Medicare Advantage plans require more scrutiny

Introduction

Federal officials need to step up efforts to investigate fraud and abuse in Medicare Advantage health plans treating millions of elderly Americans, a top government investigator says.

Gary Cantrell, a deputy Inspector General with the Department of Health and Human Services said reviews are “hampered by a lack of accurate, timely and complete data that would facilitate oversight” of the fast-growing health insurance plans.

His comments came in testimony prepared for a Wednesday hearing of the oversight subcommittee of the House Committee on Energy and Commerce.

The hearing was called to assess fraud and abuse safeguards in Medicare, which last year covered about 51 million people at a cost to taxpayers of about $604 billion. Officials estimate that almost $50 billion of that amount was paid improperly, including $11.8 billion to Medicare Advantage plans.

A Center for Public Integrity investigation published earlier this month found as much as $70 billion of improper payments to Medicare Advantage plans from 2008 through last year.

The Center’s investigation attributed the suspect payments — mostly overcharges — to abuse of a government payment formula known as a risk score. Under the risk scoring method, health plans are paid higher rates for sicker patients and less for those in good health. But government officials have struggled for years to prevent health plans from overstating how sick patients are and driving up their Medicare payments.

At the hearing, federal officials touted a number of successes in their war on health care fraud — a record $4.3 billion was recovered in 2013 — even as they conceded that more needs to be done to protect tax dollars.

Centers for Medicare and Medicaid Services (CMS) officials unveiled a new data analysis system to identify overpayments and catch culprits. CMS said software prevented $210 million in improper payments in its second year of operation, including bogus billings for home health care services in South Florida, long a hotspot for Medicare fraud.

Officials also reminded lawmakers of a host of well-publicized busts, including a sweep last month that brought 90 arrests of individuals alleged to have bilked the government out of some $260 million in fraudulent services from mental health care to fabricated lab tests. The cases focused on payments to doctors, hospitals and medical equipment suppliers which bill Medicare for each service they provide.

Officials call that “fee-for-service” Medicare.

But Medicare Advantage plans, which are often run by large insurance companies and accept a set monthly fee from the government for each patient, have largely avoided scrutiny despite their growing popularity.

Cantrell’s written testimony, which brought little in the way of comment from lawmakers, offered an unusually blunt assessment of the difficulties officials face in overseeing Medicare Advantage and Medicare Part D, which covers prescription medicines.

Cantrell cited “limited data availability” and “difficulties with access to information” held by the private insurance companies. He wrote that fraud investigators have no central place to access Medicare Advantage data, which he said “hinders the ability to identify and investigate” fraud in the program.

Cantrell said that CMS officials, who directly oversee the program, need to begin requiring Medicare Advantage plans to report fraud to the government.

Congress created Medicare Advantage in 2003 to encourage private insurance companies to jump into the senior care market without hesitation. Since then, the program has hit its stride as a health care colossus that now cares for nearly 16 million elderly and disabled people, nearly a third of those eligible for Medicare. Medicare Advantage costs are expected to top $150 billion this year.

While officials have broadened investigations into medical providers, Medicare Advantage has drawn little audit review despite longstanding concerns that the government overpays the health plans— and that some plans overbill.

The Center for Public Integrity last month sued HHS under the Freedom of Information Act to obtain a wide range of records, including Medicare Advantage program audits, billing data and the identities of any health plans suspected of overcharging the government. The Center did not request the names of patients. The case is pending.

Ranking member Diane DeGette, D-Colo. suggested at Wednesday’s hearing that officials need to broaden examinations of the Medicare Advantage plans, known as Medicare Part C in bureaucratic lingo, as well as the prescription drug plan called Part D.

“We know there is a lot of fraud in Medicare Part C and Medicare Part D,” she said.

Medicare Advantage plans are proving popular with seniors because they often provide extra benefits, such as eyeglasses and dental care, and can cost less out of pocket than standard Medicare.

With nearly 16 million patients to track, CMS largely trusts health plans to make sure risk scores are accurate. But when the agency has checked, it has exposed errors — mostly scores that were too high — in nearly a third of patient files examined. Given the magnitude of program spending, even a small error rate can bleed millions of dollars from the federal treasury.

Subcommittee chairman Tim Murphy, R-Pa. said that overall fraud, waste and abuse in Medicare “has gone on for too long.”

Citing the $50 billion in improper payments annually, Murphy said: “This is a shocking amount of taxpayer money to lose every year, especially considering that some experts tell us that we do not even know the full extent of the problem.”