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Insurance companies continue to squeeze dollars out of Medicare Advantage

Is paying private companies to manage Medicare plans worth it anymore?

Let’s say you run a big, unwieldy, expensive government program. You want to trim costs, but your program provides services in all 50 states for more than 65 million Americans, and you can’t just cut off access.

So, you have to get creative. What do you do?

One option might be to see if anyone else can manage your program more efficiently than you can. You pay them, and they handle the rest. If they can do it cheaper than you can, they get to keep the extra dollars. If they can’t, they own the risk – not you.

That’s the idea behind Medicare Advantage plans. Medicare is the U.S. health program that covers individuals 65 and older and those with certain health conditions. Under Medicare Advantage (MA), also known as Medicare Part C, the federal government pays a private health insurance company to manage the care of its beneficiaries.

MA enrollment has nearly tripled since 2007. The program is so popular that, in 2023, more than half of eligible Medicare beneficiaries are enrolled in an MA plan.

With that level of growth, it’s safe to say the MA market is pretty lucrative for those private insurance companies.

But it hasn’t always been above board.

Insurers have found ways to squeeze money out of MA plans and pocket it for themselves. Some of these tactics include overdiagnosing, overbilling, and overpayments.

One physician group is blowing the whistle on insurers for their MA dealings. The group, Physicians for a National Health Program, just released a report called “Our Payments Their Profits: Quantifying Overpayments in the Medicare Advantage Program.” In it, the group reveals that taxpayers are overpaying by at least $88 billion a year for their MA plans. Depending on the calculations, that overpayment may be as much as $140 billion a year.

“Instead of creating a more efficient system of care, large corporations have used MA as their cash cow, taking billions in taxpayer dollars while using a plethora of tactics to delay or deny treatment for patients,” according to the report.

The report details the ways in which insurers benefit from MA plans, utilizing methods such as favorable selection, upcoding, county benchmarks and quality bonuses, and induced utilization.

The report also estimates that insurers receive so much surplus money from taxpayers that it could cover critically needed benefits to all Medicare and Medicaid beneficiaries.

“Medicare Advantage is just another example of the endless greed of the insurance industry poisoning American health care, siphoning money from vulnerable patients while delaying and denying necessary and often life-saving treatment,” the report claims.

The proof is in the pudding: this year, the U.S. Office of the Inspector General (OIG) conducted an audit of Aetna’s MA program. After looking at 210 unique enrollees with high-risk diagnosis codes that Aetna received higher payments for between 2015 and 2016, the OIG found “that most of the codes Aetna submitted to CMS for use in the adjustment program did not comply with federal regulations.” What’s more, in one year, it’s estimated that Aetna received at least $25.5 million in overpayments.

Need we remind you that in 2022, Aetna brought in $91.4 billion in revenue, an increase of almost $10 billion from 2021’s revenue. And as of September 2023, CVS/Aetna’s MA enrollment increased by 5.3 percent, from 3.2 million to 3.4 million.

How does this keep happening? Because the scrutiny and fines don’t outweigh the profits. And until they do, Medicare Advantage will continue to cost more while covering less.

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