Paul Sanchez
Medicare Advantage, a private-sector alternative to traditional Medicare, has been exploited by insurers to inflate their profits by billions of dollars. A New York Times review of fraud lawsuits, inspector general audits, and watchdog investigations revealed that insurers developed elaborate systems to make their patients seem as sick as possible to increase payments, as Medicare Advantage insurers are paid a set amount for each enrollee, with higher rates for sicker patients. This has resulted in fraud and large, expensive plan overpayments that have cost the federal government billions of dollars and led to higher premiums for Medicare beneficiaries.
| Characteristics | Values |
|---|---|
| Insurers | Anthem (now Elevance Health), UnitedHealth Group, Martin's Point Health Care, Blue Cross Blue Shield of Illinois |
| Fraudulent practices | Submitting inaccurate diagnosis codes, recording additional diagnoses, inflating diagnoses, purchasing small healthcare supply companies to submit fraudulent claims, giving unnecessary skin grafts, illegally distributing prescription opioid pills |
| Impact | Higher premiums for Medicare beneficiaries, higher federal spending on healthcare, worsened outlook for the Medicare trust fund |
| Amount of fraud | $1 billion, $10.6 billion, $12 billion, $14.6 billion, $25 billion |
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What You'll Learn
Insurers billed Medicare for unnecessary procedures
Billing for unnecessary procedures is a prevalent issue in the healthcare industry that affects patients, insurance companies, and the entire healthcare system. It is a form of healthcare fraud that not only adds immense unnecessary costs to the system but also undermines public trust in medical providers and the healthcare system as a prime example of profit being prioritised over patient care.
Insurers have been found to exploit Medicare for billions by billing for unnecessary procedures. For instance, in a case of Medicare fraud, 73-year-old retired engineer Gerald Quindry received a statement that Medicare, his health insurance provider, had been billed $15,500 for urinary catheters that he did not need, want, or receive. In another instance, Maine-based Martin's Point Health Care was accused of submitting inaccurate diagnosis codes for its plan enrollees to increase reimbursement. The insurer would code patients' historical health conditions, such as cancers, strokes, and heart conditions, as active conditions, thereby generating additional revenue that it was not entitled to receive from the Medicare Advantage program.
Insurers use various tactics to bill for unnecessary procedures. One common example involves a patient visiting their healthcare provider with minor symptoms, only to be ordered multiple costly laboratory tests like MRIs and CT scans that are unnecessary. This type of billing fraud is especially prevalent when health care providers bill insurers for services that are not considered medically reasonable or necessary. Another tactic is "unbundling", which occurs when a procedure that should be billed under a single code is split into several parts to increase reimbursement. For instance, during a surgery, the pre-operative and post-operative visits might be billed separately instead of as a complete package. This practice is illegal, as it inflates the claim without any real justification.
The issue of billing for unnecessary procedures is not limited to insurers. Healthcare providers also engage in kickback schemes, which involve submitting false claims for services that were never rendered, contributing to unnecessary medical billing fraud. In such cases, patients may visit a provider for a routine checkup but later find out that they were billed for physical therapy sessions they never attended.
The financial impact of billing for unnecessary procedures is significant, resulting in higher premiums for Medicare beneficiaries and higher federal spending on healthcare. Correcting for overpayments due to billing for unnecessary procedures could save the Medicare program billions of dollars over ten years.
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Insurers manipulated risk adjustment scores
Insurers have been accused of manipulating risk adjustment scores as part of a wider pattern of exploiting Medicare for billions. Medicare Advantage (MA) is a private-sector alternative to traditional Medicare, designed by Congress to encourage health insurers to innovate and provide better care at a lower cost. However, MA has become highly profitable for private insurance companies, with the government paying insurers a set amount for each enrollee, with higher rates for sicker patients.
The risk adjustment system in MA means payments are made based on patient diagnoses, with providers receiving more money for each additional condition being treated. This has created an incentive for insurers to manipulate risk adjustment scores to make their beneficiaries appear sicker than they are, thus garnering higher plan payments. This practice, known as "coding intensity", has resulted in substantial overpayments, with estimates ranging from $12 billion to $25 billion in 2020 alone.
Insurers have developed elaborate systems to make their patients appear sicker, often without providing additional treatment. For example, the health system Kaiser Permanente urged doctors to add additional illnesses to the medical records of patients they hadn't recently seen, offering incentives such as bottles of champagne or bonuses. Anthem, now Elevance Health, paid doctors more when they reported their patients were sicker. UnitedHealth Group, the country's largest insurer, instructed workers to mine old medical records for more illnesses and sent them back to try again if they didn't find enough.
These practices have resulted in widespread allegations of fraud, with major insurers accused in court of exploiting the system to inflate their profits by billions of dollars. While insurers dispute these allegations, the impact on Medicare spending is significant, with the program now costing nearly as much as the Army and Navy combined.
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Insurers submitted inaccurate diagnosis codes
Insurers have been accused of submitting inaccurate diagnosis codes as part of a wider pattern of exploiting Medicare for billions. This issue has been highlighted by the New York Times, which has brought attention to widespread allegations of fraud on the part of major private insurers participating in the Medicare Advantage (MA) program.
The way that MA's risk adjustment system works has been identified as one of the reasons for the fraud. Payments are made based on patient diagnoses, which means that healthcare providers are incentivized to record additional diagnoses, as they are paid more for each additional condition being treated. This can result in fraudulently higher payments, with MedPAC estimating that additional diagnoses resulted in $12 billion in overpayments in 2020 alone.
Insurers have been accused of developing elaborate systems to make their patients appear as sick as possible, often without providing additional treatment. For example, the Department of Justice accused Maine-based Martin's Point Health Care of violating the False Claims Act by submitting inaccurate diagnosis codes for its plan enrollees in Maine and New Hampshire to increase reimbursement. Court records show that Martin's Point would routinely code patients' historical health conditions, such as cancers, strokes, and heart conditions, as active conditions, thereby generating additional revenue that it was not entitled to receive from the Medicare Advantage program.
These issues have led to calls for improvements to the MA program, with the Committee for a Responsible Federal Budget proposing to address coding intensity and move to budget neutrality for the MA quality bonus system.
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Insurers denied care to low-income Americans
Private health insurance companies paid by Medicaid have denied millions of requests for care for low-income Americans, according to a report by the Department of Health and Human Services Office of Inspector General (OIG). The report found that these denials of care occurred "at high rates" and with little oversight from federal and state authorities.
The issue of insurers denying care to low-income Americans is not limited to the Medicare Advantage program. For instance, a recent New York Times article highlighted denials of care by managed care plans offering coverage under the Medicaid program. This indicates a broader trend of insurers prioritising profits over providing necessary care to vulnerable populations.
Insurers have been accused of abusing the prior authorisation and coverage determination process, making it difficult for patients to access the care they need. This issue has been scrutinised by policymakers and advocates who argue that improvements are necessary to ensure equitable access to healthcare for all.
Medicare Advantage, a private-sector alternative to traditional Medicare, was designed to encourage health insurers to provide better care at lower costs. However, the program has been exploited by insurers who inflate patients' illnesses to justify higher payments from the government. This results in overpayments and higher premiums for Medicare beneficiaries, further straining the finances of an already struggling system.
Insurers have disputed allegations of fraud, arguing that their documentation of additional conditions is intended to improve care by providing a more comprehensive picture of patients' health. However, evidence suggests that insurers have developed elaborate systems to make their patients appear sicker, often without providing additional treatment. This not only impacts the financial stability of the Medicare program but also denies patients the care they need, exacerbating existing health disparities and hindering efforts to improve health outcomes for low-income individuals.
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Insurers purchased healthcare supply companies to submit fraudulent claims
A two-year investigation, called Operation Gold Rush, uncovered a conspiracy to purchase more than 30 small healthcare supply companies that were already enrolled with Medicare. The plan was to use these companies to submit a flood of claims for supplies that were not medically necessary. Beginning in late 2022, the companies collectively submitted fraudulent claims to Medicare for more than 1 billion urinary catheters, as well as continuous glucose monitors and other supplies.
The companies were able to collect about $1 billion in payments from other insurance companies that help cover older Americans' healthcare costs, known as Medicare supplemental insurers. One example of this is Blue Cross Blue Shield of Illinois, which paid 20% of a fraudulent $15,500 bill for urinary catheters.
Insurers have also been accused of inflating their profits by billions of dollars by making their patients appear as sick as possible, often without providing additional treatment. This is because the government pays Medicare Advantage insurers a set amount for each person who enrolls, with higher rates for sicker patients. Anthem, for example, paid more to doctors who said their patients were sicker.
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Frequently asked questions
Insurers have been accused of exploiting the Medicare Advantage (MA) program by inflating their profits by billions of dollars. MA is a private-sector alternative to traditional Medicare, where the government pays insurers a set amount for each person who enrolls, with higher rates for sicker patients. Insurers have been accused of developing elaborate systems to make their patients appear as sick as possible, often without providing additional treatment.
It is estimated that insurers have exploited billions of dollars from Medicare. A former top government health official suggested that overpayments in 2020 amounted to more than $25 billion. A study from the Kaiser Family Foundation found that insurers typically earn twice as much gross profit from their MA plans as from other types of insurance. Another investigation estimated that MA plans could be overpaid by between $810 billion and $1.6 trillion over the next decade.
The exploitation of Medicare by insurers has resulted in higher premiums for Medicare beneficiaries and increased federal spending on healthcare. It has also led to a worsened outlook for the Medicare trust fund, which is projected to approach insolvency in 2028. Additionally, it has raised concerns about the quality of care provided to patients, with some insurers denying or delaying care to increase profits.
