The $20 Billion Scam At The Heart Of Medicare Advantage
The health insurance behemoth Humana enjoyed a banner 2022. The Louisville, Ky.-based insurer made $2.8 billion in profits last year, while paying out $448 million in dividends to shareholders and more than $17 million in compensation to its CEO.
The main driver of those earnings? The federal government spent $20.5 billion overpaying Humana and other private insurers for the Medicare Advantage plans they manage on behalf of seniors and people with disabilities. If not for those overpayments, Humana could have suffered a nearly $900 million loss in 2022, according to a Lever analysis.
Humana is the most prominent example of how insurers have built a major cash cow out of systematically overbilling Medicare Advantage, the private Medicare program operated by private interests. These overpayments are symptomatic of a broader profit-driven policy agenda that seeks to completely privatize Medicare, one of the nation’s most popular social programs, and lock program recipients into subpar private insurance plans, even when they get sicker and need the best care possible.
Medicare Advantage plans have higher claim denial rates and more prior authorization restrictions than traditional Medicare plans. Last year, regulators found that nearly one in five payment requests rejected by Medicare Advantage plans in 2018 were wrongfully denied, representing an estimated 1.5 million claims.
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And while Biden administration proposals could have helped slow the for-profit takeover by tightening the screws on Medicare Advantage overpayments, insurers recently led a fierce lobbying campaign to dissuade the government from fully cracking down on the practice.
At the root of Medicare Advantage overpayments is “upcoding” by insurers, a scheme by which the companies systematically overbill the public as if their patients are sicker than they really are. Companies have offered bottles of champagne and bonuses to entice doctors to add diagnoses to patients’ records, according to government lawsuits reviewed by the New York Times.
In total, these practices led to $20.5 billion total excess payments to Medicare Advantage insurers in 2022, according to a March report from the Medicare Payments Advisory Commission (MedPAC), a federal body tasked with overseeing Medicare. In the coming years, the overpayment problem could get substantially worse. A November 2021 study suggested that Medicare costs from 2023 to 2031 will be $600 billion higher than if Medicare Advantage beneficiaries were instead enrolled in traditional Medicare.
Because of such overpayments, big insurers like Humana have become highly dependent on Medicare Advantage. Humana, for example, earned more than 80 percent of its revenue from Medicare last year, and now has nearly 5 million Medicare Advantage customers. Wall Street loves this business model: Humana’s stock has outperformed the S&P 500 by 23 percent over the past five years.
Humana isn’t alone in benefiting from Medicare Advantage overpayments. The other major for-profit insurers — UnitedHealth, Centene, and CVS Health, which owns Aetna, would have seen major hits to their 2022 profits had the government eliminated the overpayments.
UnitedHealthGroup would have seen its profits deteriorate by more than one-third, from $14.4 billion to less than $8.8 billion, according to an analysis by The Lever. CVS Health would have seen its profits cut by more than half, from $4.1 billion to $1.9 billion. And Centene would have seen its profits deteriorate by more than one-quarter, from $3.4 billion to $2.4 billion.
Experts say the enormous sums of money going towards overpayments endanger the overall financial stability of Medicare as a whole.
“It’s threatening the solvency of our Medicare trust fund,” said Ana Malinow, a physician active in pro-Medicare for All groups. “The trust fund is made up of payments that people make throughout their entire working lives. If you are working, you’re paying into Medicare every two weeks with your paycheck. Instead of money going to pay for health care for seniors and people with disabilities, it’s going to UnitedHealth and Humana.”
Cutting back Medicare Advantage overpayments could be transformative for the social program, said David Lipschutz, associate director of the Center for Medicare Advocacy, which lobbies for a robust Medicare system. “These are huge amounts of money that could be directed to shoring up Medicare’s finances,” said Lipschutz. “Or expanding benefits for everyone, not just in Medicare Advantage plans.”
The government’s inability to crack down on Medicare Advantage overpayments is a product of major lobbying campaigns by the industry. Two Biden administration proposals that would have tightened the screws on Medicare Advantage overpayments by enhancing audits and cutting the growth of payments to Medicare Advantage plans were both scaled back in the face of aggressive industry lobbying and TV campaigns.
Instead, while there will likely be some cutbacks, the Medicare Advantage gravy train will continue. The number of people enrolled in Medicare Advantage is set to outpace traditional Medicare for the first time ever this year, with more than 30 million beneficiaries.
Better Medicare Profits
In February, the Centers for Medicare and Medicaid Services (CMS), which oversees Medicare, proposed a rule that would have reined in upcoding abuses by reducing extra payments that insurers receive for certain diagnoses, including diabetes “with complications” and a rare form of malnutrition. But in the face of widespread industry lobbying, the agency settled on a weaker three-year phase-in effort.
Even the original proposed rule might not have been enough to address Medicare Advantage overpayments. MedPAC called the initial proposal “insufficient” in a comment letter, and said that Secretary of Health and Human Services Xavier Becerra had “not taken significant action” in response to MedPAC’s analyses of fraudulent billing in Medicare Advantage.
Another way to crack down on upcoding schemes would be to limit government payments to Medicare Advantage plans, since it would send a message to Medicare Advantage providers that overall program costs are far too high. Last December, CMS did so by proposing increasing payments to Medicare Advantage plans by just 1 percent, compared to the 8.5 percent payment increase it approved last year.
In response, the Better Medicare Alliance, an advocacy group for Medicare Advantage plans, spent at least $13.5 million on ads pressuring the administration to increase the planned rate hike.
The group also spent $570,000 lobbying Congress in the first quarter of this year, nearly double the $330,000 spent in the prior quarter. All told, the four major publicly traded health insurance companies that operate Medicare Advantage plans, as well as the insurance lobby America’s Health Insurance Plans, spent nearly $19 million on federal lobbying in the first quarter of 2023, a 66 percent increase from the prior quarter, according to a Lever analysis of data from OpenSecrets.
That lobbying paid off: Instead of a 1 percent increase in payments to Medicare Advantage — which the insurance industry cast as a reduction because the growth rate had slowed dramatically — CMS announced a 3.3 percent payment increase at the end of March.
“The industry’s aggressive lobbying campaign showcases that they clearly want to protect their profit stream,” said Lipschutz. “Their disingenuous campaign tried to paint some very minor payment adjustments as being catastrophic to the Medicare Advantage program. They tried to ‘Medi-scare’ beneficiaries into contacting their elected officials to get CMS to back off — which CMS did to a certain extent.”
While industry analysts have said that this modest rate increase will strain insurers’ prodigious profits, the bond ratings agency Moody’s declared in April that “we believe [Medicare Advantage] will continue to be a growth driver for the industry and will take further market share from traditional Medicare.”
Medicare Advantage payment increases like Biden’s 3.3 percent hike will result in higher dividends to shareholders at the expense of the solvency of traditional Medicare.
The insurance industry also took aim at a recently proposed rule to claw back years of inflated risk adjustment payments, which are made to incentivize Medicare Advantage plans to accept riskier patients.
Initial proposals floated by CMS included retroactive audits of risk adjustment payments going back to 2011. Instead, the final pared-back proposal released in March only included retrospective audits going back to 2018.
Lipschutz said he does give the administration some credit for the audit rule change and the smaller rate hike for Medicare Advantage insurers relative to the prior year.
“On the other hand, it can be seen as far too little too late,” he said, adding that federal policy being so weighted towards Medicare Advantage plans at the expense of traditional Medicare is a “serious imbalance that is long overdue for course correction.”
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Privatizing Medicare
Traditional Medicare operates on a fee-for-service basis. This means that doctors and hospitals are paid directly by Medicare for the services they provide. Private plans have operated as part of Medicare since just after the program was launched in 1965, but typically did so on a very limited basis. That changed in 2003, when Congress substantially increased subsidies for plans to enter the market, after intense industry lobbying.
While the traditional Medicare model is not without problems — Medicare only covers 80 percent of expenses, which means that seniors need either Medicaid or a Medigap insurance plan to get full coverage — it has major benefits relative to Medicare Advantage.
The principal benefit of traditional Medicare is that there is not a profit-driven insurer attempting to limit the scope of care that a patient needs.
Medicare Advantage “seems like a good idea,” said Ted Doolittle, the State Health Care Advocate for Connecticut. That’s because Medicare Advantage plans often offer expanded benefits like dental, vision, or wellness. They also eliminate the need for a potentially expensive Medigap plan if a senior isn’t eligible for Medicaid coverage.
But then, said Doolittle, “The scholarship shows that when patients get sick, they try to go back to traditional Medicare.”
According to Doolittle, most people who are either Medicaid eligible or who could afford a Medigap plan would balk at signing up for Medicare Advantage plan “if folks had adequate information about the nature of Medicare Advantage versus traditional Medicare, and the higher denial rates and the prior authorizations required for care in Medicare Advantage.”
Doolittle pointed out that there’s a key barrier to patients to getting full medical coverage if they try to switch back to Medicare once they become sick: In most states, Medigap insurers are allowed to discriminate against seniors on the basis of preexisting conditions if they are already enrolled in Medicare Advantage, something that is prohibited when seniors first become eligible for Medicare three months prior turning 65.
This problem is amplified by the rapid growth of Medicare Advantage. In 2010, a little over one-quarter of Medicare beneficiaries were in Medicare Advantage. By 2016, it was still less than one-third. But this year, a majority of Medicare beneficiaries will be on the private plans.
And the exorbitant government costs of Medicare Advantage are not limited to just overpayments related to upcoding. This year, Medicare Advantage plans will receive taxpayer rebates averaging $196 per participant. These rebates have more than doubled since 2018.
The total cost of the rebates could be as high as $75 billion this year, according to analysis by Bill Kadereit, president of the National Retiree Legislative Network.
“The extra $196 is spent on fringe benefits, and only on fringe benefits that go towards Medicare Advantage beneficiaries,” Kadereit said. “The other 30 million people in traditional Medicare get nothing. When Joe Manchin in West Virginia says ‘I like sending money to the Medicare Advantage plans, give them more,’ well, 40 percent of his people in West Virginia are not on Medicare Advantage, so they don't get a nickel.”
Expanded attention to Medicare Advantage abuses has led some members of Congress to speak up and pressure the Biden administration to rein in the industry, even in the face of aggressive lobbying.
In February, 70 lawmakers, led by Congressional Progressive Caucus chair Pramila Jayapal (D-Wash.), sent a letter to the Biden administration pointing out that “as enrollment in [Medicare Advantage] grows, spending per beneficiary has grown faster in [Medicare Advantage] than original Medicare, and that spending is being funneled into corporate profits under the guise of operating costs instead of into care for patients.”
That said, there is no voice in Congress advocating for the phasing out of Medicare Advantage and allocating expanded benefits equally to all Medicare beneficiaries, which is by far the most cost-effective option.
And the larger Medicare Advantage becomes, the more politically difficult it will be to rein in, noted Doolittle.
“As Medicare Advantage keeps getting more embedded in Medicare, the situation keeps getting worse,” he said. “It’s gotten up to a real critical mass at this point, which makes it very hard to stop.”
https://www.levernews.com/the-20-billion-scam-at-the-heart-of-medicare-advantage/
This Nonprofit Health System Cuts Off Patients With Medical Debt
Doctors at the Allina Health System, a wealthy nonprofit in the Midwest, aren’t allowed to see poor patients or children with too many unpaid medical bills.
Sarah Kliff and
Doctors at the Allina Health System, a wealthy nonprofit in the Midwest, aren’t allowed to see poor patients or children with too many unpaid medical bills.
Many hospitals in the United States use aggressive tactics to collect medical debt. They flood local courts with collections lawsuits. They garnish patients’ wages. They seize their tax refunds.
But a wealthy nonprofit health system in the Midwest is among those taking things a step further: withholding care from patients who have unpaid medical bills.
Allina Health System, which runs more than 100 hospitals and clinics in Minnesota and Wisconsin and brings in $4 billion a year in revenue, sometimes rejects patients who are deep in debt, according to internal documents and interviews with doctors, nurses and patients.
Although Allina’s hospitals will treat anyone in emergency rooms, other services can be cut off for indebted patients, including children and those with chronic illnesses like diabetes and depression. Patients aren’t allowed back until they pay off their debt entirely.
Nonprofit hospitals like Allina get enormous tax breaks in exchange for providing care for the poorest people in their communities. But a New York Times investigation last year found that over the past several decades, nonprofits have fallen short of their charitable missions, with few consequences.
Allina has an explicit policy for cutting off patients who owe money for services they received at the health system’s 90 clinics. A 12-page document reviewed by The Times instructs Allina’s staff on how to cancel appointments for patients with at least $4,500 of unpaid debt. The policy walks through how to lock their electronic health records so that staff cannot schedule future appointments.
“These are the poorest patients who have the most severe medical problems,” said Matt Hoffman, an Allina primary care doctor in Vadnais Heights, Minn. “These are the patients that need our care the most.”
Allina Health said it has a robust financial assistance program that in an average year helps over 12,000 of its 1.9 million patients with medical bills. The hospital system cuts off patients only if they have racked up at least $1,500 of unpaid debt three separate times. It contacts them by phone and with repeated letters that include information about applying for financial help, said Conny Bergerson, a hospital spokeswoman.
“Allina Health’s goal is, and will always be, to have zero patients go without services for financial reasons,” Ms. Bergerson said. She said cutting off services was “rare” but declined to provide information on how often it happens.
Allina suspended its policy of cutting off patients in March 2020, at the onset of the coronavirus pandemic, before reinstating it in April 2021.
An estimated 100 million Americans have medical debts. Their bills make up about half of all outstanding debt in the country.
About 20 percent of hospitals nationwide have debt-collection policies that allow them to cancel care, according to an investigation last year by KFF Health News. Many of those are nonprofits. The government does not track how often hospitals withhold care.
Under federal law, hospitals are required to treat everyone who comes to the emergency room, regardless of the person’s ability to pay. But the law — called the Emergency Medical Treatment and Labor Act — is silent on how health systems should treat patients who need other kinds of lifesaving care, like those with aggressive cancers or diabetes.
In 2020, thanks to its nonprofit status, Allina avoided roughly $266 million in state, local and federal taxes, according to the Lown Institute, a think tank that studies health care.
In exchange, the Internal Revenue Service requires Allina and thousands of other nonprofit hospital systems to benefit their local communities, including by providing free or reduced-cost care to patients with low incomes.
But the federal rules do not dictate how poor a patient needs to be to qualify for free care. In 2020, Allina spent less than half of 1 percent of its expenses on charity care, well below the nationwide average of about 2 percent for nonprofit hospitals, according to an analysis of hospital financial filings by Ge Bai, a professor at the Johns Hopkins Bloomberg School of Public Health.
Allina is one of Minnesota’s largest health systems, having largely grown through acquisitions. Since 2013, its annual profits have ranged from $30 million to $380 million. Last year was the first in the past decade when it lost money, largely owing to investment losses.
The financial success has paid dividends. Allina’s president earned $3.5 million in 2021, the most recent year for which data is available. The health system recently built a $12 million conference center.
Yet Allina sometimes plays hardball with patients. Doctors have become accustomed to seeing messages in the electronic medical record notifying them that a patient “will no longer be eligible to receive care” because of “unpaid medical balances.”
Dr. Rita Raverty, a primary care doctor who works at an Allina clinic, said the notifications were alarming because they meant she could not provide continuous care for some of her patients facing a number of health risks.
“Nobody wins when patients can’t get preventive care,” Dr. Raverty said. “It creates worse disease outcomes when you’re not catching things early.”
Doctors and patients described being unable to complete medical forms that children needed to enroll in day care or show proof of vaccination for school.
Serena Gragert, who worked as a scheduler at an Allina clinic in Minneapolis until 2021, said the computer system simply wouldn’t let her book appointments for some patients with outstanding balances.
Ms. Gragert and other Allina employees said some of the patients who were kicked out had incomes low enough to qualify for Medicaid, the federal-state insurance program for poor people. That also means those patients would be eligible for free care under Allina’s own financial assistance policy — something many patients are unaware exists when they seek treatment.
Ms. Bergerson, the Allina spokeswoman, did not dispute that but said the health system went “to tremendous lengths to assist patients with their financial obligations for medical care.”
Allina employees said the policy had forced them to ration care.
Beth Gunhus, a pediatric nurse practitioner, recalled a case in which a mother brought in her three children. One had scabies, an intensely itchy skin condition caused by mites burrowing into the body. She wanted to follow best practices and treat the entire family, who were sharing one bed in a single room they rented, to ensure that the scabies didn’t spread further. But she could write a prescription for only two of the children. The third’s account was locked because of unpaid bills.
“There are so many better ways of saving money than what we’re doing,” Ms. Gunhus said.
Allina says the policy applies only to debts related to care provided by its clinics, not its hospitals. But patients said in interviews that they had been cut off after falling into debt for services they received at Allina’s hospitals.
Because Allina is the dominant health system in some rural parts of Minnesota, getting kicked out can leave patients with few options.
Jennifer Blaido lives in Isanti, a small town outside Minneapolis, and Allina owns the only hospital there. Ms. Blaido, a mechanic, said she racked up nearly $200,000 in bills from a two-week stay at Allina’s Mercy Hospital in 2009 for complications from pneumonia, along with several visits to the emergency department for asthma flare-ups. Ms. Blaido, a mother of four, said that most of the hospital stay was not covered by her health insurance and that she was unable to scrounge together enough money to make a dent in the debt.
Last year, Ms. Blaido had a cancer scare, and she said she couldn’t get an appointment with a doctor at Mercy Hospital. She had to drive more than an hour to be examined at a health system unconnected to Allina.
Allina does not make this policy explicit to patients. It is not mentioned in the health system’s list of “frequently asked questions” about billing practices. In at least one case, Allina has denied that it even existed.
In a lawsuit filed last year in state court in Minnesota, Allina sued a couple, Jordan and JoLynda Anderson, for nearly $10,000 in unpaid medical bills.
In court filings, the couple described how Allina had canceled Ms. Anderson’s appointments and told her that she could not book new ones until she had set up three separate payment plans — one with the health system and two with its debt collectors.
Even after those payment plans were set up, totaling $580 a month, the canceled appointments were never restored. Allina allows patients to come back only after they have paid the entire debt.
Ms. Anderson recalls being devastated about losing her visit to an endocrinologist who specialized in a chronic condition she has. She had already been waiting four months for the appointment, and was unable to get a new one.
“It felt like I was being punished, and the punishment was you get to stay ill,” she said.
Ms. Bergerson declined to comment on these cases, citing patient privacy.
When the Andersons asked in court for a copy of Allina’s policy of barring patients with unpaid bills, the hospital’s lawyers responded: “Allina does not have a written policy regarding the canceling of services or termination of scheduled and/or physician referral services or appointments for unpaid debts.”
In fact, Allina’s policy, which was created in 2006, instructs employees on how to do exactly that. Among other things, it tells staff to “cancel any future appointments the patient has scheduled at any clinic.”
It does provide a few ways for patients to continue being seen despite their unpaid bills. One is by getting approved for a loan through the hospital. Another is by filing for bankruptcy.
Susan C. Beachy contributed research.
https://www.nytimes.com/2023/06/01/business/allina-health-hospital-debt.html
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Letter to the editor: Bike wreck reveals best of Portland
Everyone from passers-by to ambulance drivers to doctors and nurses offered me the care and concern I needed.
On the evening of May 31, I rode my bike down State Street, through the green light onto the Casco Bay Bridge, and crashed to the pavement. Though disoriented, I worried about cars coming up behind me.
I heard none. Only voices. Kind, concerned people whose names I don’t know or can’t remember. A 2DineIn driver came to me immediately. He would help me get to the side of the road. A woman with curly hair told me that 911 was on the way. A nurse showed up and asked questions about my condition. A doctor appeared. He crouched down, looked me in the eyes and assessed to ensure scarier things weren’t happening. He asked my name and called me by it several times. He wore a name tag. I don’t know what it said. They all stayed with me until the ambulance came.
The drivers were kind and professional, keeping me informed during the trip. “Your vitals look good.” (Whew.) “There are bumps ahead that are going to cause your shoulder to hurt.” (Ouch.) At Maine Medical Center, I was moved through a parade of professionals. Administrators, doctors, nurses, techs.
All were clear, concerned and caring. They affirmed my pain and attended to me. They were empathetic when telling me no bones were broken. They were happy when my dislocated shoulder popped back in. The pain instantly subsided but I held the doctor’s hand to my shoulder, so grateful for her healing skills. I appreciate everyone who took care of me.
Sam Tucker
Cape Elizabeth
https://www.pressherald.com/2023/06/03/letter-to-the-editor-bike-wreck-reveals-portlands-finest/
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