How payers have exploited Medicare Advantage

Though Medicare Advantage was designed to help lower federal healthcare expenditures, payers have exploited the program through elaborate schemes that make patients appear sicker than they actually are — thereby leading to higher payments from CMS, according to an Oct. 8 report from The New York Times.

The Times analyzed dozens of fraud lawsuits against major payers, inspector general audits and watchdog investigations to show how insurers have abused the program to raise their profits by billions.

  • Accused of fraud by a whistleblower: UnitedHealth Group, Humana, Kaiser Permanente, Cigna, SCAN Group

  • Accused of fraud by federal government: UnitedHealth Group, Elevance Health, Cigna, SCAN Group

  • OIG says it overbilled: UnitedHealth Group, Humana, CVS Health, Elevance Health, BCBS Michigan, Cigna, Highmark, SCAN Group

According to the report, Elevance Health paid physicians more if they had sicker patients, UnitedHealth Group directed employees to look through old medical records to find more illnesses and Kaiser Permanente urged physicians to add extra illnesses to medical records — those that found enough were rewarded with champagne or bonuses.

The report said payers used third-party companies to support the alleged fraud. At healthcare conferences, companies offered insurers an analysis of their medical claims and where additional codes could be added. Payers like Elevance, Molina and Cigna reportedly used in-home clinical teams to diagnose patients with additional illnesses. 

James Taylor, MD, was previously a coding expert with Kaiser Permanente and is now accusing the payer-provider of fraud. He told The Times he was instructed by superiors to find additional illnesses that would lead to expensive claims.

"The cash monster was insatiable," he said. "It was an actual agenda item and how could we get this."

"We are confident in our compliance with Medicare Advantage risk-adjustment program requirements," a Kaiser spokesperson told The Times. "Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance from CMS."

Total estimated overpayments to insurers from the federal government in 2020 ranged from $12 billion to $25 billion, according to The Times.

Elevance is currently facing a federal lawsuit for allegedly receiving more than $100 million in MA overpayments from 2014 to 2018.

According to the report, payers have largely denied the allegations and said they were attempting to accurately document all of their patients' conditions. AHIP also said there has been no purposeful inflation of diagnoses.

"Professionals can look at the same medical record in different ways," an AHIP spokesperson told The Times.

The Better Medicare Alliance, a national MA research and advocacy group, rebuked the report Oct. 9:

"The story cherry-picks allegations — in some cases more than a decade old — to paint an inaccurate and incomplete picture of a vital part of Medicare that is providing better and far more affordable health care for 30 million seniors," Mary Beth Donahue, president and CEO, said, "The story ignores basic facts, including that Medicare Advantage saves seniors nearly $2,000 per year — savings that are particularly important for seniors on fixed incomes in a period of inflation on household costs."



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