Audits – hitherto hidden – reveal millions in Medicare Advantage overrides

Newly released federal audits reveal widespread overcharges and other errors in payments to Medicare Advantage health plans for seniors, with some plans overcharging the government an average of more than $1,000 per patient per year.

Summaries of the 90 audits, which examined accounts from 2011 through 2013 and are the most recently completed reviews, were obtained exclusively by KHN through a three-year Freedom of Information Act lawsuit, which was settled in late September.

The government’s audits revealed about $12 million in net overpayments for the care of 18,090 patients in the sample, though the actual losses to taxpayers are likely much higher. Medicare Advantage, a fast-growing alternative to original Medicare, is primarily run by major insurance companies.

Officials at the Centers for Medicare & Medicaid Services have said they plan to extrapolate those samples’ payment error rates over each plan’s total membership — and recoup an estimated $650 million as a result.

But after nearly a decade, that has yet to happen. CMS was supposed to unveil a final extrapolation rule on November 1, but delayed that decision until February.

Ted Doolittle, former deputy director of CMS’ Center for Program Integrity, which oversees Medicare’s efforts to combat billing fraud and abuse, said the agency has failed to hold Medicare Advantage plans accountable. “I think CMS has fallen into this,” says Doolittle, now the state health care advocate for the state of Connecticut.

Doolittle said CMS appears to be “water transportation” for the insurance industry, which is “making money hand over hand” from Medicare Advantage. “From the outside it looks quite smelly,” he said.

In an email response to written questions from KHN, Dara Corrigan, a CMS deputy administrator, said the agency hasn’t told health plans how much they owe because the calculations “have not been finalized.”

Corrigan declined to say when the agency would end its work. “We have a fiduciary and legal duty to address improper payments in all of our programs,” she said.

The 90 audits are the only ones CMS has completed in the past decade, a time when Medicare Advantage has exploded. Enrollment in the plans more than doubled over that period, reaching 28 million by 2022, costing the government $427 billion.

Seventy-one of the 90 audits revealed net overpayments, which averaged more than $1,000 per patient across 23 audits, according to government data. Humana, one of the largest Medicare Advantage sponsors, averaged overpayments of more than $1,000 in 10 of 11 audits, according to the data.

CMS underpaid the remaining subscriptions on average, somewhere between $8 and $773 per patient.

Auditors flag overpayments when a patient’s records fail to show that the person had the medical condition for which the government paid for the health plan, or when medical assessors determine that the illness is less serious than claimed.

That happened on average for just over 20% of the medical conditions studied over the three-year period; the number of unconfirmed illnesses was higher in some plans.

As the popularity of Medicare Advantage has grown among seniors, CMS has fought to keep its auditing procedures and mounting losses largely hidden from the government.

That approach has frustrated both the industry, which has labeled the audit process “fatally flawed” and hopes to torpedo it, and Medicare advocates, who worry that some insurers will get away with impeaching the government.

“At the end of the day, it’s tax dollars that have been spent,” said David Lipschutz, a senior policy attorney at the Center for Medicare Advocacy. “The public deserves more information about that.”

At least three parties, including KHN, have sued CMS under the Freedom of Information Act to shake up details about the overpaid audits, which CMS calls Risk Adjustment Data Validation, or RADV.

In one case, CMS charged a law firm a $120,000 search fee and then returned virtually nothing, according to court documents. The law firm filed a lawsuit last year and the case is pending in federal court in Washington, DC

KHN sued CMS in September 2019 after the agency failed to respond to a FOIA request for the audits. Under the settlement, CMS agreed to turn over the audit summaries and other documents and pay $63,000 in legal fees to Davis Wright Tremaine, the law firm representing KHN. CMS has not admitted to falsely withholding the data.

High coders

Most of the audited plans fell into what CMS calls a “high coding intensity group.” That means they were among the most aggressive in seeking additional payments for patients they claimed were sicker than average. The government pays for the health plans using a formula called a “risk score,” which should yield higher rates for sicker patients and lower rates for healthier ones.

But often medical records provided by the health plans failed to support these claims. Unsupported conditions ranged from diabetes to congestive heart failure.

Overall, average health plan overpayments ranged from a low of $10 to a high of $5,888 per patient collected by Touchstone Health HMO, a New York health plan whose contract was terminated “by mutual consent” in 2015, according to CMS records.

Most audited health plans had 10,000 members or more, which greatly increases the overpayment when rates are extrapolated.

In total, the plans received $22.5 million in overpayments, though these were offset by underpayments of $10.5 million.

Auditors examine 30 contracts a year, a small sample of about 1,000 Medicare Advantage contracts nationwide.

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

Eight audits of UnitedHealthcare plans found overpayments, while seven others found the government had underpaid.

UnitedHealthcare spokesperson Heather Soule said the company welcomes “the program oversight that RADV audits provide.” But she said the audit process should compare Medicare Advantage to original Medicare to get a “full picture” of overpayments. “Three years ago, we recommended that CMS perform RADV audits on every plan, every year,” said Soule.

Humana’s 11 overpayment audits included plans in Florida and Puerto Rico that CMS audited twice in three years.

The Florida Humana plan was also the target of an unrelated audit in April 2021 by the Inspector General of Health and Human Services. That audit, which covered the 2015 bills, concluded that Humana had improperly collected nearly $200 million that year by exaggerating how sick some patients were. Officials have not yet recovered any of that money either.

In an email, Humana spokesperson Jahna Lindsay-Jones called the CMS audit findings “preliminary,” noting that they were based on a sample of years-old claims.

“While we continue to have significant concerns about how CMS audits are conducted, Humana remains committed to working closely with regulators to improve the Medicare Advantage program in a way that increases seniors’ access to quality, less expensive care” , she wrote.

Billing Showdown

Results from the 90 audits, while years old, echo more recent findings from a slew of other government reports and whistleblower cases alleging that Medicare Advantage plans routinely inflated patients’ risk scores to overpay the government billions of dollars.

Brian Murphy, an expert on medical record documentation, said the reviews collectively show the problem is “absolutely endemic” in the industry.

Auditors find “the same high costs over and over again,” he said, adding, “I don’t think there’s enough oversight.”

When it comes to getting money back from the health plans, extrapolation is the big sticking point.

While extrapolation is routinely used as an aid in most Medicare audits, CMS officials have never applied it to Medicare Advantage audits due to fierce opposition from the insurance industry.

“Although this data is more than a decade old, more recent research demonstrates the affordability of Medicare Advantage and the responsible management of Medicare dollars,” said Mary Beth Donahue, president of the Better Medicare Alliance, a group that advocates for Medicare Advantage. She said the industry is “delivering better care and better outcomes” for patients.

But critics argue that CMS monitors only a small percentage of Medicare Advantage contracts nationwide and should do more to protect taxpayers’ money.

Doolittle, the former CMS official, said the agency should “start keeping track of time and conducting these audits annually and extrapolating the results.”

But Kathy Poppitt, a Texas health care attorney, questioned the fairness of demanding massive refunds from insurers so many years later. “The health plans will fight tooth and nail and not make it easy on CMS,” she said.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Together with Policy Analysis and Polling, KHN is one of the three major operational programs of KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization that provides information about health issues to the nation.


This story can be republished for free (details).

Audits – hitherto hidden – reveal millions in Medicare Advantage overrides

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