Improper Payments to Medicare Advantage Plans Estimated at $16 Billion for FY2016

Medicare Advantage fraud has been an area of increasing focus recently. Earlier this year, the Department of Justice intervened in two whistleblower lawsuits against UnitedHealth. Investigations into the operation of other Medicare Advantage plans are reportedly continuing. And the amount of money at stake in this area continues to increase as more and more people elect to replace traditional Medicare with a private plan from an insurance company authorized through Medicare Advantage.

James Cosgrove, the Director of the Health Care team at the U.S. Government Accountability Office, recently testified before the Oversight Subcommittee of the House Committee on Ways and Means regarding Efforts to Combat Waste, Fraud and Abuse in the Medicare Program. His testimony focused on the Centers for Medicare & Medicaid Services (CMS) efforts to decrease the number of improper Medicare Advantage payments.

The current estimate from CMS is that there are $16 billion in improper payments, nearly 10 percent of the total payments, to Medicare Advantage plans. When underpayments are subtracted, CMS still estimates that it had net overpayments in Medicare Advantage of about $7 billion.

Medicare pays insurance companies running Medicare Advantage plans based on the prior diagnoses and the demographics of their insureds. In other words, the plan gets paid more for someone who is projected to have higher medical costs and less for those projected to have lower costs. In order to ensure the accuracy of information provided, CMS conducts risk adjustment data validation (RADV) audits of past payments.

If a health plan knowingly submits information from medical charts that are not properly documented, and CMS increases payments as a result, the insurer can be liable under the False Claims Act. Additionally, if the insurer submits patients who should have a higher risk adjustment to Medicare, it must also submit patients who should have a lower risk adjustment.

The estimate of the amount of improper payments does not mean that the entire amount is subject to treble damages under the False Claims Act. The FCA requires a party to violate the Act knowingly or recklessly in order for liability to be appropriate.

CMS has in place a number of methods to attempt to combat the problem of improper payments. It is also in the process of implementing recommendations made by the U.S. Government Accountability Office. Yet, Medicare Advantage continues to account for a significant amount of the fraud in the Medicare system.

If you are a potential whistleblower with information about Medicare Advantage fraud, please give us a call at 1-800-590-4116 to discuss your options and the potential reporting of the wrongdoing to the U.S. Government through the False Claims Act.