Biden Plan to Cut Billions in Medicare Fraud Ignites Lobbying Frenzy
The Biden administration has proposed changes to how it would pay private Medicare Advantage plans, setting off a lobbying frenzy.
by Reed Abelson and Margot Sanger-Katz - NYT - March 22, 2023
“How’s the knee?” one bowler asked another across the lanes. Their conversation in a Super Bowl ad focused on a Biden administration proposal that one bowler warned another would “cut Medicare Advantage.”
“Somebody in Washington is smarter than that,” the friend responded, before a narrator urged viewers to call the White House to voice their displeasure.
The multimillion dollar ad buy is part of an aggressive campaign by the health insurance industry and its allies to stop the Biden proposal. It would significantly lower payments — by billions of dollars a year — to Medicare Advantage, the private plans that now cover about half of the government’s health program for older Americans.
The change in payment formulas is an effort, Biden administration officials say, to tackle widespread abuses and fraud in the increasingly popular private program. In the last decade, reams of evidence uncovered in lawsuits and audits revealed systematic overbilling of the government. A final decision on the payments is expected shortly, and is one of a series of tough new rules aimed at reining in the industry. The changes fit into a broader effort by the White House to shore up the Medicare trust fund.
Without reforms, taxpayers will spend about $25 billion next year in “excess” payments to the private plans, according to the Medicare Payment Advisory Commission, a nonpartisan research group that advises Congress.
The proposed changes have unleashed an extensive and noisy opposition front, with lobbyists and insurance executives flooding Capitol Hill to engage in their fiercest fight in years. The largest insurers, including UnitedHealth Group and Humana, are among the most vocal, according to congressional staff, with UnitedHealth’s chief executive pressing his company’s case in person. Doctors’ groups, including the American Medical Association, have also voiced their opposition.
“They are pouring buckets of money into this,” said Mark Miller, the former executive director of MedPAC, who is now the executive vice president of health care at Arnold Ventures, a research and advocacy group. Supporters of the restrictions have begun spending money to counter the objections.
The insurers say the new rule would harm the medical care of millions, particularly in vulnerable communities.
The change would force the companies to reduce benefits or increase premiums for Medicare beneficiaries, they say, with less money available for doctors to treat conditions like diabetes and depression.
The changes are “stripping funding from prevention and early disease,” said Dr. Patrick Conway, a former Medicare official who is now an executive with Optum, a subsidiary of UnitedHealth that owns one of the nation’s largest physician groups. “As you lower payments for those conditions, you are going to have direct impact on patients.”
Since the proposal was tucked deep in a routine document and published with little fanfare in early February, Medicare officials have been inundated with more than 15,000 comment letters for and against the policies, and roughly two-thirds included identical phrases from form letters. Insurers used television commercials and other strategies to urge Medicare Advantage customers to contact their lawmakers. The effort generated about 142,000 calls or letters to protest the changes, according to the Better Medicare Alliance, one of the lobbying groups involved and the one behind the bowling commercial.
The showdown underscores just how important — and lucrative — Medicare Advantage has become to insurers and doctors’ groups that are paid by the federal government to care for older Americans. Roughly $400 billion in taxpayer money went to these private plans last year. Profits on Medicare Advantage plans are at least double what insurers earn from other kinds of policies, according to a recent analysis by the Kaiser Family Foundation.
To the surprise of many in the industry, leaders in Congress have not stepped forward to vigorously defend the private plans.
In interviews this month, top administration health officials said they would not be swayed by the loud outcry from the industry.
“We need strong oversight of this program,” said Dr. Meena Seshamani, Medicare’s top official, adding that the agency was committed to “holding the industry accountable for gaming the system.”
Stacy Sanders, an adviser to Xavier Becerra, the Health and Human Services secretary, said:
“We will not be deterred by industry hacks and deep-pocketed disinformation campaigns.”
Growing evidence of abuse
Older Americans have flocked to Medicare Advantage, finding that many policies offer lower premiums and more benefits than the traditional government program.
The insurers receive a flat rate for every person they sign up — and get bonuses for those with serious health conditions, because their medical care typically costs more.
But numerous studies from academic researchers, government watchdog agencies and federal fraud prosecutions underscore how the insurers have manipulated the system by attaching as many diagnosis codes as possible to their patients’ records to harvest these bonus payments.
Four of the largest five insurers have either settled or are currently facing lawsuits claiming fraudulent coding. Similar lawsuits have also been brought against an array of smaller health plans.
Medicare officials propose eliminating more than 2,000 specific diagnosis codes — about one-fifth of all codes — from the payment formula for these private plans. Regulators homed in on diagnoses that were not associated with more medical care. A handful of diagnoses were removed because they were prone to abuse by the private plans.
Insurers have focused their objections on three common illnesses for which codes would be removed: mild depression; vascular disease; and “diabetes with complications.”
A group of 19 policy experts who support the changes, led by two former Medicare officials, compared the private plans’ “diagnoses” of these particular illnesses against those in traditional Medicare. For example, some Medicare Advantage plans from UnitedHealth reported that half of their patients had vascular disease, in contrast with just 14 percent in the basic government program. UnitedHealth said the study highlighted how its plans provided better care.
Fraud lawsuits brought against the companies also suggest that the plans were deliberately inflating the codes under review by Medicare officials.
In its lawsuit against Cigna last October, for example, the Justice Department described an insurance executive’s email that referred to diabetes with complications; depression; and vascular disease as “the golden nuggets we are looking for.”
The insurers are contesting the allegations in court.
Not all of the plans oppose Medicare’s overhaul of the payment regimen. The Alliance of Community Health Plans, which represents nonprofit insurers, supports the Biden administration’s move on this issue, said Ceci Connolly, the group’s chief executive. In its comment letter, the group asked for a one-year delay.
And at least one corporate chief executive, Bruce Broussard of Humana, recently told investors that Medicare’s proposal might not have much impact. At a conference, he said the company usually performs well in years when Medicare is less generous, according to Modern Healthcare. “I feel that 2024 will be that way,” he said.
Weakening support in Congress
Medicare Advantage plans are so popular that these changes could affect many people, but the widely publicized lawsuits, audits and reviews have influenced the views of past supporters in Congress. Last year, nearly 80 percent of the members of the House of Representatives signed a letter to Medicare urging its officials to “provide a stable rate and policy environment for Medicare Advantage.”
But this year, support among lawmakers appears to have weakened, despite the avalanche of constituent calls. So many legislators would have fallen off the House letter that the insurance industry has declined to circulate one, several congressional aides said. That shift came in part from increasing awareness of overbilling, but also because of concerns about deceptive marketing and denials of care, they said
Representative Pramila Jayapal, Democrat of Washington, organized a letter this year requesting tougher regulation. It was endorsed by some of the very same House Democrats who had supported last year’s industry letter. “So many people just signed on because they thought, ‘Oh, my constituents are all on Medicare Advantage,’” Ms. Jayapal said. “Members are hearing from constituents because they are not happy, and on the inside we did all this deep education to counter all the lobbyists.”
A few Republican lawmakers have raised the proposal to accuse the president of cutting Medicare. The overall Republican response to the rule has been muted, however, with several requests for more information but few attacks on the approach.
Mary Beth Donahue, the chief executive of the Better Medicare Alliance, said the group had been very active in its efforts to educate lawmakers on the complex change, given the compressed time frame.
“The changes are dense,” she said.
‘A hammer to a snail’
Critics of the new Medicare approach argue that the complex change would have unintended consequences counter to other Biden administration priorities. They warn it would disproportionately reduce funding for coverage that serves minority communities and the poorest Medicare patients.
A recent analysis from the actuarial firm Milliman, commissioned by UnitedHealth, showed that the change was likely to have a larger effect on plans that served patients in those circumstances.
In comment letters, several insurance and physician groups argued that the reduced payments would make it harder to provide preventive care for sicker patients.
“It feels like this is a little bit of a hammer to a snail,” said Dr. Clive Fields, the chief medical officer at VillageMD, a developer of primary care clinics. He said he was aware that some plans were engaged in fraudulent overcoding, but said the changes to the formula would mean fewer resources to care for patients with the diagnoses that were removed from the formula.
A growing number of doctors’ practices, including those with VillageMD, have developed relationships with insurers in which they are paid a percentage of premiums, and several doctors’ groups oppose the Medicare proposal.
But Dr. Donald Berwick, a former administrator of the Centers for Medicare and Medicaid Services, said allowing private plans to overbill for extra diagnoses was not an appropriate way to finance health services for needy populations.
“It’s paying a very high toll in a very opaque way to get some funds to some people who need more support,” he said. “It’s the wrong tool to solve that problem.”
Dr. Seshamani went further, noting that because Medicare found that the diagnoses were not associated with additional treatment, she did not think the change would have any disproportionate effect on sicker patients: “We are not proposing any policies that would harm vulnerable beneficiaries.”
Aatish Bhatia contributed reporting.
https://www.nytimes.com/2023/03/22/health/medicare-insurance-fraud.html
Editor's Note -
The following column was originally published on February 16, 2013 in the Bangor Daily News -
-SPC
Health Care Spending: A 21st Century Gold Rush
by Philip Caper, MD
Winston Churchill once remarked, “Americans will always do the right thing, once they’ve exhausted all alternatives.” His observation, at least the second half of it, is proving itself as we continue to struggle with our health care system, especially its out-of-control costs that are crippling the budgets of businesses and government alike.
There is a lot of money in our health care system, and no enforceable budget. That leads to carelessness when it comes to spending that money.
What are some of the reasons health care costs continue to rise? Here are a few examples.
For at least the past 40 years, I’ve heard colleagues say, “We’d better get our fees and charges up now, because next year they’re really going to crack down on us.” It has never happened, yet. The problem is intensifying as outpatient “providers” have morphed from being real people into being corporations.
The Los Angeles Times reported on a case where a teacher’s group health plan was billed $87,500 by an “out of network” provider for a knee procedure that normally costs $3,000. Her health plan was willing to pay it. Outraged, the teacher ratted on the orthopedic surgicenter to California’s attorney general. After the press got involved, the charge was “reduced” to only $15,000. Not a bad pricing strategy, from the surgicenter’s point of view.
The New York Times reported an incident where a student who needed emergency gallbladder surgery ended up with a couple of “out-of-network” surgeons through no fault of his own. He was billed $60,000. His insurance company was willing to pay only $2,000. He was left to deal with the rest of the bill on his own.
There are many more examples. Privately insured patients are not the only ones affected. Governors around the country are continuing to struggle with how to pay for their Medicaid programs. In Oregon, Democratic Gov. John Kitzhaber is trying to find ways to impose a fixed budget on Oregon’s Medicaid program without adversely affecting Medicaid beneficiaries. But, he acknowledges, disciplining Medicaid alone will not do the job. He hopes his approach will be adopted by most other health insurance programs.
In Maine, Republican Gov. Paul LePage is struggling not only with how to keep up with burgeoning current Medicaid costs, but also how to pay the state’s almost $500 million past-due Medicaid debt to hospitals. He has proposed lowering liquor prices to boost sales, and mortgaging Maine’s future liquor revenues to secure bonds to pay the debt. His Republican colleagues in the Legislature have described this idea as “creative.”
One of the central features of Obamacare is the creation of “health insurance exchanges,” or online marketplaces. But the law has recognized that many people will need help making the right choices. So it has created an army of “navigators” to help them. A recent Washington Post story points out that a huge number of such experts will be necessary (California alone plans to certify 21,000 of them). Their cost will be reflected in higher health insurance premiums and has sparked opposition from insurance brokers who view them as competition. That will be an expensive fight, without increasing the amount going to actual health care by a single dollar.
Then there is the purchase of politicians by powerful corporate interests. When the Medicare prescription drug benefit was enacted in 2003, it was prohibited from negotiating lower drug prices, even though the veterans health system and many Medicaid programs are permitted to do so. The lead congressman pushing that provision retired from Congress soon after it was passed to take a lucrative job with the pharmaceutical industry. This has become standard practice in Washington.
And don’t forget the for-profit levels of compensation paid to the executives of nonprofit hospitals.
Meanwhile in Massachusetts, where Obamacare was born, health care costs are expected to rise six to 12 percent next year. Last year, their legislature passed a law capping increases in total private and public spending statewide, limiting them to the rate of growth of the Massachusetts economy. But the job of figuring out how to actually get it done was turfed to an “expert panel” of “stakeholders.” My bet is that such cost control will be difficult or impossible to achieve unless we simplify and centralize the way we finance health care.
Why does this financial abuse of taxpayers and patients continue? Because we let it. Americans often react to structural problems by simply throwing more money at them. We seem to be unable to say “no more.”
Maybe it’s time to revisit the part of Churchill’s comment about Americans always doing the right thing — by emulating the policies of most other wealthy countries. They have health care systems that are more popular than ours, provide better access to care, get better results, and are far less expensive.
Maybe it’s time to put everybody into a single, nonprofit system we can all support, within a budget acceptable to the majority of people. That arrangement would eliminate the political fights among people in different health insurance programs, each questioning change by asking, “How does it benefit me?”
Such a system would be best if done at a national level. But it could work initially at the level of individual states, such as Maine. That’s how the Canadians did it — one province at a time. If Maine could be one of the first states to do that, the people of Maine could truly say “Dirigo, I lead.”
'They All Laughed When I Spoke of Greedy Doctors'
"They all laughed when I spoke of greedy doctors."
Spoken by Dr Ralph Crawshaw at the Oregon Medical Association, as documented in the Western Journal of Medicine.
Crawshaw continued:
...the central clinical problem we physicians face in clinical practice is appetite control. Patients seem insatiably hungry for cigarettes, food, sex, money, love and pills. Are we so different from our patients?
My good friend Ralph was a leader in the development of the Oregon Health Plan. He also proposed that the Impaired Physician Program of the Oregon Medical Association look into physicians who were "impaired by money."
George D. Lundberg, MD
Let's face it: The American sickness care industry, with all of its disorganized elements and multiple protected revenue streams, has become a financial behemoth, and at the town, city, county, state, and federal levels, an untouchable political juggernaut. And, unlike anything seen since the US ramped up to fight the Second World War, it is a recession-proof engine for job creation. Who would not be impressed by those achievements?
Any questions? Did I hear the word "outcomes"? Uhhhh. A healthy population? Ooooh. Average lifespan of Americans? Efficiency and effectiveness? Quality of living and dying? National happiness? No need for psychoactive chemicals to escape reality? A happy workforce?
It's all about greed, but not only greedy doctors. Since Ralph's 1985 declaration, no one has said it better than Don Berwick, MD.
Can the American medical-industrial complex be tamed? Let's follow the money.
Wind up a capitalist doll and aim it at a large pile of money, and pretty soon the capitalist person or company will own a substantial portion of that pot, no matter what the entity or field may be. It is the nature of the for-profit beast.
Wind up a non-profit organization (NPO) doll in the same field as the capitalist doll and it may well assume the same characteristics as the capitalist doll to compete. And compete it will, often quite successfully. For practical purposes, little differentiates an NPO from the "capitalist beast."
A key difference is ownership: One has stock, which can compensate employed individuals with shares and options. NPOs do not have stock but must (and do) find other methods of compensation for their leaders to be able to compete for talent in the marketplace. The governing bodies of both organizational approaches are typically boards of directors. The "killer app" for successful NPOs is to populate their boards with the same kinds of people that comprise the for-profit boards, so the two approaches blend.
Of course, for-profit entities are subject to taxes in ways that NPOs are not. The laws that established such tax exemptions placed requirements to provide community goods and services on the NPOs. It is one of the worst-kept secrets in the medical industry that many (maybe most) of those tax-exempt organizations do not so contribute, or at least not enough. Enforcement ranges from none to limited and is essentially complaint driven. Everyone knows this but no one seems to care, as long as the money rolls in.
Did the United States (writ large) deliberately decide around 1980 (or was it the 1960s?) that it would build a "sickness" rather than a "health" system"? Or did the powerful motivators of human and organizational behavior simply evolve into a sickness system to the detriment of the public's health?
W. Edwards Deming (and others) observed and deduced that every system is perfectly designed to perform exactly as it does. A country cannot have money-driven medicine without a lot of money. It comes from health insurance, public (Medicare-Medicaid), private, for-profit companies, and individuals. The ability of an industry to generate goods and services to "find and treat sickness" is endless supply-driven demand. Voilà: "The New Medical-Industrial Complex" of Arnold Relman in 1980.
Greed Is Good, Right?
Just ask Gordon Gekko or F. Scott Fitzgerald's Gatsby, or in the medical domain, former governor and current senator Rick Scott. After Scott resigned from his post as CEO of Columbia/HCA in the 1990s, his lawyers kept him out of the slammer for billions of dollars in Medicare fraud that took place under his watch and led to the corporation pleading guilty to multiple felonies.
Greed certainly can motivate a lot of ambitious work.
On the other hand, according to Pope Gregory I in the 6th century, and many theological scholars since then, the seven deadly sins are pride, greed, lust, envy, gluttony, wrath, and sloth. Look at your everyday practices, docs. How many of your patients' illnesses are the result of lust, wrath, gluttony, and sloth? Yeah, a lot.
The most recent global report on health once again ranks the United States at the top of the list of developed countries for money expended on healthcare and at the bottom for health outcomes. And it isn't even close.
Many studies indicate that only 20% of healthcare comprises medical (sickness) care, while 80% results from social determinants such as education, housing, income, and environment.
Because we currently spend some 18.3% of our GDP ($4.3 trillion a year or $12,900 per capita) and have so little to show for it, maybe we should just take, let's say, 40% of that $4.3 trillion away from sickness care and invest it in healthy food, housing, crime reduction, education, clean air and water, public health, disease prevention, vaccinations, exercise, tobacco elimination, alcohol control, suicide prevention, and other drug-control and harm-reduction programs.
What?
Millions of people could lose their jobs. I get it — the American medical-industrial complex is, at its essence, a jobs program.
I wrote about waste in the US healthcare system in 2009 and warned about an impending burst of the multitrillion-dollar healthcare "bubble," during which roughly 40% of the total expenditures (the parts that do not contribute to health) would/could/even should disappear or be transferred into something of value for the country and its people.
Of course, that did not happen. We would need an enormous retraining program for those hundreds of thousands of workers who are busily doing work that does not need to be done, especially those whose main function is following the money. I refer to the health insurance industry — be gone with you.
All you do is take as much money as possible, spend as little as possible on sickness care, consume as much as possible for unneeded processing, and pay your executives and shareholders as much as possible. We don't need you.
While we are at it, how about investing to save our planet for future generations of humans, other animals, and plants?
To illustrate the capacity of the system to resist downward economic pressure, one need look no further than the mostly well-intentioned people who believed that price transparency would shame hospitals into posting actual fair prices and empower consumers to make smart choices. Think again.
Among the fatal flaws of this plan is not recognizing that the leaders of healthcare institutions are far beyond feeling any shame for their gouging behavior, and the patient-consumers are far too naive to understand what a fair price would be, not understanding how competition and other factors enter into pricing decisions. Most hospitals simply ignored the directive and awaited compliance actions. CMS, in charge of implementing this rule, now seems overjoyed that compliance with hospital price transparency is coming along. But what about the effects of this initiative? It's too soon to tell.
Solutions, Please
I'm happy to report that physicians and other professionals across the United States are appalled by the current situation and are offering paths to reform.
In 2023, Don Berwick attempted to demonize "salve lucrum" (the glorification of profit), and called upon caring professionals of all stripes and their organizations to rise up and use all tools available to reverse this long-standing trend.
Chicago-based Eric Reinhart, MD, PhD, writing in 2023, opined that we need to shrink healthcare to build health, an ideologic change that benefits the population and could reassert professionalism.
In 2023 Tatiane Santos, PhD, MPH, of Tulane, has written about how to end the US health disadvantage by focusing on prevention and social policy rather than sick care. However, she notes that "the reallocation of resources from hospitals towards primary care, prevention, and the social determinants of health is complex." Oh yeah.
Political science professor Peter Swenson, of Yale, writing in his great 2022 book Disorder, proposed that the AMA revert to its earlier public health roots by increasing the number of members. Membership dues would become the main source of revenue (replacing corporate ventures and reliance on industry) and then lobbying transparently toward progressive ends.
In 2022, San Francisco–based controversial critic Vinay Prasad, MD, MPH, detailed how this mess has played out in oncology, and states that government regulation is the only avenue to reform.
It would help if more NPOs in medicine and health that generate enormous revenue would behave more like the charitable institutions that their charters (plus society and the law) expect, and less like their for-profit competitors.
Of course, we must always remember that one person's waste is another person's income.
What other field could so consistently convert sickness, pain, suffering, and dying into revenue centers, profit margins, shareholder value, and ultimately mega-mansions, yachts, islands, endowed professorships, eponymous educational palaces, hospitals, and art galleries?
It seems pretty obvious that profit-taking as a prime motive should have absolutely no place in what is historically the premier service profession.
Let's get real. Money is power. Huge money is huge power. If anything like this ideologic transition happens, it will have to be political and incremental. Recent CMS guidance authorized Medicaid to address such social determinants of health as housing and food insecurity, on a state-by-state basis.
Johnson and Berwick proposed redesigning Medicare. They envision a "Medicare 2.0" that would shift dollars away from fee-for-service medical care to meeting population-based social needs that improve health.
Sensible help may indeed be on the way.
That's my opinion. I'm Dr George Lundberg, at large for Medscape.
George Lundberg, MD, is editor-in-chief at Cancer Commons, president of the Lundberg Institute, executive advisor at Cureus, and a clinical professor of pathology at Northwestern University. Previously, he served as editor-in-chief of JAMA (including 10 specialty journals), American Medical News, and Medscape.
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