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Nonprofit site slams Medicare program risk adjustment

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A reporter at a nonprofit news site has tossed another bottle of kerosene into the firestorm of controversy over whether U.S. taxpayers get their money’s worth from the Medicare Advantage program.

The insurers that sell the private Medicare plans and many plan members say the program offers enrollees better preventive health benefits and much better protection against out-of-pocket costs than the traditional Medicare program, helping enrollees living on fixed incomes do a better job of protecting their quality of life.

Critics have traditionally attacked the program by pointing out that the Centers for Medicare & Medicaid Services (CMS) pays more for each Medicare Advantage program enrollee than it does for each traditional Medicare program enrollee.

Fred Schulte presents a more focused critique in an article published by the Center for Public Integrity: He contends that the commercial insurers selling coverage to Medicare enrollees through the program have pumped up profits by fudging the patient information used to compute “Hierarchical Condition Category” (HCC) risk scores.

A Medicare Advantage risk-adjustment program is supposed to use the scores to ensure that Medicare managers make higher “capitation” payments — payments for each enrollee served — to the Medicare plans that serve higher risk enrollees.

Drafters of the Patient Protection and Affordable Care Act (PPACA) included a similar risk-adjustment program in the package of “three R’s” programs that’s supposed to protect health insurers against any underwriting problems caused by PPACA health insurance market changes.

A director at the U.S. Government Accountability Office (GAO) testified in 2012 that the GAO believed Medicare Advantage plans were giving enrollees risk scores that were about 4.8 percent to 7.1 percent too high, and that the Centers for Medicare & Medicaid Services (CMS) had been able to reduce the diagnostic coding gap to 3.4 percent.

A newer report from HHS shows improper payments may account for 5.6 percent of Medicare Advantage payments and 9.5 percent of traditional Medicare program payments.

Schulte cites government estimates that the diagnostic code gap led to about $70 billion in improper Medicare Advantage plan payments from 2008 through 2013 — or an average of about $12 billion per year. Medicare managers will pay about $156 billion to Medicare Advantage plans this year, according to the Henry J. Kaiser Family Foundation.

Schulte reported that the Center for Public Integrity is suing to make records about which insurers seemed to receive improper Medicare Advantage payments public. 

America’s Health Insurance Plans (AHIP) says it is working with CMS to improve the risk scoring system.

Reports show Medicare spends far less on improper payments to Medicare Advantage plans than it does on improper payments to traditional fee-for-service Medicare providers, Clare Krusing, an AHIP representative, said in a statement.

“The evidence is clear that Medicare Advantage plans are providing better quality care and improving health outcomes for millions of seniors,” Kruse said.