More scrutiny coming for Medicare Advantage, Obamacare

Introduction

Federal officials are planning a wide range of audits into billing and government spending on managed health care in the new fiscal year, ranging from private Medicare Advantage groups that treat millions of elderly to health plans rapidly expanding under the Affordable Care Act.

The Health and Human Services Office of Inspector General, which investigates Medicare and Medicaid waste, fraud and abuse, said it would conduct “various reviews” of Medicare Advantage billing practices with an eye toward curbing overcharges. Results are due next year.

The Inspector General also announced from five to ten new audits into Obamacare, ranging from the accuracy of “financial assistance” payments for new enrollees to controls to prevent fraudulent sign ups.

The Inspector General’s office did not say if individual Medicare Advantage plans would be audited, but indicated it would focus on concerns that some health plans exaggerate how their sick patients are to overcharge the government — the subject of a recent Center investigation.

“Prior OIG reviews have shown that medical record documentation does not always support the diagnoses” (used to bill Medicare),” the Inspector General said. “Efforts for FY 2015 and beyond may include additional work examining the soundness of rates and risk and payment adjustments,” the Inspector General said.

The audits are among dozens of new projects spelled out in the Inspector General’s 2015 “work plan” posted on the agency’s website late last week. While much of the plan focuses on managed care, the Inspector General also plans to audit spending on other programs, such as one paying billions of dollars to doctors and hospitals that purchased electronic health records.

The OIG work plan serves as a blueprint for enforcement actions during the upcoming year and calls attention to medical initiatives officials believe are vulnerable to fraud and abuse. The FY2015 fiscal year began October 1 and runs through Sept. 30, 2015.

Many of the audits are described only briefly in the work plan or are couched in bureaucratic language that makes it difficult to judge their potential impact.

The Inspector General is continuing to pursue allegations of billing fraud and abuse by doctors, hospitals and medical suppliers, such as ambulance companies and sellers of diagnostic gear. But it appears to be placing more emphasis on managed care than in the past.

The agency also said it planned to look into what it described as “emerging vulnerabilities” in a wide range of Obamacare programs; the work plan noted that Medicaid, the health plan for low income people, is growing explosively under the health reform law.

“Protecting an expanding Medicaid program from fraud, waste, and abuse takes on a heightened urgency as the program continues to grow in spending and in the number of people it serves,” the Inspector General wrote.

Keeping tabs on managed care spending presents a particular challenge for fraud fighters, who are accustomed to bringing cases against companies that bill for services never rendered.

The abuses suspected in Medicare Advantage are more subtle and complex. Unlike standard Medicare, in which doctors and hospitals bill for each service they provide, private Medicare Advantage plans and other managed care organizations are often paid a flat monthly rate for each patient using a formula called a “risk score” that estimates the health challenges facing individual patients. Basically, Medicare pays higher rates for sicker patients and less for people in good health.

But federal officials concede that billions of tax dollars are misspent every year because some Medicare health plans exaggerate how sick their patients are, a practice known as “upcoding.” At least six whistleblower lawsuits alleging that Medicare health plans inflated risk scores to overbill the government are pending in federal courts.

The Center for Public Integrity’s “Medicare Advantage Money Grab” series, published in June, revealed that officials have struggled for years to prevent health plans from charging too much.

The series found that Medicare made nearly $70 billion in “improper” payments to health plans — mostly inflated fees from overstating patients’ health risks — from 2008 through 2013 alone.

The Medicare Advantage program has grown rapidly under the risk-scoring formula, which Congress enacted in 2003. Officials expect Medicare Advantage to cost taxpayers as much as $160 billion this year, as enrollment nears 16 million, or about one in three elderly and disabled people on Medicare.

Federal officials have conducted audits of Medicare Advantage billing called Risk Adjustment Data Validation, or RADV, at least since 2008. But they have never imposed stiff financial penalties for overcharges, despite evidence that billing errors have been deeply rooted and waste billions of tax dollars.

OIG audits of six health plans completed in 2012 found that the companies couldn’t justify payments from the government for 40 percent or more of their patients. The resulting overpayments were pegged at nearly $650 million for 2007 alone — just for those six plans.

The Center for Public Integrity’s investigation confirmed that federal officials, after years of haggling with health plans, settled the six audits for pennies on the dollar. One New York state health plan that federal auditors said may have been overpaid by as much as $41 million in 2007, coughed up just $157,777 to settle the matter in December 2013, for instance.

Government officials aren’t sure how much of the suspected overpayments to Medicare Advantage plans are fraud and how much are due to health plans being thorough in documenting illness, according to Richard Kronick, director of the HHS Agency for Healthcare Research and Quality.

“I would not be surprised if there is some fraud involved, because this does occur in many areas of human behavior when a lot of money is at stake, but I suspect that much of the increase in risk scores is a result of health plan efforts to more fully document diagnoses that do exist,” he wrote in a blog post earlier this month.

Either way, however, Kronick said the Medicare Advantage is costing more than standard Medicare. He has advised CMS officials to consider cutting payments to health plans that report much higher-than-expected rates of patient illness.