Medicare Advantage Overpayments

This video provides an in-depth exploration of the systemic issue of government overpayments to Medicare Advantage (MA) plans, highlighting a significant financial and regulatory challenge within the U.S. healthcare system. Dr. Eric Bricker, the speaker, begins by detailing the Centers for Medicare & Medicaid Services (CMS) risk adjustment methodology, which dictates payments to private MA plans based on a beneficiary's health conditions. He illustrates how this system financially incentivizes MA plans to identify and potentially exaggerate the severity of chronic conditions, leading to increased payments from CMS. The video then progresses to discuss the legal and auditing failures surrounding these overpayments, culminating in a critical look at the political and financial forces that appear to perpetuate the problem.

The core of the issue, as presented, lies in the financial incentives embedded within the risk adjustment model. MA plans receive a base rate per member, which is then adjusted upwards if the member has more chronic conditions, reflecting higher anticipated healthcare costs. Conversely, healthier individuals result in lower payments. This structure, while designed to account for varying healthcare needs, creates a strong incentive for plans to "game the system" by making beneficiaries appear sicker than they might be. The Department of Justice has taken action, suing major insurers like Cigna and Elevance (Anthem) for allegedly inflating Medicare payments through such exaggerations. However, Dr. Bricker points out a deeper, more troubling problem: CMS's own auditing process is severely lacking, with the most recent audits dating back a decade (2011-2013), identifying $650 million in overpayments that CMS has largely failed to act upon or even disclose.

The lack of transparency and action by CMS is a central theme. The Kaiser Family Foundation (KFF) had to resort to a Freedom of Information Act (FOIA) request, and subsequently a three-year lawsuit, to compel CMS to release its own audit findings. This resistance from CMS suggests a reluctance to reveal or address the overpayment issue, which Dr. Bricker attributes to either incompetence or political pressure. He further introduces a controversial perspective by highlighting the significant financial ties between AARP and Medicare Advantage plans, particularly UnitedHealthcare. AARP receives substantial royalty payments from endorsing healthcare products, including MA plans, which far exceed its member dues. This financial incentive, Dr. Bricker speculates, could potentially influence AARP's stance on the quiet maintenance of the "Medicare Advantage gravy train," thereby contributing to the political inertia surrounding reform.

Ultimately, the video concludes with a pessimistic outlook on immediate change. With Medicare Advantage enrollment rapidly growing and projected to surpass traditional Medicare, the overpayments—estimated at $7 billion more than traditional Medicare in 2019—are hastening the depletion of the Medicare Part A trust fund, which is projected to run out by 2028. Despite these alarming financial implications and evidence of systemic issues, Dr. Bricker argues that political will for reform is absent, largely due to high re-election rates for incumbents and a lack of public outcry. He suggests that meaningful change is unlikely until a full-blown crisis forces the issue, echoing the sentiment of "never let a crisis go to waste."

Key Takeaways:

• Medicare Advantage Risk Adjustment Incentives: CMS's payment model for Medicare Advantage plans, based on risk scores reflecting chronic conditions, creates a strong financial incentive for plans to maximize the reported sickness of their members to increase payments.
• Allegations of System Gaming: The Department of Justice and the Office of Inspector General have sued major Medicare Advantage providers like Cigna and Anthem for allegedly exaggerating beneficiary health conditions to inflate payments from CMS.
• CMS Audit Deficiencies: CMS's internal audits of Medicare Advantage plans are severely outdated, with the most recent data from 2011-2013. These audits identified $650 million in overpayments, but CMS has taken minimal action to recover these funds.
• Lack of Transparency from CMS: CMS initially refused to release its own audit findings, requiring the Kaiser Family Foundation to file a Freedom of Information Act request and a subsequent three-year lawsuit to obtain the information.
• Potential Influence of AARP: AARP receives substantial royalty payments (over $750 million annually in 2020) from endorsing healthcare products, including Medicare Advantage plans, particularly from UnitedHealthcare, raising questions about its potential influence on policy and the lack of reform.
• Financial Burden on Medicare: Medicare Advantage plans are significantly more expensive for Medicare than traditional Medicare, with overpayments estimated at $7 billion more in 2019, contributing to the accelerated depletion of the Medicare Part A trust fund.
• Impending Trust Fund Depletion: The Medicare Part A trust fund, which pays for hospital services, is projected to run out by 2028, a crisis that is being hastened by the overpayments to Medicare Advantage plans.
• Political Inertia: Despite clear evidence of overpayments and financial strain, there is a perceived lack of political will to address the issue, partly due to high re-election rates for congressional representatives and a lack of public demand for change.
• Growth of Medicare Advantage: Medicare Advantage enrollment has nearly doubled in less than a decade, now covering almost half of all Medicare beneficiaries, indicating its growing impact on the overall healthcare system.
• No Immediate Change Expected: The speaker concludes that fundamental changes to the risk adjustment methodology or the auditing process are unlikely in the near future, suggesting that the "Medicare Advantage gravy train" will continue until a significant crisis forces action.

Tools/Resources Mentioned:

• NPR
• Commonwealth Fund
• Reuters
• FierceHealthcare
• OpenSecrets
• Kaiser Family Foundation (KFF)
• Freedom of Information Act (FOIA)

Key Concepts:

• Medicare Advantage (MA): Private health insurance plans that contract with Medicare to provide Part A and Part B benefits.
• Centers for Medicare & Medicaid Services (CMS): The federal agency that administers Medicare, Medicaid, and the Children's Health Insurance Program.
• Risk Adjustment: A methodology used by CMS to adjust payments to MA plans based on the health status and demographic characteristics of their enrollees, aiming to pay more for sicker patients and less for healthier ones.
• Department of Justice (DOJ): The federal department responsible for enforcing the law, including prosecuting cases of fraud against government programs.
• Office of Inspector General (OIG): An independent oversight body within the Department of Health and Human Services (HHS) that combats waste, fraud, and abuse in HHS programs.
• AARP: A non-profit organization advocating for the rights and interests of older Americans, which also generates significant revenue through royalty payments from endorsing various products and services, including Medicare Advantage plans.
• Medicare Part A Trust Fund: The federal fund that pays for hospital inpatient care, skilled nursing facility care, hospice care, and some home health care.

Examples/Case Studies:

• DOJ Lawsuits: The Department of Justice has sued Cigna and Elevance (Anthem) for allegedly inflating Medicare payments by exaggerating beneficiary sickness.
• Kaiser Family Foundation vs. CMS: KFF had to sue CMS under the Freedom of Information Act to obtain CMS's own audit findings regarding Medicare Advantage overpayments, a legal battle that lasted three years.
• AARP and UnitedHealthcare: AARP receives substantial royalty payments from UnitedHealthcare for endorsing its Medicare Advantage plans, which often carry the AARP brand name.