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Medicare Part C: Fighting Back Against Risk Adjustment Fraud

Posted  June 26, 2015

Health insurance companies that participate in the Medicare Managed Care program (also known as Medicare Advantage or Medicare “Part C”) routinely complain about cuts to their reimbursement rates – even in years, like this one, where the reimbursement rates are actually increased.  At the same time, reports indicate that insurers are “leaning heavily on their Medicare business” and “signal[ing their] intentions to get more involved in Medicare.”  Modern Healthcare.

It’s reminiscent of the Woody Allen characters who complain about a restaurant both because the food is terrible and the portions are small.  Could this seeming disconnect in health insurers’ views of the sufficiency of Medicare’s reimbursement rates be explained, at least in part, by the fact that some unscrupulous plans are substantially augmenting their reimbursement from Medicare by aggressively or even fraudulently exaggerating how sick their members are?

The Medicare Advantage program pays health plans more if their members require treatment for certain high cost diseases or health conditions — such as cancer, diabetes, or congestive heart failure – through a mechanism called “risk adjustment” or “risk scoring.”

This spring, the Center for Medicare and Medicaid Services (CMS) modified its “risk adjustment” payment methodology because it found that some insurance companies were claiming that their members had certain diseases at rates that far exceeded national averages.  For example, CMS noted that: “in 2012, 9.9 percent of [traditional Medicare] beneficiaries were coded as having ‘Renal Failure’ (HCC 131), 14.6 percent of all [Medicare Advantage] enrollees were coded with renal failure, and 38.8 percent of beneficiaries in the plans that were most aggressive in coding were coded with renal failure.”  CMS Fact Sheet: Moving Medicare Advantage and Part D Forward.

Senate Judiciary Committee Chairman Charles Grassley has also called attention to the problem of Medicare Advantage plans exaggerating the severity of their members’ illnesses.  In May 19, 2015 letters to the United States Attorney General and the Acting Administrator of CMS, Senator Grassley noted that “[n]ews reports indicate that some insurance companies are wrongfully claiming sicker patients, leading to inflated risk scores and reimbursements.”  He cited reports from the Center for Public Integrity that between 2008 and 2013, risk score gaming caused approximately $70 billion in improper Medicare Advantage payments.

While Senator Grassley seeks answers from CMS about what steps it is taking to combat risk adjustment fraud, there are increasing indications that whistleblowers are taking up the challenge to rein in the fraud.  Another report from the Center for Public Integrity notes that “[f]ederal court records show at least a half dozen whistleblower lawsuits alleging billing abuses in these Medicare Advantage plans have been filed under the False Claims Act since 2010.”  Using the Federal False Claims Act, these whistleblowers have sued insurance companies “from Columbia, S.C., to Salt Lake City, Utah to Seattle” in an effort to protect the United States taxpayers from fraudulent practices that drain resources that could be better used to treat our nation’s senior citizens.

Tagged in: Healthcare Fraud, Managed Care, Risk Adjustment Fraud,