shows the front of a Medicare card
Image courtesy Centers for Medicare and Medicaid Services

By Thomas Goldsmith

The popular Medicare Advantage program, known for attractive perks — yet questioned for some policies — is facing a recent series of critiques over its practices and cost to the U.S. budget.

It’s part of what might be called a battle for Medicare’s heart and soul being fought by powerful interests in North Carolina, where hundreds of thousands have enrolled for the plan, and beyond. 

The privately managed Medicare Advantage portion of Medicare is the subject of broad differences of opinion over its cost — including, regulators say, an eye-popping $15 billion in excess payments made in 2021. 

Recently announcing a new set of rules that have been years in the making, the Centers for Medicare and Medicaid Services said that it would conduct audits of past payments based on questionable practices by companies that provide the popular Medicare Advantage plans.

The extra costs of Medicare Advantage to treat beneficiaries are so high, analysts say, that they threaten the financial health of the entire system. 

In 2021, Medicare’s costs rose to $900 billion, and estimates are that as soon as 2028, the program’s hospital insurance fund — out of which Medicare hospital benefits are paid — could become insolvent. So, eliminating extraneous costs is becoming imperative. 

Medicare pays more for patients listed with more serious conditions, but regulators say some of the additional costs aren’t warranted because the payments were based on intentionally inaccurate diagnoses reported by Medicare Advantage insurers. 

“Given rising Medicare costs, it is a financial strain on the program for Washington to give private Medicare Advantage plans excessive payments,” said Jon Oberlander, professor of health policy and management at the University of North Carolina Chapel Hill. “Medicare Advantage was supposed to save Medicare money; the exact opposite has happened.”

At issue are parts of the program mostly unseen by the general public — including shortcomings for many beneficiaries, misleading marketing and strain on Medicare finances. 

“Upcoded” patients bring more cash 

What’s underway in Washington, D.C., is a discussion of whether insurance companies should be able to use Medicare Advantage policies to charge taxpayers more per beneficiary. 

An analysis by the federal inspector general of the Centers for Medicare and Medicaid Services of payments to traditional Medicare and Medicare Advantage showed that the privately managed versions overcharged taxpayers $15 billion more in 2019 for the same level of services as those provided by fee-for-service Medicare.  

First designed in the 1980s as a path to innovation in traditional fee-for-service Medicare, Medicare Advantage now serves about half of North Carolina’s 2.1 million Medicare enrollees — and about the same portion nationwide, in part with basic dental and vision care and perks such as gym memberships.

Traditional Medicare, still used by about half of North Carolina people eligible for the program, takes a fee-for-service approach to providing health care to older people, in which practitioners get paid each time they provide a service, run a lab or examine a patient. 

Under Medicare Advantage, however, companies are paid a per-month, per person fee for each enrollee. That monthly payment is supposed to cover everything — exams, labs, the works — and some Medicare Advantage plans also offer drug coverage. In exchange for all this, Medicare Advantage insurers receive enhanced reimbursement that’s higher than the basic cost of Medicare by a rate that’s capped at 5.9 percent. 

Medicare Advantage companies can receive an even greater payment enhancement for a patient — such as someone with advanced heart disease or diabetes — who has been diagnosed and subsequently “upcoded” as being at greater risk for more problems and, potentially, more cost. 

But sometimes chart reviews end up showing that the companies have portrayed beneficiaries as sicker than they really are. Regulators have determined that in these cases, companies have been overpaid. According to multiple federal and independent analyses, this practice of unwarranted risk adjustment pays, in part, for those bonuses and perks that Medicare Advantage enrollees swear by.

Over the years, Medicare Advantage has failed to show that health outcomes for its members are better than those for patients in traditional Medicare, according to a report by MedPac, a nonpartisan agency that gives Congress advice and analysis on the program.

Now new regulatory action, congressional scrutiny and ongoing litigation are likely to change the equation and chip away at the Medicare Advantage insurance companies’ profits. 

Those insurers respond that tighter federal regulation could mean higher costs, fewer choices and reductions in the perks that draw many consumers. 

What’s beneath the surface of Medicare Advantage

Medicare Advantage companies are likely best known to a general audience for their seemingly omnipresent television spots featuring the likes of Joe Namath promoting initially lower costs and extra benefits. But the plans have a downside, as they often change from year to year without warning. A procedure or drug that had a low-cost copay one year might become eye-poppingly expensive the next. 

Because of this variability, Triangle health care finance experts say that choosing any Medicare Advantage plan requires careful consideration.

“We’re spending way more money on Medicare, and the companies are taking that money and they’re luring people with lots of extras,” said Upchurch, founder and director of the Durham nonprofit agency Senior PharmAssist, which helps seniors make the best choices for their Medicare prescription drug plans. “The reason they have extra money is partially because of this upcoding.”

The federal Centers for Medicare and Medicaid Services has also determined this is the case based on studies and audits done by the agency’s Office of the Inspector General and by the federal Department of Health and Human Services. 

“Medicare Advantage enrollees’ medical records do not always support the diagnoses reported by Medicare Advantage organizations, which leads to billions of dollars in overpayments to plans and increased costs to the Medicare program as well as taxpayers,” according to a new rule published in the Federal Register announcing the crackdown on Medicare Advantage companies.

Chapel Hill retirees Susan Salzberg, 74, and husband Eric Juda, 78, said they did not know that the nurse practitioner who visited their home in 2022 for an annual Medicare Advantage review could possibly collect information used to change Juda’s listed diagnoses. The results of such visits, often by contract practitioners, go to insurers for use in determining diagnosis codes. These designations are used to project needed care and help determine taxpayers’ monthly payments to a Medicare Advantage company for patients’ care. 

Salzburg and Juda don’t know if his information resulted in a change in his listed diagnoses, and to them that’s a problem. 

Her recent telephone interviews with North Carolina Health News, Salzburg said, were the first she had heard about Medicare Advantage companies’ changing patients’ coding based on contractors’ home visits and chart reviews — without advising the enrollee or relatives.

“He hasn’t noticed any change in service,” Salzburg, a retired occupational therapist, said about the data gathered from Juda by a contract nurse practitioner. 

But, she said, ”you can’t make decisions on items you know nothing about.” 

Keep patients in the know 

Thomas Konrad, a researcher and scholar on aging issues at the University of North Carolina Chapel Hill, suggests that enrollees like Eric Juda who are examined should learn what the exams found and whether they result in a change in their listed diagnoses reflected in coding.

He said that one reform that could be made with minimal regulatory or legislative “fuss” would be to inform a patient if and when they’ve been “upcoded” to explain to them what it means. Those upcoded patients’ cases should also be reported to peer reviewers. 

“This would enable the beneficiary to learn to expect (or demand) relevant services that they might actually need,” Konrad said of providing direct information to patients about coding changes. “It could also dull the incentive for upcoding and restore the balance between the insurance company and the medical providers (doctors and hospitals).”

The home visits to beneficiaries, along with reviews of patient charts in some cases, have been used to increase the reimbursement for many individual patients. The U.S. Department of Justice is now suing Medicare Advantage insurers, including Cigna, UnitedHealth Group, Independent Health Corp., Elevance Health (formerly Anthem) and the Kaiser Permanente group of companies. Justice alleges that these companies knowingly submitted inaccurate claims to get reimbursed at a higher rate, according to a recent news release.

The Department of Justice has won $1.7 billion in settlements and judgments in lawsuits against health-care concerns — including some Medicare Advantage companies — in the past fiscal year. Medicare Advantage excess payments alone amount to nearly 10 times that amount, according to the changes to Medicare rules proposed in 2022.

But because litigation is a slow route to recouping overpayments, those same regulators are now more aggressively using audits to flag overpayments and claw back money. 

Gearing up opposition

The new regulations have been telegraphed since at least 2018, and observers and representatives of the multi-billion dollar private insurance market have kept a close eye on details as they are released.

The final rule issued early this month centers on what may sound like highly technical changes in the way in which the Centers for Medicare and Medicaid Services will conduct audits of payments to Medicare Advantage companies. But they are likely to face strenuous opposition and litigation from the insurance industry. 

The agency estimates it will recoup $4.7 billion in overpayments during the next 10 years through their use.

Among the changes: 

  • The federal agency will require Medicare Advantage companies to return overpayments found by audits on a representative subset of patients going back to 2018. The audits test whether companies have actually spent more on patients for whom they are collecting more money per month.
  • The Centers for Medicare and Medicaid Services will stop its practice of comparing Medicare Advantage charges to amounts incurred in fee-for-service Medicare, a process that typically adjusts fees in favor of Medicare Advantage. This is a controversial decision for the companies involved. 
  • Regulators will begin audits of a payment year as soon as it is concluded rather than waiting several years.

“[Medicare Advantage] plans are under fire for a suspiciously high amount of upcoding that made beneficiaries appear sicker than they were — and subsequently ensured [Medicare Advantage] plan sponsors got paid more,” said Jackson Hammond of the American Action Forum, a think tank self-described as advancing center-right solutions in government and business. 

Meanwhile, the U.S. Department of Justice is challenging Medicare Advantage practices in states, including North Carolina, with attention focused on the revenue-boosting “upcoding” policies by some participating insurers.

High-level controversy over Medicare Advantage hasn’t yet reached most consumers, millions of whom love its array of benefits and low initial costs. The added benefits also make Medicare Advantage an easy cause for politicians to favor.

NC senators have Medicare Advantage’s back

As prospects of policy changes were rising last year, a majority of U.S. senators rose to the program’s defense in a letter publicized by the deep-pocketed, pro-Medicare Advantage industry group Better Medicare Alliance.

“As you consider annual updates for plan year 2023, we ask you to ensure that payment or policy changes allow Medicare Advantage plans to continue to provide the patient-centered care that 43 percent of Medicare-eligible Americans rely on every day,” North Carolina’s U.S. Sen. Thom Tillis and former Sen. Richard Burr wrote in a February 2022 letter signed by more than 60 colleagues. 

“Enrollees in the program benefit from out-of-pocket cost limits and plan options that can include access to telehealth services, in-home care, nutrition services, and transportation benefits to meet seniors’ individual needs,” Tillis, Burr, and other senators said in their letter to the Centers for Medicare and Medicaid Services.

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Thomas Goldsmith worked in daily newspapers for 33 years before joining North Carolina Health News. Goldsmith is a native Tar Heel who attended the UNC-Chapel Hill, and worked at newspapers in Tennessee...

2 replies on “Medicare Advantage, insuring 1 million patients in North Carolina, faces new challenges to costs, practices”

  1. This hit a real nerve with me, having lost my MIL on January 2, 2023 due to to the mismanagement of her care by Wellcare.
    I’m still angry that she and her husband were bullied into switching from Medicare and Blue Cross to an advantage plan and then switched more times until ending up with Wellcare.

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