Is Your Health Plan Stripping Out Medicare?

KHN released details of 90 previously secret government audits that revealed millions of dollars in overpayments to the Medicare Advantage health program for seniors.

The audits, which covered billing from 2011 to 2013, are the latest financial reviews, even as enrollment in health plans has ballooned to more than 30 million in the past decade and is expected to grow further.

KHN has released audit spreadsheets as an industry standard for final regulations that could order health plans to return hundreds of millions, if not billions, or more to the Treasury in overcharges — stretching back a decade or longer payment. The Centers for Medicare and Medicaid Services is expected to make a decision by Feb. 1.

KHN obtained the long-hidden audit brief through a three-year Freedom of Information Act lawsuit against CMS, which was settled in late September.

In November, KHN reported that the audit found a net cost of care of approximately $12 million for a sample of 18,090 patients. Overall, 71 of 90 audits found net overpayments, with an average of more than $1,000 per patient in 23 audits. CMS paid too little on average to the remaining plans, ranging from $8 to $773 per patient.

The audit spreadsheet released today identifies each health plan and summarizes the findings. Medicare Advantage is a fast-growing alternative to original Medicare, primarily operated by large insurance companies. The contract numbers for these plans indicate where the insurance company was located at the time.

Since 2018, CMS officials say they will recover about $650 million in overpayments from 90 audits, but the final amount is far from certain.

Spencer Perlman, an analyst at Veda Partners in Bethesda, Maryland, said he believed the data released by KHN suggested that the government’s clawback of potential overpayments could be as high as $3 billion.

“I don’t think the government is going to give up those dollars,” he said.

For nearly two decades, Medicare has paid for health plans using a billing formula that pays higher monthly rates for sicker patients and lower monthly rates for the healthiest patients.

However, on the rare occasions when auditors examine medical records, they often cannot confirm whether a patient has a listed condition, or if the condition is as serious as the health plan claims.

Since 2010, CMS has held that overpayments found when sampling each health plan’s patient records should be extrapolated among members, a common practice in government audits. Doing so would increase the overpayment needs of large health plans from a few thousand dollars to hundreds of millions of dollars.

But the industry has managed to sidestep the rule despite dozens of audits, investigations and whistleblower lawsuits alleging widespread billing fraud and abuse in the scheme, which costs taxpayers billions of dollars each year .

CMS is expected to clarify how it will handle the upcoming regulations, including gathering past audits and future audits. CMS is currently conducting audits for 2014 and 2015.

UnitedHealthcare and Humana, the two largest Medicare Advantage insurers, accounted for 26 of the 90 contract audits over the past three years.

For the record, Humana is one of the largest Medicare Advantage sponsors, with overpayments of more than an average of $1,000 in 10 of 11 audits.

That could spell trouble for the Louisville, Kentucky-based insurer, which relies heavily on Medicare Advantage, Perlman said. He said Humana’s liability could exceed $900 million.

Humana’s director of corporate and financial communications, Mark Taylor, did not comment on the overpayment estimate.

Commenting on the upcoming CMS rules, he said in an emailed statement: “Our primary focus will remain on our members and the potential impact any changes may have on their interests. … We We hope that CMS will join us in protecting the integrity of Medicare Advantage.”

Eight audits of UnitedHealthcare programs found overpayments, while seven others found underpayments by the government.

On a conference call with reporters this week, Tim Noel, head of UnitedHealthcare’s health insurance team, said the company expects CMS to make changes to the regulations, but is “very happy” with what the 2011-13 audit results will show.

“As with all government programs, taxpayers and beneficiaries need to know that the Medicare Advantage program is being administered properly,” he said.

He said the company supports an annual audit of Medicare Advantage plans.

But Perlman said the scale of the program made annual audits “completely impractical”.

These audits are “very time-consuming and labor-intensive”, he said.

KHN (Kaiser Health News) is a national newsroom that produces in-depth coverage of health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating projects of KFF (Kaiser Family Foundation). KFF is a funded nonprofit organization that provides information on health issues to the nation.

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