Medicare Advantage is the privately administered alternative to traditional Medicare, in which the government contracts with insurers to deliver benefits to seniors. Medicare Advantage is popular; more than half of all eligible Medicare beneficiaries are enrolled in private Medicare Advantage plans, in part because they often offer added benefits like gym memberships, dental coverage, and an out-of-pocket spending cap.
But there is a grave issue with the program: Medicare Advantage accounts for billions of dollars in improper payments each year and has faced persistent concerns about waste, fraud, and abuse.
Since the creation of Medicare Advantage’s predecessor under the Balanced Budget Act of 1997, the program has relied on a payment structure that can encourage fraudulent billing. Insurers are paid based on patient “risk scores,” which reflect medical history and other factors. Higher scores signal costlier, more complex patient cases and trigger higher federal reimbursement. In practice, multiple lawsuits allege insurers have manipulated these scores to inflate Medicare reimbursements for patients who are not as sick or medically complex as reported.
This year alone, several insurers including Kaiser Permanente and Complete Health have settled with the federal government over allegedly doctoring patient risk scores. Alleged risk-score manipulation generally takes two forms: making existing conditions appear more severe through a process called upcoding, or using health risk assessments to add diagnoses that are unsupported or not reflected in a patient’s ongoing medical care. Upcoding exaggerates a diagnosis’s severity – for example, coding diabetes as diabetes with complications when those complications are not actually documented. Health risk assessments send insurer-affiliated clinicians into patients’ homes to identify diagnoses added solely to boost risk scores rather than guiding treatment.
Federal lawsuits have recovered millions from insurers and providers accused of manipulating risk scores. But litigation addresses the problem only after the fact. It does not fix the underlying payment structure that makes inflated risk scores so lucrative in the first place.
The consequences are far-reaching: inaccurate diagnoses can follow patients through their medical records, complicate care for providers, and drive unnecessary federal spending. Left unchecked, these practices erode trust in Medicare Advantage and drain billions from the Medicare program.
Curbing Medicare Advantage fraud has bipartisan support. Lawmakers with medical backgrounds, including Senator Bill Cassidy (R-LA), have been especially attuned to the risks it poses to patients and providers.
Cassidy and Senator Jeff Merkley (D-OR) introduced the No UPCODE Act, which would restructure Medicare Advantage’s payment incentives to curb fraudulent billing at its source. The bill would change Medicare Advantage’s risk-adjustment system by using two years of diagnostic data, excluding diagnoses collected through chart reviews and health risk assessments from risk-adjusted payments, and requiring The Centers for Medicare & Medicaid Services to more fully account for differences in coding patterns between Medicare Advantage and traditional Medicare.
Separately, Representative Mark Pocan (D-WI) has proposed a package of bills that would bar insurers previously convicted of defrauding the government from offering Medicare Advantage plans.
These proposals mark a strong start, but litigation alone cannot solve a problem rooted in Medicare Advantage’s payment structure. Congress should reform the incentives that make risk-score manipulation so lucrative, preventing fraud before it occurs rather than relying on federal enforcement agencies to recover taxpayer dollars after the fact. Patients, providers, and taxpayers cannot afford to keep paying for a system that invites abuse.
Further Reading
Improving Medicare Advantage by Accounting for Large Differences in Upcoding Across Plans – USC Schaeffer Institute for Public Policy
CMS Takes Aim at Upcoding: Ending “Unlinked” Chart Reviews in Medicare Advantage – Medicare Policy Initiative
Watchdog Estimates $7.5 Billion Medicare Advantage Overpayment from “Questionable” Health Risk Assessments – Medicare Rights Center
