Health insurers have made millions of dollars off of overpayments from Medicare. The industry is gearing up to fight any effort for the government to demand that money back.
The Biden administration is expected to finalize a rule next month to try to recoup overpayments — but Medicare Advantage insurers are threatening to sue if the rule moves forward as written. (ATU Images / Getty Images)
This year, for the first time, a majority of seniors eligible for Medicare will be on privatized Medicare Advantage plans. Now, the insurance companies raking in giant profits from these for-profit plans are mounting a pressure campaign and planning to sue the government to protect years of overpayments they’ve extracted from Medicare.
A cash cow for big insurers, the for-profit version of Medicare has not been a great deal for the American public. Medicare Advantage plans cost the government more per beneficiary than traditional Medicare, and often wrongfully deny care.
What’s more, federal audits have found Medicare Advantage plans systematically overbilling the public — mostly by billing as if patients are sicker than they really are, a scheme known as “upcoding.” Officials estimate that the private plans collected $650 million in overpayments from 2011 to 2013.
The Biden administration is expected to finalize a rule next month to try to recoup some of these overpayments — but Medicare Advantage insurers are threatening to sue if the rule moves forward as written, according to Stat News. If insurers sue, it could further delay the government’s efforts to claw back excess payments stretching back more than a decade, as well as future overpayments.
The health insurance industry argues that regulators should allow for some level of payment errors — and should only apply new rules to audits moving forward, instead of retroactively punishing past misconduct.
“It’s crazy,” said Diane Archer, founder of Just Care USA, an organization that opposes Medicare privatization. “They overcharged. Who’s ever heard of a situation where you’re overcharged and you don’t get your money back? It’s beyond comprehension. The Medicare trust fund should not be paying out funds inappropriately, and it’s driving up Medicare [insurance] premiums.”
“Hundreds of Millions of Dollars, If Not More, at Stake”
President Joe Biden is doing nothing to slow the Medicare privatization push. Indeed, his administration has hiked payments to Medicare Advantage insurers while expanding a program called ACO REACH that allows companies to enroll seniors on traditional Medicare into private health care plans without their informed consent.
But in a significant shift, last month the Biden administration proposed new regulations to prevent Medicare Advantage insurers from wrongfully denying claims or refusing to approve services that would be paid under the traditional public Medicare program.
Consumer advocates like David Lipschutz, associate director of the Center for Medicare Advocacy, were pleasantly surprised by the proposal — even if it came a decade late.
Lipschutz noted that the industry response to the proposed claim denial regulations has been “been pretty muted so far.”
He said insurers are far more concerned about two planned announcements from the Centers for Medicare and Medicaid Services next month that could have much greater impact on their bottom line.
“There are potentially hundreds of millions of dollars, if not more, at stake,” said Lipschutz.
Regulators could decide whether to factor insurers’ upcoding tactics into how much they pay Medicare Advantage plans. They are also expected to announce a final audit rule to prevent future overpayments and recoup some of the cost of excessive disbursements that have gone to Medicare Advantage insurers in the past.
Speaking at the annual J. P. Morgan Healthcare Conference this week, health insurer Humana’s chief financial officer, Susan Diamond, said “the industry likely will go to litigation” if the final audit rule does not include a so-called fee-for-service adjuster. Such a provision would allow insurers to get away with some level of diagnosis coding and billing errors — and it would likely substantially reduce the sums that insurers would have to pay back to the government.
The dollars at stake are significant. In September, the office of the inspector general at the Health and Human Services Department (HHS) released audit reports finding that even just the Medicare Advantage plan affiliated with Humana owed the government nearly $44 million worth of overpayments from 2016 and 2017.
A separate HHS inspector general audit found a Florida Humana plan overcharged Medicare by nearly $200 million in 2015.
“Prospectively, Not Retroactively”
Medicare Advantage has become a major profit-driver for the insurance industry, with government funds now accounting for a majority of most big insurers’ health plan revenues.
That’s especially true for Humana, which received more than 90 percent of its health plan revenue from taxpayers in 2021. UnitedHealth Group and CVS Health, which owns Aetna, both brought in more than 70 percent of their health plan revenue from the government.
Those insurers are part of the Better Medicare Alliance, a health insurance industry front group that spent nearly $3 million on TV ads promoting Medicare Advantage between Election Day and the end of the year, according to data from AdImpact.
The Better Medicare Alliance has called on the government to audit every Medicare Advantage plan annually “to increase program oversight and ensure that arbitrary decisions about which contracts are audited do not disproportionately impact some organizations more than others.”
The group has additionally argued that “changes to audit methodologies should be applied prospectively, not retroactively,” because doing the former “would invalidate actuarial assumptions made by health plans over more than a decade and threaten the care that seniors rely on today.”
Having the audit rule changes apply prospectively would allow insurers to retain years of overpayments.
Lipschutz said that the Better Medicare Alliance “and the folks that fund them don’t want to pay out what could be owed to the program looking backwards, so they want to try to focus on moving forward.”
While the Better Medicare Alliance does not disclose its donors, CVS Health reported donating $3 million to the group in 2021. Humana gave $2 million that year and $1 million in the first half of 2022.
Executives from CVS Health, Humana, and UnitedHealth Group serve on the alliance’s board of directors. (UnitedHealth Group does not voluntarily disclose its donations to dark money front groups like the Better Medicare Alliance.)
Humana and CVS Health also belong to America’s Health Insurance Plans (AHIP), the powerful DC health insurance industry lobby.
Last summer, AHIP submitted a comment letter opposing the Medicare Advantage audit rule, arguing it “fails to account for errors in [fee-for-service] Medicare data” and complaining that it would apply retroactively.
“Retroactive rulemaking is unfair, inappropriate, and legally impermissible,” wrote AHIP.
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