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Writer's pictureDon Drake

Medicare Advantage Plans - Gaming the Medicare System

Title of today's Blog Connelly Law Offices, Ltd.
Attorney RJ Connely III
Attorney RJ Connelly III

"The Medicare Advantage program was established in 2003 to allow private insurance plans to serve as intermediaries, to reduce government spending on Medicare," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Research from the Medicare Payment Advisory Commission (MedPAC) suggests that the program has not delivered the anticipated cost savings since its inception."


"These plans receive a fixed payment for the care they provide, which creates a strong incentive for the sponsoring insurers to limit care," Attorney Connelly continued. "This has led to high rates of denied claims, resulting in poorer health outcomes and increased administrative burdens for healthcare providers."


Criticism has been directed at these private plans' high rate of denied patient care. While these denials harm health outcomes, they often result in cost savings for insurance companies as patients forego treatments they cannot afford.


Despite the government's legal action against these providers, the number of claim denials continues to rise. A report from the KFF (Kaiser Family Foundation), found that in 2021, Medicare Advantage denied two million prior authorization requests, a significantly higher rate than traditional Medicare.


Man reading meidcare advantage letter
Denials of meidcal claims continue to rise

The enrollment in Medicare Advantage plans has tripled since 2007, surpassing the growth of traditional Medicare enrollment. Unfortunately, individuals who switch from traditional Medicare to private plans may encounter administrative barriers when attempting to return. "Medigap insurers can refuse future coverage for those who leave Medicare Advantage," said Attorney Connelly. "This creates difficulties for individuals seeking to return to traditional Medicare, particularly when they require broader coverage networks due to illness. Consequently, seniors with significant healthcare needs may find themselves confined to the networks covered by their Medicare Advantage Plans and denial of care."


The significant financial gains from Medicare Advantage plans, which result in the federal government overpaying private companies by as much as $140 billion annually, are the driving force behind aggressive and often unethical marketing tactics. There is a growing disparity between Medicare Advantage and traditional Medicare, with Medicare Advantage being given preferential treatment in many aspects. These plans receive higher payments per beneficiary than traditional Medicare, incentivizing them to employ every possible method to increase their enrollment numbers. In other words, these providers appear to be gaming the Medicare system.


"Leaving traditional Medicare comes with two significant drawbacks that are often not communicated to beneficiaries," Attorney Connelly pointed out. "First, individuals may not be informed that by leaving traditional Medicare, they are giving up access to the extensive Medicare provider network, which includes nearly every doctor. Second, if a person requires expensive medical care while enrolled in Medicare Advantage, they may encounter prior authorization requirements, unlike in traditional Medicare, where almost no prior authorization restrictions exist."


Medical Providers Leaving MA Networks

In late September, a notable shift occurred in the interaction between for-profit Medicare Advantage plans and healthcare providers. Scripps Health, a prominent healthcare provider in San Diego, garnered attention when it announced its decision to decline most Medicare Advantage plans due to its practices. Scripps CEO Chris Van Gorder told MedPage Today about the impact of these plans on patient care, stating, “We are an organization focused on patient care rather than patient denial, and, in many respects, the managed care model has historically revolved around denying or delaying care, particularly from an economic standpoint.”


Man at his doctor's office
Prior authorizations are needed

Van Gorder further expounded on how the recurrent denials from private plans have resulted in substantial financial deficits for Scripps' medical groups, amounting to $75 million annually. He underscored the challenges posed by denials, prior authorizations, and administrative processes, which have emerged as significant issues for physicians and hospitals.


Scripps' decision reflects a broader trend, as numerous healthcare groups nationwide choose to terminate or partially terminate their contracts with Medicare Advantage plans. Reports have surfaced from medical groups in Ohio, Virginia, Oregon, Missouri, Oklahoma, and South Dakota, citing delayed reimbursements and administrative conflicts as primary motives for their actions.


"Providers leaving Medicare Advantage plans will lead to a reduction in network providers for plan users, resulting in extended wait times for patients in need of services," said Attorney Connelly. "Further, given the substantial administrative obstacles for those considering switching back to original Medicare, a healthcare crisis for seniors and individuals with disabilities may be imminent."


Predatory Behaviors

Physicians for a National Health Program (PNHP), a non-profit research and education organization with over 25,000 members advocating for single-payer Medicare for All reform, has published a paper outlining four strategies employed by Medicare Advantage plans to exploit the Medicare system for financial gain. These strategies, as highlighted by the report, are as follows:


Favorable selection and deselection - Researchers found that Medicare Advantage plans target healthier patients through their marketing efforts, known as "favorable selection" and "favorable deselection." Unlike traditional Medicare, which accepts all eligible individuals, private plans aim their marketing toward a healthier demographic. When high-need patients realize that their Medicare Advantage plans do not cover their healthcare costs, they often try to switch back to traditional Medicare. This results in low-need patients choosing Medicare Advantage and taking Medicare funding with them. In contrast, high-need patients put further strain on the traditional Medicare system due to increased care costs. Patients tend to switch to traditional Medicare as they get sicker due to the narrow provider networks and care restrictions of Medicare Advantage plans.


Discussion at a doctor's office
Upcoding is a major issue

Upcoding - Beneficiaries enrolled in Medicare Advantage plans are generally healthier, but there are concerns that private plans may intentionally make their patients appear sicker to receive higher Medicare payments. This is achieved through "upcoding," where records are manipulated to indicate more severe patient conditions. A 2021 study cited in the PNHP report found that risk adjustment payments are 20 percent higher in Medicare Advantage than in traditional Medicare, indicating a financial incentive for private plans to engage in this practice.


Questionable Quality benchmarks and location bonuses - The current Medicare system provides bonuses to Medicare Advantage plans based on the locations they cover, aiming to ensure equal geographic access to coverage. These location-based payments are combined with bonuses that Medicare Advantage insurers receive for providing higher "quality" coverage. It is worth noting that over half of all plans currently receive over four stars out of five, making them eligible for "quality" payments. Nevertheless, the rating system is criticized for having limited information, affecting its accuracy in measuring performance. According to the PNHP report, overspending from quality benchmarks and county bonuses may total $24 to $28 billion annually.


Induced utilization - In traditional Medicare, 80% of health care costs are covered, and 86% of beneficiaries have supplemental coverage. In contrast, Medicare Advantage participants don't need supplemental coverage. Medicare makes spending assumptions for Medicare Advantage based on more comprehensive coverage than the plans offer, resulting in an estimated $36 billion in costs per year passed on to Medicare recipients.


A Final Word

"The adverse effects arising from the privatization of Medicare through Medicare Advantage plans are more serious than most realize," stated Attorney Connelly. "This is largely attributed to the significant lobbying efforts by companies heavily invested in these plans, which result in tens of billions of dollars in overpayments from the federal treasury annually. The denial of potentially life-saving care to the sickest enrollees and the substantial expenditure on administrative bureaucracy required to facilitate care denial contributes to the gravity of the situation. The reality is that Medicare Advantage undermines Medicare's commitment to providing universal care for seniors and those with disabilities. Discontinuing Medicare Advantage plans and reallocating the resulting savings of tens of billions of dollars to enhance traditional Medicare services for all beneficiaries is the most viable resolution."

Connelly Law Offices, Ltd.

Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.

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