Researcher: Medicare Advantage plans cost billions more than they should

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Switching seniors to Medicare Advantage plans has cost taxpayers tens of billions of dollars more than keeping them in the original Medicare, a cost that has exploded since 2018 and is likely to rise even more, according to new research.

Richard Kronick, a former federal health policy researcher and professor at the University of California-San Diego, said his analysis of recently released Medicare Advantage billing data estimates Medicare overpayed for private health plans. by over $ 106 billion from 2010 to 2019 because of the way private plans charge for the sickest patients.

According to Kronick, nearly $ 34 billion of that new spending came in 2018 and 2019, the latest available payment period. Centers for Medicare and Medicaid Services have produced their 2019 billing data public for the first time in late September.

“They are paying [Medicare Advantage plans] far more than they should, “said Kronick, who was assistant secretary for health policy in the Department of Health and Human Services during the Obama administration.

Medicare Advantage, a fast-growing alternative to the original Medicare, is managed primarily by major insurance companies. Health plans have signed up nearly 27 million members, or about 45 percent of people eligible for Medicare, according to AHIP, an industry trade group formerly known as America’s Health Insurance Plans.

The industry argues that the plans generally offer extra benefits, such as eyewear and dental care, not available under the original Medicare, and that most seniors who join health plans are happy they did.

“Seniors and taxpayers alike expect high-quality, high-value health coverage from Alzheimer’s [Medicare Advantage] plans, “AHIP spokesman David Allen said.

Yet critics have argued for years that Medicare Advantage costs taxpayers too much. Industry has also been the target of multiple governments investigations and Department of Justice lawsuits claiming widespread billing abuse by some plans.

The payments issue has come under closer scrutiny as some Democrats in Congress seek ways to fund the Biden administration’s social spending agenda. Medicare Advantage plans are also trying to attract new members by advertising extensively during the fall open enrollment period, which ends next month.

“It’s hard not to notice that Medicare is grossly paying for these plans when you see that beneficiaries have more than 30 plans available in their area and are bombarded with TV, magazines and advertisements daily,” said Cristina Boccuti, director of health policy. by West Health, a group seeking to cut health care costs, and supported Kronick’s research.

Kronick called Medicare Advantage cost growth an “industry-wide systemic problem,” which CMS has failed to curb. He said some plans have seen “mind blowing” revenue gains, while others have seen more modest increases. According to Kronick, the giant insurer UnitedHealthcare, which had about 6 million Medicare Advantage members in 2019, has received about $ 6 billion in overpayments. The company has not made any comments.

“This is not a small change,” he said Joshua Gordon, director of health policy for the Committee for a Responsible Federal Budget, a non-partisan group. “The problem is only getting worse.”

Responding to written questions, a spokesperson for the CMS said the agency “is committed to ensuring that payments to Medicare Advantage plans are appropriate. It is CMS’s responsibility to make sure Medicare Advantage plans live up to their role and the agency will certainly maintain the plans to the standards they are expected to meet. “

However, any Medicare Advantage payment cuts face stiff opposition.

on October 15, 13 United States Senators, including Senator Kyrsten Sinema (D-Ariz.) Sent to letter a CMS opposing any reduction in payments, which they believe “could lead to higher costs and premiums, reduce vital benefits, and undermine progress made to improve health outcomes and health equity” for people enrolled in the plans .

Much of the debate has centered on the complex method used to pay for health plans.

In original Medicare, medical service providers bill for each service they provide. In contrast, Medicare Advantage plans are paid for using a coding formula called a “risk score” which pays higher rates for sicker patients and less for healthy ones.

This means that the more serious medical conditions diagnosed by the plans the more money they get – sometimes thousands of dollars more per patient over the course of a year with little monitoring by the CMS to make sure the higher rates are justified.

Congress recognized the problem in 2005 and ordered the CMS to set up an annual “tagging intensity adjustment” to reduce Medicare Advantage risk scores and keep them more in line with original Medicare.

But since 2018 CMS has set the coding adjustment at 5.9%, the minimum amount required by law. Boccuti said the adjustment is “too low,” adding that health plans “are inventing new ways to increase their subscribers’ risk scores, which earn them higher monthly Medicare payments.”

Some of these coding strategies have been the target of lawsuits and government investigations claiming that health plans illegally manipulated risk scores by making patients appear sicker than they were or by billing medical conditions that patients did not have. In one recent case, the Justice Department accused Kaiser Permanente’s health plans to raise about $ 1 billion by inflating risk scores. In a declaration, the insurer disputed the allegations. (KHN is not affiliated with Kaiser Permanente.)

Legal or not, the increase in Medicare Advantage tagging means taxpayers pay far more for similar patients who join health plans than the original Medicare ones, according to Kronick. He said there is “little evidence” that higher payments to Medicare Advantage are justified because their members are sicker than the average senior.

Kronick, who has studied The problem of coding for years, both inside and outside the government, claimed that risk scores in 2019 were 19% higher in Medicare Advantage plans than in original Medicare. Medicare Advantage scores increased 4 percentage points between 2017 and 2019, faster than the average for past years, he said.

Kronick said that if the CMS keeps the current coding adjustment in place, spending on Medicare Advantage will increase by $ 600 billion from 2023 to 2031. While some of that money would provide patients with additional health benefits, Kronick estimates that up to two-thirds of it could go towards profits for insurance companies.

AHIP, the industry trading group, did not respond to questions about the coding dispute. But a report prepared for AHIP warned in September that risk score-related payments are a “key component” in how health plans calculate the benefits they provide and that even a slight increase in coding adjustment would require plans to reduce benefits or charge more to patients.

This threat sounds alarms to many lawmakers, according to Kronick. “Under pressure from Congress, CMS is not doing the job it should,” he said. “If they do what the law tells them to do, they will be screamed out loud and not too many people will cheer.”

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