Are MA Plans Overcharging?
We've had some major news stories about MA Plans overcharging lately. What exactly are they about?
A couple of Florida MAPD insurers are paying almost $32 million to settle a lawsuit that showed the plans made patients seem sicker so they could get larger payments from Medicare. The two companies involved were Optimum Healthcare and Freedom Health.
Dr. Darren Sewell filed the lawsuit in 2009. Dr. Sewell worked for both plans (2007-2012) before he passed away in 2014, but the case continued on by his brother, David Sewell.
Timothy McCormack, an attorney with the Constantine Cannon Law firm said (about Sewell's decision to sue), “He did this at great personal risk to his career and his family's livelihood”.
Dr. Sewell claimed that the plans made patients seem a lot sicker than they really were.
He also said that the plans claimed that these patients had medical conditions that they didn't really have. Both claims add up to the MA plans overcharging Medicare, which is really just we the people.
The government pays these MA plans (also known as Medicare Advantage or Part C Plans) a capitated rate. Sicker patients mean higher rates. This is called a risk score. The lawsuit alleged that the MA plans were inflating the risk score so they could get more money from Medicare.
Privatized Medicare exists in MA plans. It works like this: Give up Medicare Parts A and B and get privatized Part C. You get added benefits such as set co-pays and yearly medical spending caps. The MA plan gets a monthly capitated rate set by CMS each year. And when they have sicker members, they get higher payments because of how the risk scoring system works. It makes sense on the surface, but apparently, it creates an environment that encourages some MA plans to game the system.
Stephen Muldrow, who is the Acting US Attorney said, “This settlement underscores our Office's commitment to civil health care fraud enforcement.”
The GAO has indicated that the people are overcharged by some Medicare Advantage plans due to the inflated risk scores. At least six whistle-blowers have similar allegations and lawsuits about tampering with the risk scores.
One of Sewell's attorneys, Mary Inman (also of Constantine Cannon) said, “This is the largest whistle-blower settlement involving health insurers' manipulation of their members' risk scores.” She also said that the settlement “…sends an important signal to health insurers that the government is serious about risk adjustment fraud.”
Mary Inman also said, “I wish my client were here to see it.”
Her client Sewell had also alleged that in addition to the MA plans to overcharge, these two Florida based plans didn't have enough service providers to justify their growth. That includes physicians and hospitals. This is also a violation of Medicare regulations.
The Optimum plan had approximately 3,000 members when it started in 2004 but later expanded. Freedom started in 2005, and in a couple of years had over 12,000 members.
Attorney Bijal Patel, the council representing the MA plans, denied that the two plans did anything wrong.
Allegedly, these health plan officials asked their employees to look through the files to determine additional medical billing codes for each patient so they could increase their risk score. When the risk score increased, the MA plan's payments also increased.
But according to the lawsuit, both plans knew that up to 80 percent of these additional codes were bogus or rather unsubstantiated.
The lawsuit indicated that this cost us over 40 million dollars from 2009 to 2010. Now the two MA plans will pay over 32 million dollars for the allegations of risk adjustment fraud and improper territory expansion.
Under the False Claims Act, Dr. Sewell's estate will also get between 15 and 25 percent of the over 32 million dollar settlement for the MA plans overcharging.
And this isn't the only story about Medicare overcharging.
The Justice Department is now accusing the United Health Group of improperly increasing risk scores. That means it might have overcharged Medicare by more than $1 billion over the last ten years. We will wait and see how that lawsuit plays out MA plans.