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Medicare Advantage plans are being investigated for adding false diagnosis codes to patient records to increase profits

Kaiser Permanente Front Door OlympiaEvery year during open enrollment, I warn people about the problems of signing up for a Medicare Advantage plan.

Instead of getting health care through Medicare, with Medicare Advantage private organizations provide the service. It can be offered through an insurance company, an HMO, or a preferred provider organization, which is a health plan with doctors, hospitals, and other providers in a network.

Medicare Advantage plans are paid a fixed amount per enrollee to provide benefits covered by traditional Medicare. The Centers for Medicare and Medicaid Services or CMS, which oversees the Medicare program, can pay more to Medicare Advantage plans based on demographic information and the health status of each plan beneficiary.

The adjustments are made using “risk scores.” A beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger payment to the Medicare Advantage plan for that beneficiary.

While Medicare Advantage may cost consumers less and provide additional services such as Silver Sneakers, eyeglasses, or dental care, more and more problems are coming to light about how these organizations operate.

For years, the federal government has been cracking down on fraudulent coding in Medicare Advantage plans.

In August of 2021, Sutter Health, a California-based health care services provider, and several affiliated entities agreed to pay $90 million to resolve allegations that Sutter Health violated federal law by submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage plans.

Sutter Health submitted unsupported diagnosis codes for certain patient services, the U.S. Department of Justice alleged. These codes caused inflated payments to be made to the plans and to Sutter Health. The lawsuit also alleged that, when Sutter Health became aware of these unsupported diagnosis codes, it failed to take action to identify and delete additional unsupported diagnosis codes.

“The government relies on health care providers, including those furnishing services to Medicare Part C beneficiaries, to submit accurate information to ensure proper payment,” said Deputy Assistant Attorney General Sarah E. Harrington of the Justice Department’s Civil Division.

The fraud was exposed by a whistleblower complaint.

Also in 2021, Kaiser Foundation Health Plan of Washington, formerly Group Health Cooperative, paid $6.3 million to resolve allegations that it submitted invalid diagnoses and received inflated payments as a result.

In addition, the department intervened and filed complaints in separate lawsuits against Independent Health Corporation and members of the Kaiser Permanente consortium alleging that those Medicare Advantage organizations submitted or caused the submission of inaccurate information about the health status of beneficiaries enrolled in their plans to increase reimbursement from Medicare.

The department has also investigated Anthem, Humana, UnitedHealth, and others for faulty Medicare Advantage coding.

The Medicare Advantage program was supposed to reduce Medicare spending. Since its beginning in 1985, payments to private plans were set at 95 percent of fee-for-service Medicare payments under traditional Medicare.

But the private plans have never produced savings for Medicare, due to policies governing payment rates to Medicare Advantage plans that the Medicare Payment Advisory Commission or MedPAC has found to be deeply flawed. MedPAC is independent congressional agency that advises Congress on issues affecting the Medicare program.

Adding false diagnoses to patient records to increase payments to Medicare Advantage plans undermines the goal of plans competing to improve quality and reduce health care costs, MedPAC said.

What MedPAC calls “excess payments” increased to $12 billion in 2020 out of total program costs of $350 billion and are estimated to be more than $16 billion in 2023.

When Medicare Advantage plans submit unsupported diagnosis codes to increase their profits, it makes their patients appear sicker than they actually were, according to the Justice Department.

This may cause problems for consumers who may be given unneeded or wrong medications and treatments based on faulty diagnosis codes.

For more information on the specifics of how Medicare Advantage organizations are falsifying medical coding, see The Washington Post article “Beat Cancer? Your Medicare Advantage Plan Might Still Be Billing for It.”

Another problem with Medicare Advantage organizations is that they sometimes delay or deny treatment to beneficiaries even though the requests met Medicare coverage rules, according to a review of case files by the Office of the Inspector General, an oversight agency within the U.S. Department of Health and Human Services.

See my article “Medicare Advantage Insurance Companies Deny Some Treatments Medicare Approves, Oversight Agency Says” for details.

In 2021, more than 26 million Medicare beneficiaries were enrolled in Medicare Advantage plans, and the Congressional Budget Office estimates that CMS would pay more than $343 billion to private carriers who offered those plans.

Due to heavy advertising, it’s expected that soon half of Medicare recipients will select a Medicare Advantage plan.


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