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Why Medicare Advantage costs taxpayers billions more than it should
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Why Medicare Advantage costs taxpayers billions more than it should

First in a three-part series. See sidebar.

In South Florida, one of the nation's top privately-run Medicare insurance plans faces a federal investigation into allegations that it overbilled the government by exaggerating how sick some of its patients were.

In the Las Vegas area, private health care plans for seniors ran up more than $100 million in added Medicare charges after asserting patients they signed up also were much sicker than normal — a claim many experts have challenged.

In Rochester, New York, a Medicare plan was paid $41 million to treat people with serious diseases — even though the plan couldn't prove the patients in fact had those diseases.

These health plans and hundreds of others are part of Medicare Advantage, a program created by Congress in 2003 to help stabilize health care spending on the elderly. But the plans have sharply driven up costs in many parts of the United States — larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are, an investigation by the Center for Public Integrity has found.

Dominated by private insurers, Medicare Advantage now covers nearly 16 million Americans at a cost expected to top $150 billion this year. Many seniors choose the managed-care Medicare Advantage option instead of the traditional government-run Medicare program because it fills gaps in coverage, can cost less in out-of-pocket expenses and offers extra benefits, such as dental and eye care.

But billions of tax dollars are misspent every year through billing errors linked to a payment tool called a "risk score," which is supposed to pay Medicare Advantage plans higher rates for sicker patients and less for those in good health.

Government officials have struggled for years to halt health plans from running up patient risk scores and, in many cases, wresting higher Medicare payments than they deserve, records show.

The Center's findings are based on an analysis of Medicare Advantage enrollment data from 2007 through 2011, as well as thousands of pages of government audits, research papers and other documents.

Federal officials who run the Medicare program repeatedly refused to be interviewed or answer written questions.

Among the findings:

  • Risk score errors triggered nearly $70 billion in "improper" payments to Medicare Advantage plans from 2008 through 2013 — mostly overbillings, according to government estimates. Federal officials refused to identify health plans suspected of overcharging Medicare, citing agency policy that keeps many business records confidential. The Center is suing to make these records public.
  • Risk scores of Medicare Advantage patients rose sharply in plans in at least 1,000 counties nationwide between 2007 and 2011, boosting taxpayer costs by more than $36 billion over estimated costs for caring for patients in standard Medicare.
  • In more than 200 of these counties, the cost of some Medicare Advantage plans was at least 25 percent higher than the cost of providing standard Medicare coverage. The wide swing in costs was most evident in five states: South Dakota, New Mexico, Colorado, Texas and Arkansas.

Reprinted by permission of The Center for Public Integrity.

Three part series

Part two: Explaining Medicare Advantage, and why it matters to you

Part three: Whistleblower: health plan cheated gov't out of more than $1 billion

Key finding

  • Federal officials have made billions in “improper” payments to Medicare Advantage plans traced to risk score errors.
  • Medicare Advantage risk scores rose much faster than the national average in hundreds of counties nationwide between 2007 and 2011. That rise in risk scores cost taxpayers more than $36 billion; critics attribute that more to aggressive billing than sicker patients.
  • Though federal health officials have recently disclosed some Medicare billing data, key financial records of Medicare Advantage plans have been kept under wraps.
  • The failure to crack down on health plans that overbill doesn’t bode well for the Affordable Care Act, which relies on a similar risk scoring system.

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