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News July 2015

Washington Watch

Government’s Medical Billing Comes under Scrutiny

By Alan M. Schlein

The alleged fraud, first revealed by whistle-blowers and recent news reports by the non-profit investigative reporting group, the Center for Public Integrity, documented how these private plans have added on billions of dollars in overcharges and other suspect billings based on inflated assessments of how sick patients are.

After news reports revealed that billions of Medicare dollars have been wasted by overcharging the government for services that didn’t cost as much as they were billed for, two U.S. senators are pushing federal officials to increase oversight of privately-run Medicare Advantage health plans treating seniors.

Medicare Advantage programs, the popular private health plans, cover about one in three people eligible for Medicare – at an annual cost topping $150 billion. The alleged fraud, first revealed by whistle-blowers and recent news reports by the non-profit investigative reporting group, the Center for Public Integrity, documented how these private plans have added on billions of dollars in overcharges and other suspect billings based on inflated assessments of how sick patients are.

A Government Accountability Office report recently estimated “improper payments to Medicare Advantage plans at more than $12 billion in 2014.” But that’s just the tip of the financial iceberg.

Federal officials even acknowledge that they’ve struggled for years to track this overspending since Medicare Advantage was created in 2004. A 2009 Medicare study found that some plans had exaggerated how sick patients were to boost their payments and current of the Centers for Medicare and Medicaid Services (CMS) officials acknowledge that this remains a costly problem.

Recently, Sen. Charles Grassley, R-Iowa, who chairs the Senate Aging Committee and Sen. Claire McCaskill, D-Missouri, the committee’s top-ranking Democrat, issued separate calls for action. They are worried about the accuracy of a billing tool called a “risk score” which is intended to pay Medicare Advantage insurers higher rates for taking sicker people and less for those with few medical needs. Grassley recently wrote to Attorney General Loretta Lynch to tighten scrutiny of Medicare Advantage programs, while McCaskill and Grassley have each written separately to Andrew Slavitt, CMS administrator.

The lawmakers want to know what is being done to eliminate these overcharges. “Safeguards become all the more important as Medicare Advantage adds more patients and billions of dollars of hard-earned taxpayer money is at stake," the Iowa Republican wrote. Grassley asked both Justice and CMS to find out how many risk-score fraud investigations had been conducted over the past five years, their outcome and how much money has been collected.

Medicare Advantage plans have gained popularity as an alternative to the government-run Medicare program in recent years, and the plans now cover some 16 million people. CMS has made more than $70 billion in what the agency itself deemed “improper” payments to Medicare Advantage plans between 2008 and 2013.

Grassley also cited the Center for Public Integrity’s reports on “an increasing number of whistleblower lawsuits targeting Medicare Advantage.” According to Fred Schulte’s investigative reporting, federal court records show at least a half dozen whistle-blower lawsuits alleging billing abuses in these Medicare Advantage plans have been filed under the False Claims Act since 2010, including two that just recently surfaced. The suits have named insurers from Columbia, S.C., to Salt Lake City, Utah, to Seattle, and other plans which have together enrolled millions of seniors. The lawsuits allege that patient records are being changed to make patients sicker than they actually are leading to inflated risk scores and higher reimbursements.

What has made Schulte’s reporting so outstanding is that government investigations of Medicare Advantage rarely spill out into public view. Schulte recently reported about a pair of whistle-blower lawsuits alleging that Blue Cross of South Carolina submitted inflated claims between 2006 and 2010 then “acted to cover up and hide the false submissions so that they would be able to retain the wrongly paid reimbursements. That lawsuit also names the Deseret Mutual Insurance Company, a Utah company, which processed the Medicare Advantage billings.

One of the few whistle-blower cases that became public was a 2009 Justice Department lawsuit against the owners of America’s Health Choice Medical Plans in Vero Beach, Florida. The government accused the health plan of bilking Medicare out of millions of dollar by reporting “as many diagnosis codes as possible without regard to their truthfulness.” The health plan denied the accusations and a settlement was reached in 2010 where the plan’s owners agreed to pay the government $22.6 million. The HMO is now defunct.

A current probe that is believed to be widening involves Humana Inc, based in Louisville, Ky., which counts more than 3 million seniors in its plan. In documents filed with the Securities and Exchange Committee, Humana noted that “a number of Medicare Advantage plans, providers and vendors” have come under scrutiny. Also, DaVita Healthcare Partners Inc, headquartered in Denver, Colorado, disclosed that Justice Department investigators had subpoenaed Medicare Advantage billing data and other records from 2008-2013.

Medicare Advantage has been especially popular with seniors as an alternative to traditional Medicare because of its low out-of-pocket costs. The plans also tend to offer high quality care and more benefits than standard Medicare, which has always paid doctors and hospitals on a fee-for-service basis. Recently, the Obama administration has tried to change that focus from quantity to quality.

 

And There’s More

Meanwhile, other medical billing issues have also become news. The prices that hospitals ask customers to pay for a series of common procedures have increased by more than 10 percent between 2011 and 2013 – more than double the rate of inflation, according to new data released recently by Medicare. But the amounts paid by Medicare have stayed flat, according to that data. The hospitals’ rising list prices mainly affect the uninsured and people who use hospitals outside their insurance network.

The 2013 Medicare billing information was part of a large release of data breaking down spending based on hospital procedures, physician specialties and other types of care. It included information about roughly 950,000 doctors and health care practitioners who received $90 billion in Medicare payments.

The data revealed that joint replacement was the most common procedure that Medicare paid for in 2013, accounting for nearly 450,000 inpatient admissions and $6.6 billion in payments. Among physicians, cancer specialists received the largest payments from Medicare, but much of their reimbursements went to cover the cost of the very expensive drugs to treat their patients.

The data also point out that a small cadre of doctors and individual medical providers are consistently the biggest recipients of Medicare dollars. The top 1 percent of billers in 2013 took in 17.5 percent of all payments to individual providers that year. Medicare paid at least 3,900 individual health care providers at least $1 million in 2013.

House conservatives have recently offered their plan for repealing President Obama’s health care legislation and replacing it with tax breaks and other changes. But they are divided over whether to replace the law’s subsidies for lower-earning people should the Supreme Court annul them late in June.

The U.S. Supreme Court reviewed a case brought by conservatives asserting that subsidies the administration is paying to millions of people in more than 30 states are illegal. Conservative activists say the law limited the aid to people in states that create their own insurance marketplaces, not those that use the federal government’s healthcare.gov website.

Meanwhile, on Capitol Hill, the House Ways and Means Committee voted 31-8 – including several Democrats – for legislation to repeal the health care law’s Independent Payment Advisory Board – a 15-member independent body that would make recommendations on cuts to the Medicare budget, made famous by then-Republican vice presidential candidate Sarah Palin’s labeling it the government’s “death panel.” Under the law, if Congress didn’t agree with the IPABs recommendations, it would have to devise its own plan to cut the Medicare budget by the same amount. However, the idea has been so controversial since it was proposed that no members have ever been appointed to the board and it has never met.

Nonetheless, IPAB repeal and a measure to repeal the medical device tax, which also passed the committee 25-14, are headed for the House floor sometime in June. The medical device tax has strong bipartisan support and is likely to pass the House, but IPAB repeal has little chance to pass in the Senate, so lawmakers may try and separate the proposals in order to get the device tax passed.

 

Also contributing to this report were: Politico, the New York Times, the Associated Press, the Center for Public Integrity and MedPage Today

Alan Schlein runs DeadlineOnline.com, an internet training and consulting firm. He is the author of the bestselling “Find It Online” books.

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