CMS not fulfilling obligation to recover Medicare Advantage overpayments

Auditors: feds failed to rein in billions in over-billing by Medicare Advantage

By Fred Schulte
The Center for Public Integrity, May 9, 2016

Private Medicare Advantage plans treating the elderly have over-billed the government by billions of dollars, but rarely been forced to repay the money or face other consequences for their actions, according to a new Congressional audit.

In a sharply critical report made public Monday, the Government Accountability Office called for “fundamental improvements” to curb overbilling by the health plans, which are paid more than $160 billion annually.

GAO took aim at Medicare’s primary tactic for recouping overcharges, a secretive, and lengthy, audit process called Risk Adjustment Data Validation, or RADV. Unlike many other anti-fraud programs, RADV has cost the government way more than it has returned to the treasury.

The GAO said that the Centers for Medicare and Medicaid Services, an arm of the Department of Health and Human Services, has spent about $117 million on these audits, but so far has recouped just $14 million.

The GAO launched its audit in October 2014 in the wake of the Center for Public Integrity’s “Medicare Advantage Money Grab” series.

The Center’s investigation traced the overpayments to abuse of a billing formula called a risk score, which pays higher rates for sicker patients and less for people in good health. Since 2004, however, the risk score formula has largely operated as an honor system, despite criticism that many health plans have overstated how sick some patients are to boost their revenues. That practice is known in medical circles as “upcoding.”

Medicare officials have quietly conducted these audits since 2008. But they have never imposed stiff financial penalties even as evidence built up that billing errors were deeply rooted and wasting tax dollars at an alarming clip.

GAO in its report noted that CMS has failed to target health plans with “known improper payment risk,” thus allowing the worst performers to escape the net.

GAO reviewers said that CMS is stepping up the RADV audits, but added that much more needs to be done. GAO noted that officials expect the upcoming audits to recover $370 million, but that’s just three percent of the total estimated annual overpayment.


Report to the Chairman, Committee on Ways and Means, House of Representatives

Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments

Government Accountability Office, April 2016


Limitations in CMS’s processes for selecting contracts for audit, in the timeliness of CMS’s audit and appeal processes, and in the agency’s plans for using MA RACs to assist in identifying improper payments hinder the accomplishment of its contract-level RADV audit goals: to conduct annual contract-level audits and recover improper payments. These limitations are also inconsistent with federal internal control standards and established project management principles. Our analyses of these processes and plans suggest that CMS will likely recover a small portion of the billions of dollars in MA improper payments that occur every year. Shortcomings in CMS’s MA contract selection methodology may result in audits that are not focused on the contracts most likely to be disproportionately responsible for improper payments. Furthermore, CMS’s RADV time frames are so long that they may hamper the agency’s efforts to conduct audits annually, collect extrapolated payments efficiently, and use audit results to inform future RADV contract selection. By CMS’s own estimates, conducting annual contract-level audits would potentially allow CMS to recover hundreds of millions of dollars more in improper payments each year. Agency officials have expressed concerns about the intensive agency resources required to conduct contract-level RADV audits. To address the resource requirements of conducting contract-level audits, CMS intends to leverage the MA RACs for this purpose; however, the agency has not outlined how it plans to incorporate RACs into the contract-level RADV audits and is in the early stages of soliciting industry comment regarding how to do so.


Medicare Advantage 2016 Spotlight: Enrollment Market Update

By Gretchen Jacobson, Giselle Casillas, Anthony Damico, Tricia Neuman and Marsha Gold
Kaiser Family Foundation, May 11, 2016

The number and share of Medicare beneficiaries enrolled in Medicare Advantage has steadily climbed over the past decade, and this trend in enrollment growth is continuing in 2016. The growth in enrollment has occurred despite reductions in payments to plans enacted by the Affordable Care Act of 2010 (ACA).

Almost one in three people on Medicare (31% or 17.6 million beneficiaries) is enrolled in a Medicare Advantage plan in 2016.



By Don McCanne, M.D.

Today’s message provides yet one more example of CMS’s complicity in the privatization of Medicare. What does that mean and why does it matter?

Medicare Advantage (MA) plans are private health insurance plans that Medicare enrollees can select in place of the traditional Medicare program. The purpose was ideologically driven - to get the government out of Medicare.

Congress originally established the private plan option through the Medicare + Choice program. They believed the promise of the private insurers that they could provide higher quality care at a lower cost. That failed and insurers withdrew simply because it costs considerably more to finance health care through private insurers than through our public Medicare program. Congress went back to the drawing boards and established the Medicare Advantage program in which the private insurers were paid about fourteen percent more than the public program was paying for comparable patients.

Thus the private MA plans were able to attract patients by offering them supplemental benefits and lower out-of-pocket cost sharing. They also successfully marketed to a healthier, lower cost population - being paid more while spending less. To counter this “favorable selection,” risk adjustment was introduced in which the insurers would be paid more if they enrolled sicker patients. The insurers quickly learned how to upcode to qualify for payments greater than the health status of their enrollees warranted.

When Congress created the Affordable Care Act it was recognized that the overpayments needed to be pared back, especially since the insurers were rewarding themselves with favorable selection and upcoding. Thus ACA required that the overpayments be reduced gradually, and that process has now been completed.

But what happened? Each year CMS has found offsets to the required payment reductions - offsets that were generous enough to actually result in increased payments in each year that reductions should have occurred.

And what about the upcoding that was used to qualify for unearned risk adjustments? The Government Accountability Office (GAO) has shown that CMS has failed to recapture the overpayments even though the problem was well recognized and theoretically a process was in place to do so. After pressure from the GAO and from the investigative reporting of The Center for Public Integrity, CMS is going to step up its efforts at recovery. However, these renewed efforts are expected to recover only about three percent of the overpayments. The insurers get to keep their illicit overpayments, with the complicity of CMS.

Kaiser (KFF) has just released a report showing that the nefarious plot to transfer patients to the private MA plans is working. Enrollment has steadily climbed over the past decade. If Congress and CMS can keep up this subterfuge then very soon Congress can begin to reduce funding for the traditional Medicare program which will cause more providers to drop out. That will then create a public demand for the overpaid private MA plans. Congress can then enact their premium support (voucher) program for private Medicare Advantage plans, and then follow through by emasculating the traditional program ("drown it in a bathtub").

Once everyone is in a privatized Medicare voucher program, Congress can ratchet down the value of the voucher. This will complete their goal of bringing us consumer-directed health care - placing patients in charge of controlling health care costs through price sensitivity necessitated by high deductibles and other cost sharing, whether or not they have health savings accounts. This, of course, will lead to financial hardship and forgone health care.

If you think that our government would never do this to us, keep in mind that the process is well underway. Today Speaker Paul “Premium Support” Ryan met with likely presidential-nominee Donald Trump to set the agenda for our nation’s future.