Haris Ashley
Medicare Advantage insurers have been accused of exploiting the system to increase their profits by billions of dollars. This is achieved by making patients appear sicker than they are, resulting in higher payments from the government. The New York Times exposé revealed that insurers used various strategies, such as urging doctors to add additional illnesses to medical records and offering perks like health club memberships to attract healthier seniors. These tactics led to diagnoses of serious diseases that might not have existed and resulted in overpayments from Medicare, impacting the finances of the program and undermining its promise of equitable care for seniors.
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What You'll Learn
Inflated bills and diagnoses
Medicare Advantage plans have been accused of inflating bills and diagnoses to increase payments received from the Medicare program. The program pays a set amount per patient per month, with monthly payments determined by the patient's demographics and risk-adjusted for a patient's diagnoses. By making patients appear sicker than they are, insurers can increase the amount they are paid by the federal government.
According to federal audits, eight of the ten biggest Medicare Advantage insurers have submitted inflated bills. Four of the five largest players—UnitedHealth, Humana, Elevance, and Kaiser—have faced federal lawsuits alleging that efforts to overdiagnose their customers amounted to fraud. The health system Kaiser Permanente has been accused of urging doctors to add additional illnesses to the medical records of patients they hadn't seen in weeks. Anthem, now Elevance Health, paid doctors more when they said their patients were sicker.
These practices have had a significant financial impact. In 2020, additional diagnoses led to an estimated $12 billion in overpayments, according to a group that advises Medicare on payment policies. A former top government health official suggested the figure could be more than $25 billion. Another estimate put the total taxpayer overpayments to Medicare Advantage plans at $282.6 billion from 1985 to 2013.
In response to these practices, regulators introduced a discount on payments to Medicare Advantage plans to account for upcoding. However, insurers continued to find ways to increase diagnoses, such as sending nurses to enrollees' homes to conduct suspect in-home tests. As a result, Medicare Advantage plans have continued to extract enormous overpayments from taxpayers.
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Fraudulent schemes
Medicare Advantage insurers have been accused of fraudulent schemes, including submitting inflated bills and overdiagnosing customers to increase profits. According to federal audits, eight of the ten biggest Medicare Advantage insurers have submitted inflated bills, with four of the five largest players facing federal lawsuits alleging fraud. These companies include UnitedHealth, Humana, Elevance, and Kaiser.
Insurers have been accused of padding patients' medical records with additional and often irrelevant diagnoses to make them appear sicker, a practice known as "upcoding." This results in higher payouts from the government, as Medicare Advantage is paid a set amount per patient per month, with payments adjusted for patients' diagnoses and demographics. This led to an estimated $12 billion in overpayments in 2020, with some estimates suggesting double that amount.
In addition to upcoding, insurers have also been accused of enticing only the healthiest seniors to join their plans, resulting in lower costs and higher profits. They achieve this through strategies such as locating enrollment offices upstairs or offering perks like gym memberships, which attract healthier individuals who are less likely to require expensive care.
The New York Times exposé, "The Cash Monster Was Insatiable," detailed how insurers exploited Medicare Advantage for billions, highlighting the lucrative nature of the niche in the insurance market. The article also mentioned the wasteful insurance bureaucracy required to implement these strategies, which consumes about 14% of Medicare Advantage revenues, significantly higher than traditional Medicare's overhead.
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Overdiagnosing patients
UnitedHealth Group, the largest insurer in the country, has been accused of encouraging its workers to mine old medical records for more illnesses and sending them back to try again if they don't find enough. These tactics have led to diagnoses of serious diseases that may not even exist, resulting in lucrative overpayments from the government. In 2020, it was estimated that additional diagnoses led to $12 billion in overpayments, and a former top government health official suggested that the true number could be more than $25 billion.
These practices are often defended by insurers as an attempt to improve patient care by accurately describing their health. However, critics argue that the primary goal of insurance companies is to maximize profit rather than deliver healthcare, and that Medicare Advantage undermines the principle of equitable, single-tier care for seniors. As a result, Medicare Advantage has faced lawsuits and investigations by the Department of Justice, with four of the five largest insurers being accused of fraud.
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Enticing the healthiest seniors
Medicare Advantage insurers have been accused of enticing only the healthiest seniors to join their plans. This is because healthier seniors require less care, meaning that insurers would make more money. Some of the strategies used to attract these seniors include locating enrollment offices upstairs, offering gym memberships, and hiring celebrities to hawk their products.
These strategies have been described in federal lawsuits against the companies, which allege that such practices led to the diagnosis of serious diseases that might never have existed. These diagnoses allowed insurers to collect more money from the federal government's Medicare Advantage program.
According to federal audits, eight of the ten biggest Medicare Advantage insurers have submitted inflated bills. Four of the five largest players—UnitedHealth, Humana, Elevance, and Kaiser—have faced federal lawsuits alleging that their efforts to overdiagnose customers amounted to fraud. The fifth company, CVS Health, which owns Aetna, is also under investigation by the Department of Justice.
In response to these tactics, Congress decided to pay more for sicker patients. However, insurers quickly found ways to exploit this system as well, rigorously documenting all of a patient's health conditions, regardless of whether they were relevant to the patient's current medical care. This practice, known as "upcoding," makes patients appear sicker on paper, resulting in higher payouts from the government.
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Advertising and perks
Medicare Advantage insurers have been accused of spending extravagant sums on advertising, including hiring celebrities to promote their products. This is part of a broader strategy to entice patients to join their plans, with perks such as health club memberships also offered to attract new members.
These advertising and promotional strategies have been criticised as wasteful, with some arguing that they undermine the promise of equitable, single-tier care for seniors. Indeed, Medicare Advantage plans have been accused of prioritising profit over delivering healthcare, with some studies indicating that privatisation does not reduce healthcare costs.
The government now spends a significant amount on Medicare Advantage, with the program costing almost as much as the Army and Navy combined. This expenditure has been driven in part by inflated bills, with insurers accused of submitting fraudulent diagnoses to increase payments.
Medicare Advantage insurers have disputed allegations of fraud, arguing that their aim in documenting more conditions is to improve care by accurately describing patients' health. However, critics argue that insurers are exploiting the system to increase profits, with Medicare Advantage described as "the most lucrative niche in the insurance market".
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Frequently asked questions
Insurance firms exploit Medicare Advantage by making patients appear sicker than they are in order to increase their profits. They do this by scouring patient medical records for additional diagnoses that they then report to the government to increase the amount the Medicare program pays them.
This exploitation has led to billions of dollars in overpayments from Medicare to Medicare Advantage plans. It has also resulted in decreased payments to hospitals and potentially impacted beneficiary access to medically necessary care.
Eight of the ten biggest Medicare Advantage insurers, including UnitedHealth, Humana, Elevance, and Kaiser, have been accused of submitting inflated bills and have faced federal lawsuits alleging fraud. Other insurers such as CVS Health and Aetna have also been investigated for similar practices.
