A report from the Wall Street Journal has found that private health insurance companies running Medicare Advantage programs have overcharged the federal government by up to $50 billion by claiming that their patients are worse off than they actually were.
Medicare Advantage, also known as Medicare Part C, is a program in which private insurers provide supplementary, Medicare-approved health insurance plans that, in theory, are intended to incentivize private insurers to provide healthcare to patients with complex medical conditions.
The government pays insurers a base rate of $3,735 for each member enrolled on Medicare Advantage. Health insurance companies are entitled to extra payments when their patients are diagnosed with certain conditions that are costly to treat.
For example, insurers receive an additional $2,370 for Medicare Advantage members with morbid obesity, $2,541 for atrial fibrillation, $2,180 for stroke, $2,086 for seizures, $1,422 for prostate cancer, $1,280 for chest pains and $654 for kidney disease.
Medicare Advantage was created assuming that private, for-profit health insurance companies could use the program to provide healthcare more efficiently. Instead, the system has given insurers an incentive to search their patients for additional diagnoses they could stick on them, leading to patients seeming sicker on paper.
This has led Medicare Advantage spending to balloon. Now, it costs taxpayers more than $450 billion, and spending in the program now accounts for more than half of all Medicare spending and has proven to be more expensive than the regular Medicare system it has ended up supplanting.
Insurers over-diagnosing patients to earn more from Medicare Advantage
Over the last decade, insurers have exploited the higher earnings they can receive in Medicare Advantage, leading to more than half of the 67 million seniors and disabled people on Medicare being enrolled in Medicare Advantage Plans.
One way health insurance companies do this is by adding diagnoses to the ones that patients' own doctors submit – with Medicare approval. Medicare claims this option is necessary as it allows health insurance companies to catch conditions that doctors failed to diagnose and record.
However, the Wall Street Journal's analysis notes that many diagnoses were added in contradiction to doctors' views and for which patients received no treatment.
"The insurers make new diagnoses after reviewing medical charts, sometimes using artificial intelligence, and sending nurses to visit patients in their homes," wrote the Wall Street Journal's four-person investigative team, led by reporter Christopher Weaver and senior editor Mark Maremont. "They pay doctors for access to patient records, and reward patients who agree to home visits with gift cards and other financial benefits."
Dr. Howard Chen, an ophthalmologist in Goodyear, Arizona, noted that insurers added diabetic cataract diagnoses to 148 of his patients even though he saw, at most, one or two such cases a year. Chen charged insurers $40 per patient to cover his costs for providing them with medical charts.
"If they are just making stuff up, then why do they even need or want my charts?"
Medicare does not provide insurers additional pay for Medicare Advantage members with cataracts caused by old age. However, patients with diabetic cataracts net insurers an additional $2,863.
Between 2019 and 2021, the government paid all Medicare Advantage insurers more than $700 million for diabetic cataracts diagnoses. Patients signed up for Medicare Advantage were 15 times more likely to be diagnosed with diabetic cataracts than patients enrolled in traditional Medicare. Most of these diagnoses were added by insurers.
Other diagnoses were also more likely for patients on Medicare Advantage, including morbid obesity, heart failure, depression and emphysema. Some diagnoses claimed by insurers were demonstrably false – like over 66,000 of the Medicare Advantage patients who were diagnosed with diabetic cataracts. These tens of thousands of patients had already gotten cataract surgery. Another 36,000 patients did not receive any medical services or prescription drugs related to diabetes.
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