Federal Audits Of Medicare Advantage Reveal Widespread Overcharges

Government audits just released as the result of a lawsuit detail widespread billing errors in private Medicare Advantage health plans going back years, including overpayments of thousands of dollars a year for some patients.

Since 2004, private insurers that run Medicare Advantage plans, an increasingly popular alternative to traditional Medicare, have been paid using a risk score calculated for each patient who joins. Medicare expects to pay higher rates for sicker people and less for those in good health.

But the internal audits, never before made public, provide striking new evidence of billing mistakes — mostly overcharges — in the Medicare Advantage plans. Four of the audits were recently obtained by the Center for Public Integrity through a court order in a Freedom of Information Act lawsuit.

The audits involve four health plans: an Aetna Health Inc. plan in New Jersey, Independence Blue Cross in the Philadelphia area; Lovelace Health Plan in Albuquerque, N.M, and a Care Plus plan in South Florida. Care Plus is a division of Humana, Inc.

Last month, the Center for Public Integrity reported on a fifth such audit at PacifiCare in Washington state, an arm of giant UnitedHealth Group, the nation's largest Medicare Advantage operator.

In all five audits, two sets of auditors inspected medical records for a sample of 201 patients at each plan for 2007. If the medical chart didn't document that a patient had the illnesses the plan reported, Medicare asked for a refund. Auditors also gave plans credit for underpayments they discovered.

Among the findings:

• Medicare paid the wrong amount for 654 of the 1,005 patients in the sample, an error rate of nearly two-thirds. The payments were too high for 579 patients and too low for 75 of them. The total payment error topped $3.3 million in the sample.
• Auditors concluded that risk scores were too high for more than 800 of the 1,005 patients, which in many cases, but not all, led to hefty overpayments. Medicare's annual payment for more than 200 patients was at least $5,000 higher than merited, according to the audits.
• Auditors could not confirm one-third of the 3,950 medical conditions the health plans reported, mostly because records lacked "sufficient documentation of a diagnosis." The names of the medical conditions were redacted by federal officials.

The federal Centers for Medicare and Medicaid Services, or CMS, which conducted the audits, had no comment.

None of the health plans would discuss the audit findings. Aetna, in a statement, said the company had "raised a number of questions and concerns" regarding the results and was "awaiting a response from CMS."

Clare Krusing, a spokeswoman for America's Health Insurance Plans, the insurance industry's primary trade group, said the audits "overstated" the payment errors. Health plans have since improved their record keeping and offer better care for people with chronic health conditions than traditional Medicare, Krusing said.

"The evidence is overwhelmingly clear that these programs (Medicare Advantage) deliver the right care for beneficiaries," she said.

The records are coming to light at a time of rapid expansion — and consolidation — in the Medicare Advantage market. Enrollment has neared 17 million, about 1 in 3 people eligible for Medicare. Last week, Aetna announced plans to buy competitor Humana for $37 billion.

But the industry also is drawing scrutiny over the accuracy of risk-based payments—and a penchant for secrecy.

The Center for Public Integrity first reported last year that billions of tax dollars are wasted every year due to plans that appear to exaggerate how sick their patients are, a practice known as "upcoding."

The government audits, known as Risk Adjustment Data Validation, or RADV, are the government's primary tool for catching these sorts of billing mistakes and holding the industry accountable.

Yet the process has proven unwieldly at best, partly due to a complex and lengthy appeals process and partly to indecision over how much the health plans should refund to the government.

It's not clear how the five audits were settled because CMS officials have refused to release these records.

The five RADV audits were launched in 2008, but findings weren't issued until August 2012, when CMS officials sent each plan a form letter detailing the amount of the overpayment and the plan's extensive appeal rights. CMS has refused to make public the status of the audits—or even how many total RADV audits have been conducted. CMS cites an exemption to the Freedom of Information Act that shields "trade secrets."

This stance has largely concealed Medicare Advantage billing records. It wasn't until April 15, 2011, that CMS announced it would release minimal billing data annually. Doing so would "inform the public on how their tax dollars are being spent," the agency said at the time, citing President Obama's January 2009 Memo on Transparency and Open Government.

But much to the chagrin of some researchers, CMS has never expanded on what is released, even though it has made public a huge cache of billing data and audits centering on thousands of doctors, hospitals and other medical suppliers.

"It's astonishing," said Brian Biles, a professor at George Washington University who successfully sued CMS to win release of the limited billing data now available. "They are dumping huge amounts of data in other areas. Medicare Advantage is now 30 percent of the Medicare program." (Biles assisted the Center for Public Integrity with its 2014 analysis of that data.

Timothy Layton, a Harvard Medical School researcher who recently co-authored a paper on health plan upcoding, said scholars "are definitely hindered" by the lack of data. For instance, researchers can't examine individual risk scores and the various medical conditions that raise and lower them, he said.

"Without the ability to answer these questions, we can keep pointing out how big the overpayment to MA (Medicare Advantage) is, but we can never really provide the optimal solution to the problem," Layton said.

David Himmelstein, a physician and professor in the CUNY School of Public Health at Hunter College who supports a single payer medical system, agreed.

"Medicare publishes detailed data on almost every doctor and hospital that gets paid a penny, but it leaves the public — and researchers — almost completely in the dark about the giant Medicare Advantage plans that will collect more than $150 billion from Medicare this year," he said.

Still, Medicare Advantage insurers are facing calls for closer scrutiny of their operations. In May, Senate Judiciary Committee Chairman Charles Grassley, R- Iowa, wrote to Attorney General Loretta Lynch and CMS administrator Andrew Slavitt asking how many risk score fraud investigations had been conducted over the past five years and their results. He's still waiting for an answer.

"Sen. Grassley continues to expect responses to his letters and will continue to press for responses," said Grassley spokeswoman Jill Gerber. "This is an important issue involving a large amount of taxpayer money"

In a separate letter, Sen. Clare McCaskill, the senior Democrat on the Senate Aging Committee, asked CMS officials to advise her of government efforts to curb Medicare Advantage billing abuses.

"After meeting with CMS we have continued concerns about the level of oversight taking place with respect to Medicare Advantage plans and will continue working to increase oversight and accountability in this area," said McCaskill spokesman Drew Pusateri.

This piece comes from the Center for Public Integrity, a nonpartisan, nonprofit investigative news organization. For more, follow the center on Twitter @Publici, or sign up for its newsletter.