For Medicare Advantage programs, buyer beware

Some of the major health insurance companies that offer Medicare Advantage programs are being investigated by the

U.S. Department of Justice for fraud, after multiple whistleblower complaints. The New York Times first reported this on Oct. 8 in an article entitled, “The Cash Monster Was Insatiable: How Some Insurers Exploited Medicare for Billions.” The large insurance companies United Health (27% of Medicare Advantage market share), Humana (17%), Kaiser (6%) and Cigna (2%) have been accused of fraud by either insider whistleblowers or the Department of Justice directly. Optima Medicare Advantage has not been involved in these allegations.

This is how Medicare Advantage programs work. Medicare pays the insurance company a set amount, averaging $11,500 per year, to manage and pay for all the care for each person who enrolls with the company. If the company can do this for less than $11,500, it makes money on that person. There are incentives such as free gym memberships to enroll healthy people who will not use health services much, leading to more profit.

For sicker patients with multiple medical problems who require more care, a complex system of medical coding was devised to pay the insurance company extra money for each diagnosis listed. For example, if a patient has bipolar disorder (which is vastly over diagnosed), the annual payment goes up by $2,700. Doctors who manage these patients receive intensive training to make sure that these codes are captured in billing data, to maximize payments to the insurance company. The fraud accusations come from insider accounts by doctors regarding how they were encouraged to add diagnoses that were not accurate: either old, inactive problems or making existing problems seem more severe, a process known as up-coding. This resulted in inappropriately high payments from Medicare to the insurance companies, with some estimates as high as $25 billion in overpayments in 2020 alone.

Why is this a problem? Almost half of Medicare patients are now enrolled in Medicare Advantage programs as a result of aggressive advertising of many alleged benefits by celebrities such as Joe Namath and William Shatner. Medicare Advantage programs were originally started in 1997 to improve the quality of care and to lower Medicare’s costs. The opposite has actually happened; Medicare Advantage programs have increased costs over traditional Medicare without any demonstrable improvement in the quality of care. Insurance companies make an average of $1,600 per year in profit on each Medicare Advantage patient.

Medicare’s finances are precarious, with the Part A Trust Fund (which pays for hospital care) facing insolvency in 2028. Expensive Medicare Advantage programs hasten the time when taxpayers will be paying more to keep Medicare financially viable.

There are other problems with Medicare Advantage. First, the programs narrow choice to network contracted providers. The Mayo Clinics this year, for example, decided not to participate with most Medicare Advantage programs. This could cause unexpected out-of-network expenses for the enrollee. There may be money saved at the expense of loss of choice.

Medicare Advantage plans often deny care or tests, causing unneeded delays in getting essential treatment. Prior authorizations may be required by the primary doctor, adding to their already heavy administrative burden. If one enrolls in Medicare Advantage and then develops a new chronic health problem, there may be difficulty obtaining a Medicare Part B supplement when switching back to traditional Medicare.

Lastly, the information that a salesperson gives over the phone may be inaccurate. In a recent survey, more than 80% of “secret shoppers” were given misleading and inaccurate information about the benefits of certain Medicare Advantage programs in aggressive efforts to obtain enrollment in the plan. Some advertised benefits were really too good to be true.

Thorough research is required before choosing a Medicare Advantage plan. There is always the option of staying with traditional Medicare.