Did your health plan rip off Medicare?

Reviewed by Emily Henderson, B.Sc.Jan 27 2023

Today, KHN has released details of 90 previously secret government audits that reveal millions of dollars in overpayments to Medicare Advantage health plans for seniors.

The audits, which cover billings from 2011 through 2013, are the most recent financial reviews available, even though enrollment in the health plans has exploded over the past decade to over 30 million and is expected to grow further.

KHN has published the audit spreadsheets as the industry girds for a final regulation that could order health plans to return hundreds of millions, if not billions, of dollars or more in overcharges to the Treasury Department — payments dating back a decade or more. The decision by the Centers for Medicare & Medicaid Services is expected by Feb 1.

KHN obtained the long-hidden audit summaries through a three-year Freedom of Information Act lawsuit against CMS, which was settled in late September.

In November, KHN reported that the audits uncovered about $12 million in net overpayments for the care of 18,090 patients sampled. In all, 71 of the 90 audits uncovered net overpayments, which topped $1,000 per patient on average in 23 audits. CMS paid the remaining plans too little on average, anywhere from $8 to $773 per patient.

The audit spreadsheets released today identify each health plan and summarize the findings. Medicare Advantage, a fast-growing alternative to original Medicare, is run primarily by major insurance companies. Contract numbers for the plans indicate where the insurers were based at the time.

Since 2018, CMS officials have said they would recoup an estimated $650 million in overpayments from the 90 audits, but the final amount is far from certain.

Spencer Perlman, an analyst with Veda Partners in Bethesda, Maryland, said he believes the data released by KHN indicates the government's clawbacks for potential overpayments could reach as high as $3 billion.

"I don't see government forgoing those dollars," he said.

For nearly two decades, Medicare has paid the health plans using a billing formula that pays higher monthly rates for sicker patients and less for the healthiest ones.

Yet on the rare occasions that auditors examined medical files, they often could not confirm that patients had the listed diseases, or that the conditions were as serious as the health plans claimed.

Since 2010, CMS has argued that overpayments found while sampling patient records at each health plan should be extrapolated across the membership, a practice commonly used in government audits. Doing so can multiply the overpayment demand from a few thousand dollars to hundreds of millions for a large health plan.

But the industry has managed to fend off this regulation despite dozens of audits, investigations, and whistleblower lawsuits alleging widespread billing fraud and abuse in the program that costs taxpayers billions every year.

CMS is expected to clarify what it will do with the upcoming regulation, both for collecting on past audits and those to come. CMS is currently conducting audits for 2014 and 2015.

UnitedHealthcare and Humana, the two biggest Medicare Advantage insurers, accounted for 26 of the 90 contract audits over the three years.

Humana, one of the largest Medicare Advantage sponsors, had overpayments exceeding the $1,000 average in 10 of 11 audits, according to the records.

That could spell trouble for the Louisville, Kentucky-based insurer, which relies heavily on Medicare Advantage, according to Perlman. He said Humana's liability could exceed $900 million.

Mark Taylor, Humana's director of corporate and financial communications, had no comment on the overpayment estimates.

Commenting on the upcoming CMS rule, he said in an emailed statement: "Our primary focus will remain on our members and the potential impact any changes could have on their benefits. ... We hope CMS will join us in protecting the integrity of Medicare Advantage."

Eight audits of UnitedHealthcare plans found overpayments, while seven others found the government had underpaid.

In a conference call with reporters this week, Tim Noel, who leads UnitedHealthcare's Medicare team, said the company wants CMS to make changes in the regulation but remains "very comfortable" with what the 2011-13 audit results will show.

"Like all government programs, taxpayers and beneficiaries need to know that the Medicare Advantage program is well managed," he said.

He said the company supports annual auditing of Medicare Advantage plans.

But Perlman said the sheer size of the program makes annual audits "completely impractical."

These audits are "incredibly time-consuming and labor-intensive" to conduct," he said.