable care ‘ she wrote.
A payroll showdown is imminent
The results of the 90 audits, while years old, reflect more recent findings from a slew of other government reports and whistleblower lawsuits — many of which were released over the past year — that allege that Medicare Advantage plans routinely review patient risk assessments inflated to overcharge the government by billions of dollars.
Brian Murphy, an expert in medical records documentation, said that overall the reviews show the problem remains “absolutely endemic” in the industry.
Auditors “keep” finding the same excessive fees, he said, adding, “I don’t think there’s enough oversight.”
When it comes to getting money back from health plans, the big sticking point is extrapolation.
Although extrapolation is routinely used as a tool in most Medicare audits, CMS officials have never applied it to Medicare Advantage audits due to stiff opposition from the insurance industry.
“Although this data is more than a decade old, recent research demonstrates the affordability of Medicare Advantage and the responsible use of Medicare dollars,” said Mary Beth Donahue, president of the Better Medicare Alliance, a group that advocates for Medicare Advantage. She said the industry “offers better care and better outcomes” for patients.
But critics argue that CMS only audits a tiny percentage of Medicare Advantage contracts nationwide and should be doing more to protect taxpayers’ money.
Doolittle, the former CMS official, said the agency “needs to start keeping up with the times and doing these audits annually and extrapolating the results.”
But Kathy Poppitt, a Texas health attorney, questioned the fairness of demanding huge reimbursements from insurers so many years later. “The health plans will fight tooth and nail and won’t make it easy for CMS,” she said.
KHN (Kaiser Health News) is a national, editorially independent newsroom and program of KFF (Kaiser Family Foundation).
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