July
16, 20195:00 AM ET Fred Schulte Lauren Weber
Health
insurers that treat millions of seniors have overcharged Medicare by nearly $30 billion over the past
three years alone, but federal officials say they are moving ahead
with long-delayed plans to recoup at least part of the money.
Officials
have known for years that some Medicare Advantage plans overbill the government
by exaggerating how sick their patients are or by charging Medicare for
treating serious medical conditions they cannot prove their patients have.
Getting
refunds from the health plans has proved daunting,
however. Officials with the Centers for Medicare & Medicaid Services
repeatedly have postponed or backed off efforts to crack down on billing abuses
and mistakes by the increasingly popular Medicare Advantage health plans
offered by private health insurers under contract with Medicare. Today, such
plans treat more than 22 million seniors — more than 1 in 3 people on Medicare.
Now CMS
is trying again, proposing a series of enhanced audits tailored to claw back $1
billion in Medicare Advantage overpayments by 2020 — just a tenth of what it
estimates the plans overcharge the government in a given year.
At the
same time, the Department of Health and Human Services Inspector General's
Office has launched a separate nationwide round of Medicare Advantage audits.
As in
past years, such scrutiny faces an onslaught of criticism from the insurance
industry, which argues the CMS audits especially are technically unsound and
unfair and could jeopardize medical services for seniors.
America's
Health Insurance Plans, an industry trade group, blasted the CMS audit design
when details emerged last fall, calling it "fatally flawed."
Insurer
Cigna Corp. warned in a May financial filing:
"If adopted in its current form, [the audits] could have a detrimental
impact" on all Medicare Advantage plans and "affect the ability of
plans to deliver high quality care."
But
former Sen. Claire McCaskill, a Missouri Democrat who now works as a political
analyst, says officials must move past powerful lobbying efforts. The officials
must hold health insurers accountable, McCaskill says, and demand refunds for
"inappropriate" billings.
"There
are a lot of things that could cause Medicare to go broke," she says.
"This would be one of the contributing factors; $10 billion a year is real
money."
Catching
overbilling with a wider net
In the
overpayment dispute, health plans want CMS to scale back, if not kill off, an
enhanced audit tool that, for the first time, could force insurers to cough up
millions in improper payments they've received.
For
more than a decade, audits have been little more than an irritant to insurers,
because most plans go years without being chosen for review and often pay only
a few hundred thousand dollars in refunds as a consequence. When auditors
uncover errors in the medical records of patients the insurers were paid to
treat, CMS has simply required a rebate for those patients for just the year
audited — relatively small sums for plans with thousands of members.
The
latest CMS proposal would raise those stakes enormously by extrapolating error
rates found in a random sample of 200 patients to the plan's full membership —
a technique expected to trigger many multimillion-dollar penalties. Though
controversial, extrapolation is common in medical fraud investigations — except
for investigations into Medicare Advantage. Since 2007, the industry has
successfully challenged the extrapolation method and, as a result, largely avoided accountability
for pervasive billing errors.
"The
public has a substantial interest in the recoupment of millions of dollars of
public money improperly paid to health insurers," CMS wrote in a Federal
Register notice late last year announcing its renewed attempt at using
extrapolation.
Penalties
in limbo
In a
written response to our questions, CMS officials said the agency has already
conducted 90 of those enhanced audits for payments made in 2011, 2012 and 2013
— and expects to collect $650 million in extrapolated penalties as a result.
Though
that figure reflects only a minute percentage of actual losses to taxpayers
from overpayments, it would be a huge escalation for CMS. Previous Medicare
Advantage audits have recouped a total of about $14 million — far less than it
cost to conduct them, federal records show.
Though
CMS has disclosed the names of the
health plans in the crossfire, it has not yet told them how much each owes,
officials said. CMS declined to say when, or if, it would make the results
public.
This
year, CMS is starting audits for 2014 and 2015, 30 per year, targeting about 5%
of the 600 plans annually.
This
spring, CMS announced it would extend until
the end of August the audit proposal's public comment period, which was
supposed to end in April. That could be a signal the agency might be looking
more closely at industry objections.
Health
care industry consultant Jessica Smith says CMS might be taking additional time
to make sure the audit protocol can pass muster.
"Once
they have their ducks in a row," she says, "CMS will come back hard
at the health plans. There is so much money tied to this."
But
Sean Creighton, a former senior CMS official who now advises the industry for
health care consultant Avalere Health, says payment error rates have been dropping
because many health plans "are trying as hard as they can to become
compliant."
Still,
audits are continuing to find mistakes. The first HHS inspector general audit,
released in late April, found that Missouri-based Essence Healthcare Inc. had
failed to justify fees for dozens of patients it had treated for strokes or
depression. Essence denied any wrongdoing but agreed it should refund $158,904
in overcharges for those patients and ferret out any other errors.
Essence
also faces a pending whistleblower suit filed by Charles Rasmussen, a Branson,
Mo., doctor who alleges the health plan illegally boosted profits by
overstating the severity of patients' medical conditions. Essence has called
the allegations "wholly without merit" and "baseless."
Essence
started as a St. Louis physician group, then grew into a broader holding
company in 2007, backed by prominent Silicon Valley venture capitalist John
Doerr, with his brother Thomas Doerr, a St. Louis doctor and software designer.
Neither would comment for this story.
How
we got here
CMS
uses a billing formula called a "risk score" to pay for each Medicare
Advantage member. The formula pays higher rates for sicker patients than for
people in good health.
Congress
approved risk scoring in 2003 to ensure that health plans did not shy away from
taking sick patients who could incur higher-than-usual costs from hospitals and
other medical facilities. But some insurers quickly found ways to boost
risk scores — and their revenues.
In
2007, after several years of running Medicare Advantage as what one CMS
official dubbed an "honor system," the agency launched "Risk
Adjustment Data Validation" audits. The idea was to cut down on the
undeserved payments that cost CMS nearly $30 billion over the past three years.
The audits of 37
health plans revealed that, on average, auditors could confirm just 60% of the
more than 20,000 medical conditions CMS had paid the plans to treat.
Extra
payments to plans that had claimed some of its diabetic patients had
complications, such as problems with eyes or kidneys, were reduced or
invalidated in nearly half the cases. The overpayments exceeded $10,000 a year
for more than 150 patients, though health plans disputed some of the findings.
But CMS
kept the findings under wraps until the Center for Public Integrity, an
investigative journalism group, sued the
agency under the Freedom of Information Act to make those results public.
Despite
the alarming findings, CMS conducted no audits for payments made during 2008,
2009 and 2010 as they faced industry backlash over CMS' authority to conduct
them and the threat of extrapolated repayments. Records released through the
FOIA lawsuit show some inside the agency also worried that health plans would
abandon the Medicare Advantage program if CMS pressed them too hard.
CMS
officials resumed the audits for 2011 and expected to finish them and assess
penalties by the end of 2016. That has yet to happen, amid the continuing
protests from the industry. Insurers want CMS to adjust downward any
extrapolated penalties to account for coding errors that exist in standard
Medicare. CMS stands behind its method — at least for now.
At a
minimum, argues AHIP, the health insurers association, CMS should back off
extrapolation for the 90 audits for 2011-13. Should the agency agree, CMS would
write off more than half a billion dollars that could be recovered for the U.S.
Treasury.
Kaiser Health News is a nonprofit, editorially
independent program of the Kaiser Family Foundation. KHN is not affiliated with
Kaiser Permanente.
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