By Bonner R. Cohen, Heartland Institute
Responding to criticisms lodged against an otherwise popular program among seniors, Senators Bill Cassidy, M.D. (R-LA) and Jeff Merkley (D-OR) introduced a bill to improve the way Medicare Advantage (MA) providers determine patients’ health risks, to eliminate overpayment.
The bipartisan No Unreasonable Payments, Coding, and Diagnoses for the Elderly (No UPCODE) Act aims at saving taxpayers billions of dollars, Cassidy’s office stated in a press release.
“Medicare is going insolvent, and our budget deficit is expanding,” said Cassidy in the statement. “We need to stop overpaying where we can if we’re going to preserve Medicare for Americans who rely on it. This is the direction we need to go.”
“Fraud, waste, and abuse by bad actors are destroying the stability of both Medicare Advantage and traditional Medicare,” said Merkley. “Our bipartisan bill cracks down on the fraudsters overcharging taxpayers by billions of dollars every year, closing the loopholes they use to turn sick patients into healthy profits.”
Calls for New Model
Unlike traditional fee-for-service, Medicare pays MA providers a standard fee based on the health of an individual enrollee.
“Because of this, Medicare Advantage plans have a financial incentive to make beneficiaries appear sicker than they might be to receive a higher Medicare reimbursement,” stated Cassidy.
Medicare could save $124 billion over 10 years based on Congressional Budget Office estimates, the release states.
The Cassidy-Merkley bill calls for a risk-adjustment model that uses two years of diagnostic data of an enrollee, instead of one year. Providers would be limited in the use of old or unrelated medical conditions when determining the cost of care. Medicare would cover only treatments related to relevant medical conditions, and patient assessments in MA would be more closely aligned with those in traditional Medicare.
CMS Orders Audits
Most significantly, the bill tightens diagnostic coding to end the practice of “upcoding.”
Upcoding has become such a drain on Medicare’s already stressed finances that the Centers for Medicare and Medicaid Services (CMS) announced May 21 it was expanding its efforts to audit Medicare Advantage plans’ risk-adjustment payments through the Risk Adjustment Data Validation (RADV) program.
“While the administration values the work that Medicare Advantage plans do, it is time CMS faithfully executes its duty to audit these plans and ensure they are billing the government accurately for the coverage they provide to Medicare patients,” said CMS Administrator Mehmet Oz, M.D., in a press release.
Last Overpayment Recovery: 2007
CMS acknowledged it is “several years behind” in carrying out these audits.
“The last significant recovery of MA overpayments occurred following the audit of payment year (PY) 2007, despite federal estimates suggesting MA plans may overbill the government by approximately $17 billion annually,” CMS stated in the news release
“The Medicare Payment Advisory Commission (MedPAC) estimates this figure could be as high as $43 billion per year,” stated the agency. “CMS’s completed audits for PYs 2011-2013 found between 5% and 8% in overpayments.”
To address this backlog, the Trump administration plans to complete all remaining RADV audits for PY 2018 to PY 2024 by early 2026, says CMS.
CMS said it will collaborate with the Department of Health and Human Services Office of Inspector General (HHS-OIG) to recover uncollected overpayments identified in past audits.
Fixing a Popular Program
Currently, more than 54 percent of Medicare beneficiaries are enrolled in MA programs, according to KFF. Unlike the Obama and Biden administrations, the Trump administration has shown no regulatory hostility to the program.
The CMS crackdown on upcoding fraud through aggressive audits, along with the measures in the Cassidy-Merkley bill, could be the way to address the criticisms being lodged against MA.
“The right answer is to crack down with financial penalties on insurers who are taking shortcuts by asking to get paid without submitting medical records and a treatment plan,” said John C. Goodman, co-publisher of Health Care News and founder and president of the Goodman Institute for Policy Research.
“However, insurers who play by the rules need to be paid sooner, not later,” said Goodman. “Chronic diseases tend to be progressive, getting worse through time. If a patient is diagnosed as prediabetic, the plan should get an immediate boost in premium because the patient should be immediately taking medications. Avoiding or delaying an early premium increase risks denying the patient access to preventive medicine that could avert progression to full diabetes and all the costs that entail.”
The Third-Party Payer Problem
It is not a surprise that bad actors have exploited the MA program, says Jeff Stier, a senior fellow at the Center for Consumer Choice
“When the end user isn’t the payer, it should be expected that there would be all sorts of inefficiencies and market participants looking to exploit the system,” said Stier. “That’s not to say that the government shouldn’t be the payer here, but the problem the bipartisan legislation seeks to mitigate is predictable—almost as predictable as the insurance industry’s opposition.”
An unnamed J.P. Morgan analyst told Healthcare Dive the audits could pose “difficult to size,” challenges to insurance and create an “incremental headwind” for managed care organizations that offer MA plans.
Bonner Russell Cohen, Ph.D., ([email protected]) is a senior fellow at the National Center for Public Policy Research.