Newly released government records reveal that Federal health officials were advised in 2009 that a formula used to pay private Medicare plans triggered widespread billing errors and overcharges that have since wasted billions of tax dollars.
Medicare Advantage plans that are privately operated, offer an alternative to standard Medicare, which pays doctors for each service they render. Under Medicare Advantage, the federal government pays the private health plans a set monthly fee for each patient based on a formula known as a risk score, which is supposed to measure the state of their health. Sicker patients merit higher rates than those in good health.The program appears to work and approximately 16 million have signed up. However, according to a new study, the risk scores for Medicare Advantage enrollees grew twice as fast between 2004 and 2008 as they would have had the same person remained in standard Medicare. The study said it was “extremely unlikely” that people who enrolled in the plans actually got sicker and noted that coding inflation “results in inappropriate payment levels.”
The lead author was Richard Kronick, then a researcher at the University of California, San Diego. Kronick now heads a research arm of the Department of Health and Human Services. The study cited diabetes as an example of the billing problem. The private Medicare Advantage health plans reported rates of diabetes with medical complications more than twice as often as for people in standard Medicare. “It seems extremely unlikely that the actual distribution of diabetics changed substantially in MA plans … and almost surely reflects MA efforts to more fully document members’ diagnoses,” the study said. The authors noted that “a number of companies have successfully marketed services to help MA plans increase their risk scores.” They also said that the problem was worsening over time. The study said that a number of large Medicare health plans, which were not named, raised risk scores far above their peers. But the agency chose not to ferret out the worst offenders and discipline them. Instead, CMS cut rates industrywide in 2010 by 3.41 percent to offset the jump in risk scores. Earlier this week, the GAO the audit arm of Congress, cited more than $12 billion in improper payments to Medicare Advantage plans among a total of nearly $60 billion in misspent Medicare funds for 2014. A broader GAO audit of how well federal officials have monitored the industry to curb overbilling is underway; it’s due to be released later this year. Jeffrey Newman represents whistleblowers.