Kaiser Health News recently published an article by Fred Schulte titled “Researcher: Medicare Advantage Plans Costing Billions More Than They Should” (Nov. 11, 2021). Schulte highlights research by Richard Kronick, U.C. San Diego, analyzing “newly released Medicare Advantage billing data estimat[ing] that Medicare overpaid the private health plans by more than $106 billion from 2010 through 2019 because of the way the private plans charge for sicker patients” [emphasis added]. Nearly $34 billion of this new spending came during 2018 and 2019, the most recent period available for analysis.
These overpayment stem from the current MA risk-adjusted payment system that incentivizes plans to record enrollees with as many medical conditions as possible in order to increase payment. As the article notes, this system “pays higher rates for sicker patients and less for those in good health” which “means the more serious medical conditions the plans diagnose the more money they get — sometimes thousands of dollars more per patient over the course of a year with little monitoring by CMS to make sure the higher fees are justified.”
Schulte notes that “critics have argued for years that Medicare Advantage costs taxpayers too much. The industry also has been the target of multiple government investigations and Department of Justice lawsuits that allege widespread billing abuse by some plans.”
The article quotes Kronick referring to MA cost growth as a “‘systemic problem across the industry,’” which CMS has failed to rein in. He said some plans saw ‘eye-popping’ revenue gains, while others had more modest increases. Giant insurer UnitedHealthcare, which in 2019 had about 6 million Medicare Advantage members, received excess payments of some $6 billion, according to Kronick.”
The article also notes that “[m]aking any cuts to Medicare Advantage payments faces stiff opposition” by many members of Congress, despite the fact that, as Kronick notes, “the rise in Medicare Advantage coding means taxpayers pay much more for similar patients who join the health plans than for those in original Medicare” and that “there is ‘little evidence’ that higher payments to Medicare Advantage are justified because their enrollees are sicker than the average senior.” As policymakers continue to do nothing to address these overpayments, things will get even worse: “Kronick said that if CMS keeps the current coding adjustment in place, spending on Medicare Advantage will increase by $600 billion from 2023 through 2031. While some of that money would provide patients with extra health benefits, Kronick estimates that as much as two-thirds of it could be going toward profits for insurance companies.”
November 18, 2021 – D. Lipschutz