Billing and Patient

Negligent, lax auditing has given overcharging encouragement to Medicare Part C advantage health insurance plans.

With the mounting evidence that federal officials have been overpaying some Medicare Part C advantage health insurance plans by tens of millions of dollars a year, the government revisited efforts to reclaim as much money as possible.

Records of the Centers for Medicare and Medicaid Services reveals that officials there as early as 2008 identified a group of privately run Medicare Part C Advantage health insurance plans they suspected of ripping off the government.

CMS officials chose to do only 30 in-depth financial audits to recover overpayments each year, even though the records make clear they could complete many more.

In February 2012, CMS announced it would do just that — which meant about 5 percent of the roughly 600 Medicare Advantage contracts in force would be audited in a year.

The agency expected to complete the first batch of the Medicare Advantage audits, which covered 2011 spending, and to “recoup overpayments” in early 2014, according to another document. But it has yet to do so. A spokesman said the Medicare agency “anticipates completing” the audits in 2016.

The CMS records were recently released to the Center for Public Integrity through a court order in a Freedom of Information Act lawsuit.

Since 2004, the government has paid the health plans using a risk score it calculates for each patient based on diseases reported by the health plans. Medicare expects to pay higher rates for sicker people and less for those in good health. But overspending tied to fast-rising risk scores has cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series of articles published in 2014, leading to widespread suspicions that some risk scores are being purposefully inflated.

Many of the records released by CMS are heavily redacted, with dates and the names of their authors sometimes missing. More than 1,400 pages have been “withheld in their entirety” by CMS, including names of the health plans and how much they were overpaid.

 The government’s relaxed pace in chasing down overpayments — and the secrecy surrounding the audit results — brought a sharp rebuke from Senate Judiciary Committee Chairman Charles Grassley.

“The agencies are responsible for getting the payments right in the first place and pursuing full refunds of all over-payments for the taxpayers,” the Iowa Republican said in a statement.

“The agencies also have an obligation to be as transparent as possible in the public interest about a taxpayer-funded program,” Grassley added.

The CMS records make clear that Medicare Advantage overpayments have piled up mainly because the complex formula relying on risk scores that is used to pay the plans has few safeguards to discourage abuse. One memo describes it as an “honor system.”

A CMS spokesman didn’t directly address written questions posed by the Center for Public Integrity about the history of the audits. But the agency offered a statement that read in part: “CMS takes seriously program integrity and payment accuracy in Medicare Advantage, and is taking steps to protect taxpayers, Medicare beneficiaries, and the Medicare program.”

The CMS records include an earlier confidential audit of 2005 payments to 22 Medicare Advantage health plans; it showed that auditors couldn’t confirm that 31 percent of the patients had the diseases Medicare was paying plans to treat.

Some plans were much worse than others. The average error rate for 17 of the 22 plans was more than 10 percent above the norm, with some even higher. The confidential 2005 audit, conducted by consulting firm BearingPoint, projected 2005 losses at $4.2 billion from what it termed a “substantial overpayment” to Medicare Advantage plans.

The audits are called RADV, for Risk Adjustment Data Validation. Auditors review medical records of a sample of 201 patients to verify they have the diseases their health plan is being paid to treat.

CMS officials also appeared to have doubts about the legality of RADV because it lacked a formal appeals process. The health plans were not penalized until February 2012 — even though officials knew payment errors were wasting billions of tax dollars.

Audits for 2007, for instance, dragged on for more than five years before ending with a whimper. CMS had anticipated collecting from $500 million to $800 million from 37 health plans audited that year.

That never happened. Instead, CMS collected less than $14 million, and some health plans, including UnitedHealth Care, have spent years appealing to get at least some of that money recovered.

The Centers for Medicare and Medicaid Services, which is part of the Department of Health and Human Services, spends about $17 million a year conducting RADV audits and estimating payment errors. So far, these efforts have returned about $15 million to the agency.

By contrast, other medical fraud and abuse efforts are said to more than pay for themselves. HHS announced in March 2015 that fraud recovery efforts by the department returned $7.70 for every dollar spent.

CMS officials have said the threat of being audited, and a provision of the Affordable Care Act requiring prompt return of any excess payments, have led Medicare Advantage insurance plans to voluntarily send back more than $1 billion to the Treasury**, mostly since 2010.

The CMS spokesman said audits of 30 Medicare Advantage insurance company contracts and their spending from 2012 have begun and that plans were chosen based on how aggressively they report diagnosis codes to CMS for payment.

But Steve Ellis, vice president of the budget watchdog group Taxpayers for Common Sense, said it was troubling that the audits have not delivered better results. “You really have to enforce audits and act on them and not let the bad actors off the hook,” he said.

**Please note:  When millions of dollars are paid to settle a Medicare or Medicaid false claim allegation, where is the reclaimed money allocated? Some of the fines, mostly paid by health care companies, are rewarded to whistleblowers…close to $2.5 billion from 2009 to 2014. Another portion goes to the Crime Victims Fund and other funding goes to the Healthcare Fraud and Abuse Control Program.  So, what happens to the remaining Medicare fraud reclaimed tax dollars? Well, the remainder of recaptured fraud dollars is placed in the Department of Justice “slush fund” with a present balance of $9 billion. And, is used for what the department considers important matters such as terrorism. To reiterate, a large portion of the money is not returned to Medicare or Medicaid for replacement of illegal payments to fraudsters.