The federal government made more than $16 billion in erroneous payments to Medicare Advantage health plans last year. The U.S. Government Accountability Office (GAO) recently testified that nearly 10% of payments to Medicare Advantage plans were improper. Those improper payments are driving up costs not only for Medicare, but also for every person in Medicare Part B — including people who are not even enrolled in a Medicare Advantage plan.
Part B premiums are based on the average cost per person for everyone covered by Medicare. About one-third of all Medicare beneficiaries get their coverage through Medicare Advantage plans and the government expects even more to do so in the future. For years, government audits of Medicare Advantage plans have found that reimbursements to the plans tend to cost the government more than the government pays for the same services under traditional fee-for-service Medicare.
Unlike fee-for-service Medicare in which the Centers for Medicare and Medicaid Services (CMS) pays a pre-approved amount for each service, CMS pays Medicare Advantage plans a predetermined monthly amount for each enrollee. The payments cover all Medicare-approved services, no matter how many services are provided, or how much they cost. But the payments vary according to the health status of enrollees, with higher payments for sicker patients, less for people in good health.
CMS uses a special process known as “risk adjustment” to estimate each enrollee’s health care costs using diagnosis data from Medicare Advantage plans and demographic data from Medicare. Improper payments occur when health plans don’t have medical records and health data to support the “risk scores” and payments received. Evidence from the audits suggests that some plans may be inflating risk scores to receive higher payments.
According to the GAO, several factors impede CMS’ efforts to identify and recover improper payments. CMS hasn’t completed audits for 2011, 2012 or 2013, nor has it expanded the use of Recovery Audit Contractors as required by law since 2010. Instead, antifraud efforts have been repeatedly hit by Medicare budget cuts since 2011.
“Let’s tell Congress that overpayments to private health plans have to stop, and that Medicare needs to recover those funds,” says TSCL Executive Director Shannon Benton. “Medicare Part B premiums are the fastest growing cost older people have to deal with in retirement,” she notes. “But Medicare can’t fight fraud and waste without audits, the right tools and investigators to do the job,” Benton says.
“CMS’s Efforts to Ensure Proper Payments and Identify and Recover Improper Payments,” Testimony Before the Subcommittee on Oversight, Committee on Ways and Means, House of Representatives, Government Accountability Office, July 19, 2017.