Medicare Failed to Recover Up to $125 Million in Overpayments, Records Show

CMS collected pennies on the dollar

Six years ago, federal health officials were confident they could save taxpayers hundreds of millions of dollars annually by auditing private Medicare Advantage insurance plans that allegedly overcharged the government for medical services. An initial round of audits found that Medicare had potentially overpaid five of the health plans $128 million in 2007 alone. But officials never recovered most of that money, according to a report from Kaiser Health News (KHN).

Under pressure from the health insurance industry, the Centers for Medicare and Medicaid Services (CMS) quietly backed off its repayment demands and settled the audits in 2012 for just under $3.4 million—shortchanging taxpayers by up to $125 million in possible overcharges just for 2007, KHN says.

Medicare Advantage is a popular alternative to traditional Medicare. The privately run health plans have enrolled more than 17 million elderly and disabled people—approximately one-third of those eligible for Medicare—at a cost to taxpayers of more than $150 billion a year. And while the plans generally enjoy strong support in Congress, there are critics.

“It’s unclear why the Obama Administration allowed [the] CMS to overpromise and underdeliver so badly on collecting these overpayments,” Senator Chuck Grassley (R-Iowa) told KHN in an email.

He said that the CMS “should account for why this process seems to be so broken and why it can’t seem to fix it, despite recommendations to do so. The taxpayers depend on getting this process right.”

Away from public view, federal officials have been losing a high-stakes battle to curb widespread billing errors by Medicare Advantage plans, according to records obtained through a Freedom of Information Act lawsuit filed by the Center for Public Integrity (CPI).

The CPI first disclosed in 2014 that billions of tax dollars are wasted annually partly because some health plans appear to exaggerate how sick their patients are––a practice known in health care circles as “upcoding.”

Last August, the investigative journalism group reported that 35 of 37 health plans that the CMS has audited overcharged Medicare, often by overstating the severity of medical conditions, such as diabetes and depression.

The newly released CMS records identify the companies chosen for the initial 2007 audits as a Florida Humana plan; a Washington state subsidiary of United Healthcare called PacifiCare; an Aetna plan in New Jersey; and an Independence Blue Cross plan in the Philadelphia area. The fifth audit focused on a Lovelace Medicare plan in New Mexico, which has since been acquired by Blue Cross.

Each of the five audits, which took more than two years to complete, unearthed significant—and costly—billing mistakes, although the plans disputed them. For example, auditors couldn’t confirm that one-third of the diseases the health plans had been paid to treat actually existed, mostly because patient records lacked “sufficient documentation of a diagnosis.”

Overall, Medicare paid the wrong amount for nearly two-thirds of patients whose records were examined; all five plans were far more likely to charge too much than too little. For 20% of patients, the overcharges were $5,000 or more for the year, according to the audits. None of the plans would discuss the findings with KHN.

A CMS move to recover more than $128 million from the five plans fizzled when insurance industry representatives argued that the audits were flawed and the results unreliable. In August 2012, the CMS gave in and notified the plans that it would settle for a few cents on the dollar.

The agency kept the settlement terms under wraps until 2015, after an inquiry by Grassley. The senator had requested details about Medicare Advantage fraud controls in response to articles published by the CPI.

In a July 31, 2015, letter to Grassley, CMS Acting Administrator Andy Slavitt attached a table that showed the five plans repaid just under $3.4 million. Slavitt’s letter didn’t mention the earlier estimate that the government was due $128 million. Grassley said it should not have taken a lawsuit to make that information available to the public.

Source: Kaiser Health News; January 6, 2016.