Trump administration plans crackdown on Medicare Advantage overcharges : NPR

Dr. Mehmet Oz directs the Centers for Medicare and Medicaid Services. A CMS plan to keep Medicare Advantage payments flat in 2027 shook health insurance stocks this week.

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Medicare Advantage health plans are launching a government proposal this week that would keep their reimbursement rates steady next year while making other payment changes.

But some health policy experts say the plan could help reduce billions of dollars in extra costs that have been common in the program for more than a decade.

On Jan. 26, officials at the Centers for Medicare & Medicaid Services announced that they planned to increase rates paid to health plans by less than a tenth of a percent for 2027, far less than the industry expected. Some of the largest publicly traded insurers, such as UnitedHealth Group and Humana, have seen their stock prices fall as a result, while industry groups have threatened that people 65 and older could see their services cut if the government does not invest more money.

In Medicare Advantage, the federal government pays private insurance companies to manage health care for people 65 and older or disabled.

“Graphics Reviews”

Less noticed in the brouhaha over rates: CMS also proposed restricting plans to conduct so-called “chart reviews” of their clients. These exams can lead to new medical diagnoses, sometimes including conditions that patients didn’t even ask their doctors to treat, increasing government payments to Medicare Advantage plans.

The practice has been criticized for more than a decade by government auditors who say it triggered billions of dollars in overpayments to health plans. Earlier this month, the Justice Department announced a record $556 million settlement with nonprofit health system Kaiser Permanente over allegations that the company added about half a million diagnoses to its Advantage patient records between 2009 and 2018, generating about $1 billion in improper payments.

KP did not admit any wrongdoing as part of the settlement.

“I think the administration is serious about cracking down on overpayments,” said Spencer Perlman, a health care policy analyst in Bethesda, Maryland.

Perlman said that while the Trump administration strongly supports Medicare Advantage, officials are “troubled” by schemes that reap improper profits by using records reviews to bill the government for medical problems, even when no treatment is provided.

In a press release, CMS Administrator Mehmet Oz said curbing the practice would ensure more accurate payments to plans while “protecting taxpayers from wasteful spending that is not directed toward meeting real health care needs.”

“The proposed payment policies are intended to ensure that Medicare Advantage works better for the people it serves,” Oz said.

Richard Kronick, a former federal health policy researcher and professor at the University of California, San Diego, called the proposal “at least a mildly encouraging sign,” although he said he suspects health plans might eventually find a way around it.

Kronick argued that switching seniors to Medicare Advantage plans cost taxpayers tens of billions of dollars more than keeping them in the government-run Medicare program, due to unbridled excesses in medical coding. Insurance plans have grown significantly in recent years and now have about 34 million members, or more than half of those eligible for Medicare.

David Meyers, an associate professor at the Brown University School of Public Health, called the proposed restriction on chart reviews a “step in the right direction.”

“I think the administration has made it clear that they want to reduce inefficiencies,” he said.

The industry outcry, primarily directed at the proposal to essentially keep Medicare Advantage payment rates flat, was swift and sharp.

“If finalized, this proposal could result in benefit reductions and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026,” said Chris Bond, a spokesperson for AHIP, formerly known as American Health Insurance Plans.

CMS is accepting public comments on the proposal and says it will issue a final decision on payment rates and other provisions by early April.

Meyers said health plans often claim they will be forced to cut benefits when they are unhappy with CMS payments. But that rarely happens, he says.

“These projects can still make money,” he said. “They are mostly very profitable, but not as profitable as shareholders expected.”

The government pays Medicare Advantage plans higher rates to cover sicker patients. But over the past decade, dozens of lawsuits, government audits and other investigations have alleged that health plans exaggerate their customers’ health status to pocket payments they don’t deserve, a tactic known in the industry as “upcoding.”

Many Medicare Advantage health plans have hired medical coding and analysis consultants to review patients’ medical records to find new diagnoses that they then bill the government. Medicare rules require health plans to document — and treat — all medical conditions they bill for.

Yet federal audits have shown for years that many health plans’ billing practices don’t stand up to scrutiny.

A December 2019 report from the Department of Health and Human Services inspector general found that health plans “almost always” used chart reviews to add, rather than remove, diagnoses. “More than 99 percent of chart reviews in our review added diagnoses,” investigators said.

The report found that diagnoses reported only on chart reviews – not service records – resulted in payments estimated at $6.7 billion for 2017.

This week’s proposal is not the first time CMS has attempted to crack down on record reviews.

In January 2014, federal officials developed a plan to restrict the practice, only to abruptly backtrack a few months later amid what one agency official described as an “outcry” from the industry.

The health insurance industry has for years relied on aggressive lobbying and public relations campaigns to combat efforts to curb overpayments or otherwise reduce costs to Medicare Advantage taxpayers.

What happens this time will speak volumes about how serious the Trump administration is in cracking down on controversial and long-standing payment practices under the program.

Perlman, the policy analyst, said it’s “fairly common” for CMS to partially backtrack when faced with industry opposition, such as phasing in changes over several years to soften the blow to health plans.

David Lipschutz, an attorney at the Center for Medicare Advocacy, a nonprofit public interest law firm, said finalizing the records review proposal “would be a significant step toward reining in overpayments to Medicare Advantage plans.”

But in the past, he said, even a minor change in Advantage payments has led the industry to protest that ‘the sky is going to fall and the proposal is generally abandoned.’

“It’s hard to say at this point how this is going to play out,” Lipschutz said.

KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of the major operating programs of KFF.