Published with permission of the author, Alan Unell, PhD
October 15th was the start of the Medicare sign up season. In honor of that we will discuss how insurance companies become wealthy at the expense of the taxpayers. Recall that Medicare Advantage IS NOT MEDICARE. It is private insurance.
Physicians for a National Health Plan has been researching the fraud in the Medicare Advantage system and here is their groundbreaking report. These companies have stolen between $88 Billion and $140 billion from Medicare IN 2022 ALONE. Here is an overview article on today’s subject. First, some background material.
The Balanced Budget Act of 1997 (BBA) established a new Part C of the Medicare program, known then as the Medicare+Choice (M+C) program, effective January 1999. In the early 2000s it was relabeled Medicare Advantage. It was an interesting idea, the government, in an effort to buy down risk, would pay insurers to assume the risk. That payment is a minimum $1000/month for each subscriber and higher if the insurance company claims they are sicker than nominal. Part of the idea was that the government could save money this way. However, research from the Medicare Payment Advisory Commission (MedPAC), an independent agency that advises Congress on Medicare, shows that the program has not yielded savings in the two decades since it was established. It does however, provide the most lucrative health insurance program ever, for insurance companies. It is essentially, a giveaway.
Those plans, may put a cap on subscribers yearly maximum expenditures but there is a price to pay, in copays and deductibles. We have had story after story about how the top Medicare (dis)Advantage providers have been cheating the government. The Department of Justice has suits against them for willful fraud (not mistakes).
Back to PNHPs analysis. Here’s how they cheat.
Favorable Selection
Researchers found that Medicare Advantage plans actively seek out healthier patients, targeting their marketing towards a healthier demographic in a process called “favorable selection” and “favorable deselection.” The flat rates that the government pays to Medicare Advantage insurers is based on the costs of traditional Medicare participants, but traditional Medicare participants tend to be far sicker. Research shows that patients tend to switch to traditional Medicare as they get sicker due to Medicare Advantage plans’ narrow provider networks and restrictions on care. When that happens it becomes difficult for them to obtain a Medical-Gap plan that would limit their copay amount (20% on traditional Medicare).
MedPAC, found in June that favorable selection for a healthier Medicare Advantage population resulted in 11 percent lower costs for Medicare Advantage plans, even as insurers get paid on the basis of the traditional, higher-need Medicare population. The report estimates that these overpayments cost Medicare $44-56 billion annually.
Upcoding
We’ve discussed this before. The insurance companies list you as sicker than you are so they can increase their monthly payments from the federal government to way over the nominal $1000/month.
As The Lever covered in May, this fraudulent practice leads to $20 billion in additional spending per year — and generates more profits for insurers.
Quality Benchmarks & County Bonuses
Currently, Medicare provides bonuses to Medicare Advantage plans based on the locations they cover, supposedly to ensure equal geographic access to coverage. But as MedPAC noted in its 2023 report, these payments “are not necessary for maintaining affordable supplemental coverage” and “fail to capture savings for the Medicare program.” Insurance companies falsely increase their quality rating and payments while frequently denying care to patients and increasing profits. The measures used allow this. The PNHP report estimates this kind of manipulation is worth approximately $24 billion to $28 billion in overcharges to the government.
Induced utilization
This is the idea that people with supplemental coverage are likely to use more health care because their insurance pays for more of their cost, removing some of the financial barriers to accessing health services. People with Medicare Advantage plans have a yearly maximum cap, whereas traditional Medicare does not – unless you buy that Gap insurance. The value is an extra $108/month/subscriber or about $36 billion for the Medicare Advantage insurance companies. They receive this directly from the monthly payments that people pay to Medicare. Not fair.
SUMMARY
Profiteers want to make our health care system even more unequal and ineffective than it already is. If we want to one day achieve improved Medicare for All, we can’t let corporate insurers have their way. We need to act now to stop them.
ACTION
Let’s educate our Congressperson and Senators about how bad the situation really is. You can find their contact information in the Resources section below.
Here is a sample letter:
“I am your constituent and I just learned how private insurance companies are gaming the Medicare Advantage system and overbilling the US government. This is not Medicare, it is private insurance and we pay them over $1000/month to provide insurance for seniors. They deny prior authorizations (6%) and provide less healthcare than traditional Medicare, and are overbilling on the order of $140 billion in 2022 alone. Here is THE URL to a report from Physicians for a National Health Plan on the subject. PLEASE READ IT.
You can fix this by enacting the Improved Medicare for All system, HR 3421. No private insurance, cradle to grave coverage, no copays/deductibles to dissuade people from going to the doctor. You can fix this and I want you to do it.”
Dr Unell’s blog can be found on Substack.
Healthcare for All Maine 