Some Medicare Advantage Plans Are Taking Us For A Ride

In 2003, Congress made a major change to Medicare.  In the hopes of reducing costs through privatization, it created what are called Medicare Advantage plans.  The idea was that private companies would be paid a fixed amount to provide Medicare beneficiaries with the health care for which Medicare would normally pay.  The amount the plan would be paid would depend upon a number of factors, including the cost of medical services in the area where the beneficiary lived and risk factors relating to the beneficiary himself or herself.  If the plan could deliver those services for less money that it received from Medicare, it made a profit.  The benefit for Medicare was that its costs for that patient were fixed.  Even if the patient needed thousands of dollars worth of unexpected care, Medicare was off the hook; the advantage plan paid for it all.

Medicare Advantage Riding High As New Insurers Flock To Sell To Seniors | Kaiser Health News

As anyone who has watched even a few minutes of television can attest, Medicare Advantage plans are in hot competition to persuade seniors to sign up with them.  As an enticement, some offer services Medicare does not, such as vision and dental coverage.  Some even offer to pay eligible beneficiaries a monthly amount to sign up.  In return for these extra benefits, the Advantage plans limit the options seniors enjoy under traditional Medicare.  I wrote about some of these limitations here.  Here is an excellent piece from Medicare about how much it costs to enroll in a Medicare Advantage plan and how the plans charge for various services as well as how they control costs.

Medicare Advantage plans have been very successful in persuading beneficiaries to sign up with them.  They have doubled their enrollment over the last ten years.  In 2021, there were 26 million enrollees (42% of all Medicare beneficiaries), who accounted for $343 billion, or 46%, of all Medicare spending.  You will note that, while only 42% are enrolled in plans, the plans cost Medicare 46% of its payouts.  That 4% difference amounts to almost $30 billion in 2021.

In my earlier blog post, I was not critical of the plans themselves.  It appears I was a bit hasty in my assessment that the plans were overall a good thing.  It appears some plans have been taking advantage of both Medicare and their customers.

As I noted above, one of the factors which goes into determining the amount of money Medicare pays to an Advantage plan is how sick is the beneficiary.  Each beneficiary’s health is converted to a risk score, which is used to set the amount of payment from Medicare to the plan.  Basically, the sicker the patient, the higher the amount Medicare pays to the plan to provide health care to that patient.

The plans are taking a disproportionate amount of money from Medicare by claiming that their patients are sicker than the average patient.  In some cases, this may be true but in others, the plans are misrepresenting the health of their customers.

Over and over again, Medicare has found what it believes to be aggressive attempts by Advantage plans to bill excessively on the grounds that their enrollees are very sick.  These excessive billing cases are difficult to prove because they involve the health of many, many individual patients and it would require a detailed analysis of each patient’s records to show misrepresentations and even then Medicare would have to prove intent to defraud.

It is not just small, fly-by-night companies that are involved in overbilling Medicare.  Recently, Medicare settled with a large plan in Northern California.  Medicare alleged that the plan had added fake diagnoses to the medical records of its patients.  The allegations against the plan were based upon information from a whistleblower, who had been employed by the plan to cull patient records looking for stray information that could be used to justify a claim that the patient was very sick.  Most of the fake diagnoses were of cancer or stroke or a fracture.  The plan, which did not admit guilt, nonetheless paid the federal government $90 million.

These fake diagnoses not only hurt our national treasury by siphoning off billions that could and should go to actual patient care, they also hurt the patients whose health records now show them as having serious illnesses that they don’t really have.  This will affect them when they seek life insurance or some other forms of insurance.  It can affect them, if they are injured in an accident and their health status becomes an issue.  It can affect them in their employment as many seniors continue to work after reaching the age of Medicare eligibility.

The point, of course, is that wherever there is money, greedy people will look for ways to help themselves to some of it.  Privatization is not a silver bullet that will always save us money.  Many times it is the private interests brought in to save the government money, who end up stealing from it.


Posted in Fee for Service, Fraud, General Health, Health Care Costs, Health Insurers, medical charts, Medical Costs, Medicare, Secrecy |