Medicare Advantage Plan Audit Finds Medicare Paid Too Much for Nearly Half of Patients

A 2012 audit of a Medicare Advantage plan provided by UnitedHealth Group through PacifiCare of Washington State of 201 patients found 153 erroneous diagnoses out of 786 diagnoses. In total, the Government paid too much for nearly half of the patients on the insurance plan.

Medicare should have paid less in 49 percent of bills, with higher payments 15 percent in the audit. As a result, the government asked the health insurer to pay the difference, a total penalty for UnitedHealth of only $381,000 since the audit only involved a small number of cases and the government did not seek to predict the adjustment in the other patient populations.

And yet it formed the basis of a three year legal battle that remains ongoing. UnitedHealth objected to having to collect the medical records to support the erroneous diagnoses. 64 percent of the improper payments involved insufficient documentation. For example, 38% of the objectionable records lacked a physician’s signature.

The internal estimates of CMS officials concerning Medicare Advantage fraud totaled $13.5 billion in billing errors in 2010 alone. The Center for Public Integrity had previously estimated that improper payments to Medicare Advantage plans could top $12 billion in 2014.

A recent study by the National Bureau of Economic Research suggested that $2 billion of those improper payments are the result of upcoding. The working paper estimates that patients on Medicare Advantage plans have 6% to 16% higher risk scores than they would under traditional Medicare. The paper, which stops short of calling all issues the result of intentional manipulation, also suggests that CMS hasn’t gone far enough with its 2010 decrease in risk scores.

The Department of Justice has been investigating the use of risk adjustment scores in MA plans at healthcare plans, providers and vendors. Humana, one of the largest U.S. providers, has previously disclosed a government inquiry into its practices, for example. Several health care whistleblowers have already filed lawsuits under the False Claims Act to challenge fraud in insurance plans in this area as well.

Audits like the one performed on UnitedHealth are called Risk Adjustment Data Validation. If risk scores are inaccurate, it can cause Medicare to pay higher rates for people who are not as sick as the health care provider or insurer represents. In the audit, auditors typically review medical records to confirm that patient conditions are properly documented and the facility was entitled to payment.

The Center for Public Integrity obtained the documents concerning UnitedHealth through a FOIA request.

Medicare Advantage has been a hot topic since it now treats 17 million Americans at a cost of more than $150 billion a year. It is the subject of a few different bills in Congress at the moment. A recent bill to extend the period of time for comment on rates and policy changes by 15 days just passed the House. And another to extend poorly rated drug plans set to be eliminated in 2015 to be extended until 2018 to give seniors using the Medicare plans a chance to find a different insurance plan.

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