Cherry Picking and Lemon Dropping

By Neal S. Meritz, MD

Medicare Advantage companies and other Health Insurers usually try their best to accommodate their insured clients but they also know that time is of the essence when approving requests for medical treatments. They understand that to avoid paying a policyholder’s valid claim is a means to bolster their own profits. Medicare Advantage plans are now adept at enrolling healthy patients while shunting away sick ones. Insurers are able to utilize Health Risk Assessments and leveraged chart reviews to maximize payments to the insurance company, and these maneuvers result in little or no value to the beneficiary.

Health Insurers commonly exclude high risk patients who are more likely to suffer expensive medical catastrophes. Cherry Picking is a popular term for the practice of Medicare Advantage plans to sell policies to those who don’t need them. Another term, Lemon Dropping describes the custom of canceling those who are insured when they do need the policy. The Insurance Company obtains a favorable and less costly set of patients while shunting away the sick, poorly reimbursed ones.

Sicker, more costly patients withdraw from Medicare Advantage plans at a higher rate than healthier ones. As a group they have medical expenses 28% higher than their Medicare risk factors predict. Medicare Advantage plans utilize selective marketing to design and advertise particular benefits to attract a healthier subset of the Medicare population. They may also emphasize benefits that appeal to healthier persons, such as sports medicine clinics and dental coverage. There are many more prior authorizations required for sicker patients with complex medical problems, and insurers only minimally advertise prescription drug benefits that appeal to those with more serious chronic conditions. Insurance coverage for memberships to fitness clubs, undoubtedly a valuable benefit, attracts physically active elderly persons, most of whom are less likely to be expensive to the insurance company.

Health Insurance companies perform an honorable and extremely important function in our lives, but the purchase of data about prospective patients allows them to Cherry Pick more easily. A patient with multiple prior hospitalizations for a chronic condition is very likely to require multiple future hospitalizations, a significant expense. Having a company representative as part of the enrollment process, allows selective redirecting of expensive patients from Medicare Advantage plans to traditional Medicare plans. Avoiding the sicker patient allows the plan to be more profitable.

Medicare Advantage plans have become extremely eager to send a doctor or nurse to visit patients at home. These free “house calls” are touted as a major health benefit. In home Health Risk Assessments are often conducted by vendors hired by the Medicare Advantage company, not by the beneficiary’s primary care provider. The quality of care coordination and the validity of diagnoses reported are problematic at best. According to CMS (Centers for Medicare and Medicaid), there is a paucity of evidence showing that home visits make people healthier, improve their care, or do much beyond driving up Medicare’s costs.

Medicare Advantage companies are able to utilize their beneficiaries’ diagnoses to obtain higher capitation payments from CMS, Medicare Advantage companies are thus financially incentivized to make their insureds appear as sick as possible. CMS then risk adjusts payments to companies whose medical costs are expected to be higher than anticipated. Medicare Advantage companies routinely leverage both chart reviews and Health-Risk Assessments in order to maximize these payments. Unsupported risk adjusted payments have resulted in billions of dollars of questionably legitimate income for these plans.

The government has begun litigating multiple lawsuits alleging that insurers fraudulently added diagnosis codes without medical justification in violation of Medicare rules. Illegitimate behaviors include chart reviews to pressure physicians to add diagnoses to the patient’s record, establishing benchmarks to “improve” diagnosis capture and tracking physician performance in adding these diagnoses. The Office of the Inspector General (OIG) of the Department of HHS has issued multiple revelatory reports detailing alleged abuses of the Risk Adjustment Process for improper financial gain, resulting in billions in over-payments.

Most Health Insurance companies agree with and usually strictly follow the implied covenant of good faith and fair dealing in an insurance contract. But Medicare Advantage plans now are very capable of manipulating the Risk Scoring to provide an appearance of more severe illness in order to increase payments to the plan from Medicare. Perhaps the only conceivable entity capable of preventing insurance companies from defrauding consumers is the Government. The survival of our current healthcare system depends upon aggressive oversight of insurance companies.

References

Reed Abelson and Margot Sanger-Katz, The Cash Monster Was Insatiable: How Insurers Exploited Medicare For Billions, The New York Times Oct 8, 2022

Fred Shulte, David Donald, and Erin Durkin, Why Medicare Advantage costs taxpayers billions more than it should, The Center for Public Integrity 910 17th St NW Suite 1030 Washington DC 20006

June 4, 2014

Fred Shute, Health Insurers have their way with regulators, The Center for Public Integrity. June 9, 2014

Fred Shulte, Home is where the money is for Medicare Advantage plans, The Center for Public Integrity June 10, 2014

Brenda Gazzar, Cherry Picking? Lemon Dropping? How Health Insurers weed out sick people, Code Wack Podcast July 26, 2021

Jonathan H. Ferry and Ocasha O. Musah, The National Law Review, Volume XII Number 327 November 21,2022

Eric Roehm MD, FACC, Medicare Advantage Plans Cherry Pick Patients, www.NutritionHeart.com/Medicare-at-Risk

Alicia L. Cooper MPH and Amal N. Trivedi MD MPH, Fitness Membership and Favorable Selection in Medicare Advantage Plans, N Eng J Med 2012; 366: 150-157 January 12, 2012

Jeanmarie Loria, Founder and CEO Advize Health, OIG Files: Health Plans, Cherry Picking, and Lemon Dropping, September 24, 2021

Neal S. Meritz is a retired Family Practice Physician, Graduated from the University of Texas Medical School at San Antonio in 1972. He is a member of the Bexar County Medical Society and an active member of the BCMS Publications Committee.