Feds seek new authority to recoup Medicare Advantage overcharges

Introduction

Federal officials, facing criticism they overpay Medicare Advantage plans for the elderly by billions of dollars annually, are seeking new power to recover excessive charges.

The Centers for Medicare and Medicaid Services says its wants to set up “a formal process to recoup overpayments” made to the health plans. The draft regulation is set to be published on July 14 and a final decision on the proposal is due by November 1.

Federal officials have struggled to pay the senior care plans accurately for years. A Center for Public Integrity investigation published last month found that Medicare paid the health plans nearly $70 billion in “improper” payments — mostly inflated fees from overstating the health risks of patients — from 2008 through 2013 alone.

Medicare expects to pay more for sicker patients and less for those in good health using a formula known as a risk score. But CMS largely trusts health plans to identify and return any money paid in error.

In its proposal, CMS acknowledges it lacks a process for routinely going after these overpayments—even though its own auditors estimate that Medicare loses billions annually as a result.

How much money CMS expects to recover also remains unclear. CMS said the health plans could be on the hook for overpayments dating back six years, but the agency did not indicate that it is ramping up audits to catch health plans that overbill.

CMS said that once it identifies an overpayment, most health plans return the money. Cases in which they don’t do so voluntarily happen “very infrequently,” according to CMS. The agency said health plans would routinely be notified of payment errors and allowed to appeal any repayment orders through an administrative process.

“Deterring improper payments is a top priority for CMS in order to protect beneficiaries and taxpayers,” said CMS spokesman Raymond Thorn. “This new rule is just another tool that CMS would use to recover improper payments in the Medicare program.”

It’s unclear, though, whether CMS will stick to its guns. In the past, the agency has regularly backed off proposed efforts to tighten oversight in the face of industry opposition. The draft regulation was quietly disclosed late last week. According to the rulemaking process, it will be subject to a public comment period before a final decision to issue the rule is made.

“We are evaluating the proposal,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans, the industry’s trade group.

Congress created Medicare Advantage and introduced risk scores in 2003 as a way to encourage private insurance companies to jump into the senior care market. The program now insures some 16 million elderly and disabled people, nearly a third of those eligible for Medicare, and its costs are expected to top $150 billion this year.

The plans, many of them run by some of the nation’s largest insurance companies, are popular because they often provide extra benefits, such as eyeglasses and dental care. They also can cost seniors less out of pocket than standard Medicare.

Whether the plans are a good deal for taxpayers is a far more contentious question.

The Center for Public Integrity’s analysis of Medicare Advantage plan data from 2007 through 2011 confirmed that risk scores rose more than twice as fast as the government-estimated average for people in standard Medicare in some plans in at least 1,000 counties nationwide.

Recognizing the problem, CMS started cutting risk scores in 2010, which reduced payments. But the scores crept back up in 2011. Critics argue that even as the health insurance industry lobbies Congress to stave off further rate cuts, it remains overpaid.

One new study concludes that Medicare Advantage plans on average cost taxpayers seven percent more every year than standard Medicare—or more than $9 billion annually.

The study by health economists Michael Geruso and Timothy Layton blames the “excess” payments on “upcoding,” or overstating how sick patients are. Their findings were presented at a conference of the American Society of Health Economists in Los Angeles on June 25.

“Our study is the first that can look at the whole system to look at total bottom line costs,” said Geruso, an assistant professor at the University of Texas at Austin.

Sen. Charles Grassley, R-Iowa, said that refining the payment system to keep those costs in check is a “constant challenge” for CMS and Congress.

“The difficulty of the challenge shouldn’t be an excuse to throw the baby out with the bath water and do away with Medicare Advantage. Instead, we have to work on the right formulas that keep providers in the program without creating incentives for gaming the taxpayers,” Grassley said in a statement.

Grassley said that he and Finance Committee Chairman Ron Wyden, D-Ore., have previously supported a competition to pay as much as $10 million to anyone who can figure out how to fine- tune the risk scoring system.

“I hope we’ll have the chance to advance this proposal, especially since it has bipartisan support,” he said.

The names of Medicare Advantage plans that have been overpaid — and by how much — remains under wraps. In late May, the Center for Public Integrity sued the Department of Health and Human Services to make its audits and other records public. The case is pending.