Medicare Advantage: How Private Insurers Exploit Medicare

An excellent interview with the former head of CMS, which oversees Medicare, lays out how Medicare Advantage insurers manipulate costs and quality, grabbing massive profits from public funds with no clinical benefits for patients. He wants its growth stopped and its problems fixed.

March 2, 2024

Obama CMS Chief: Medicare Advantage Plans Game the System
MedPage Today
March 1, 2024
by Cheryl Clark

(HJM bolding)

Donald Berwick, MD, MPP was the administrator of the Centers for Medicare & Medicaid Services (CMS) during the Obama administration and is president emeritus and senior fellow at the Institute for Healthcare Improvement.

MedPage Today interviewed him about his concerns that too many Medicare beneficiaries are being misled into enrolling into private Medicare Advantage plans, which he said should be slowed or stopped because the plans have gamed the system to receive billions more than what is spent for traditional Medicare beneficiaries’ care.

Cheryl Clark: Medicare Advantage, or MA, plan enrollment has been growing so fast; 52% of beneficiaries are now enrolled, with 60%, 70% projected in a few years. … I hear a traditional Medicare patient can’t find a primary care provider in some parts of the country because all the doctors are locked in MA.

Will every eligible beneficiary have no choice but Medicare Advantage? … And is that a good idea, given your concern about how MA plans have gamed the system to get more money?

Berwick: I think MA growth should be slowed or stopped, at least until we end the extraordinarily high subsidies for MA plans, which are unfair to traditional Medicare and burdensome to the public treasury and many beneficiaries. Many beneficiaries can get better care for themselves and greater choice through traditional Medicare, and that option should remain robust and available. …

Clark: Let’s talk about … how MA plans are overpaid. They’ll receive $88 billion more this year than what is spent for the same patients in traditional Medicare. That is a huge concern. But I don’t think it’s clear to readers how the plans are paid, that it’s not necessarily for better care.

Berwick: It’s a really complicated process and, I must say, possibly intentionally so, because I think it serves the interests of the private plans to have payment rules that are so hard to understand.

What the benchmark begins with is a comparison to the traditional Medicare population: people like me, who are in fee-for-service, traditional Medicare. There’s a calculation of the cost of my expected care… based on demographics and county, because care is more expensive in some counties than others. ..

Most importantly, the amount that an MA plan gets is adjusted for the number of codes for diagnoses that a beneficiary has, like atrial fibrillation or diabetes, and for each code the plan gets more money, supposedly reflecting the additional care the patient needs. And that’s where the gaming nonsense occurs. Many codes have no real implications at all for evidence-based clinical care, but they carry with them extra payment nonetheless. The coding system has created opportunities for these plans to upcode. They comb through patients’ histories and try to stuff in as many diagnoses as they possibly can, even if they have nothing to do with the care of the patient.

Clark: During a January 12 MedPAC meeting, one of the commissioners mentioned that the plans were paying doctors to go through each record and look for anything that could add to capitated payment.

Berwick: That’s right. That’s worth a bit of a dive. There are three ways health plans manipulate the coding processes. What they’re after is what you said, which is, comb through the patient’s record, send a nurse into the patient’s home to find additional diagnoses. Sometimes, in some of the MA systems, they actually pay the doctor to code using a software package the insurance plan gives to the doctor. …

And a third and now much more popular, certainly to insurers, is to simply employ the doctors. Once the doctor is an employee, then you can set up all sorts of ways to accelerate upcoding. You can train the doctors or give them incentives to upcode. And now, the largest employer of doctors is a health plan, an MA plan. In this third tactic, the MA plan gets the benefit of all the upcoding, and that’s part of the game they are playing.

Now rather than lower costs, MA has much higher costs — something to the tune of $80 billion a year. Other estimates are as high as $120 billion. For the most part, that money doesn’t represent the needs of the patient. In fact, we know that beneficiaries in MA are, on the whole, healthier than those in traditional Medicare, and ought to cost less, not more.

It’s just a transfer of money to the private sector. Most of that goes to profit for the plan, or for stock buybacks, high compensation for plan executives, …

And further, because of all the gaming of diagnoses, it gets really, really hard to compare quality of care and outcomes between Medicare Advantage and traditional Medicare patients.

Clark: You’ve said you think MA plans should be slowed or stopped. How do you think that should happen?

Berwick: … We need to stop these abuses as quickly as possible. And we need simultaneously to improve the attractiveness of traditional Medicare, which is what tens of millions of Americans still have. …

Clark: [The MedPAC director] said that for chronic conditions, there is evidence that MA plans deliver better care.

Berwick: … There is some information that suggests that for some conditions, some MA plans do offer better chronic care but that’s a really hard statement to prove, and it certainly doesn’t apply across the board. And remember: MA plans are upcoding patients, so they make the patients look sicker, so when you try to assess outcomes, adjusted for severity, you’ve already fallen into the hole created by this game in which you’re no longer comparing apples to apples….

Clark: You spoke of the quality bonus program, which is a factor in MA capitated payments. How does it work?

Berwick: … the quality bonus system needs a big overhaul. It now has been pretty thoroughly gamed by MA plans. They focus on the scored variables, not overall better care – “teaching to the test,” as it were. Something like 80% of plans now are four-star or five-star on a five-star scale. I call that the “Lake Wobegon” effect, where everybody is above average. It’s a tricky system with unintended consequences. For example, when you’re treating a very distressed population with limited resources and there are barriers to treatment, you don’t want to take money away from the very organizations that need more money because their populations are harder to treat. But it has just become too easy to get a high score. …

The rating system is flawed and amounts to a check off the box analysis.

Other restriction for care require prior authoization for certain expensive tests, or imaging (MRI), and durable medical equipment (DME) for which they have strict limited vendors

On the other hand Advantage plans provide free transportion to senior citizens, many of which have no transportation

Caveat emptor---Let the buyer beware

Comment by: Jim Kahn

Don Berwick is a hero for many of us, for his decades of foundational work in quality of medical care and his forthright criticism of Medicare Advantage, the private insurance arm of Medicare.

In this interview, he reviews how insurers thoroughly game the MA systems for payment and quality rating, yielding tens of billions in excess payments with no evidence of clinical benefit. Indeed, there is evidence of impaired access to care for the sickest and poorest, and financial harm to providers who treat the most needy.

You should read the entire interview, it’s wide-ranging and informative, and only a little technical. We’ll be writing more on Medicare Advantage issues in coming days.

As Dr. Berwick points out, traditional Medicare – in which the government pays providers directly – works more efficiently to assure access to care. But it needs some coverage gaps closed. That is, we need an improved traditional Medicare. Then we could extend that to everyone. That’s an “improved Medicare for All”. Aka: single payer.

About the Commentator, Jim Kahn

Jim (James G.) Kahn, MD, MPH (editor) is an Emeritus Professor of Health Policy, Epidemiology, and Global Health at the University of California, San Francisco. His work focuses on the cost and effectiveness of prevention and treatment interventions in low and middle income countries, and on single payer economics in the U.S. He has studied, advocated, and educated on single payer since the 1994 campaign for Prop 186 in California, including two years as chair of Physicians for a National Health Program California.