By John J. LoCurto, JD

Medicare Disadvantaged:

A Raft of Lawsuits Exposes Fraud in Medicare Part C

By John J. LoCurto, JD

Healthcare fraud is a massive and stubborn problem. Perhaps the best way to confirm this is to examine the annual Health Care Fraud and Abuse Control Program Report that the United States Departments of Justice and Health and Human Services prepare. Year after year, the Report touts huge fraud recoveries. In Fiscal Year 2021, it boasted healthcare fraud judgments and settlements exceeding $5 billion and total collections approaching $2 billion.1 Of course, recoveries that big necessitate even bigger frauds.

Schemes directed at Medicare Part C – also known as Medicare Advantage – are an emerging concern. Losses are difficult to calculate precisely but are surely in the billions. The Centers for Medicare & Medicaid Services (CMS) estimates that Part C overpaid more than $15 billion in FY21.2 Other estimates range from $12 to $25 billion.3 With so much money at stake, it should come as no surprise that the Department of Justice designated Medicare Advantage an enforcement priority.4 The Department has filed or joined a raft of lawsuits against major health insurance companies – e.g., Kaiser Permanente, UnitedHealth, Anthem – that allegedly bilked Medicare Advantage out of billions. To understand how fraud this big could have occurred, one must first understand Medicare Part C.

Medicare Advantage is an alternative to traditional Medicare, which comprises inpatient (Part A) and outpatient (Part B) services. Under Part C, private health plans (MA Plans) contract with CMS to cover Medicare beneficiaries who have opted out of traditional Medicare. MA Plans must cover all the services that beneficiaries would normally receive from traditional Medicare. Most plans also cover Medicare Part D (prescription drugs) and many offer additional coverages not available under traditional Medicare, including vision, hearing and dental, to attract beneficiaries. Enrollment in Medicare Advantage has exploded. According to the Kaiser Family Foundation, as of 2022, Medicare Advantage plans cover nearly 50% of the Medicare-eligible population – over 28 million persons.5

Medicare Advantage pays MA Plans a base monthly rate for each beneficiary they cover. The government makes this “per member, per month” payment irrespective of the services that patients actually receive or that Plans actually reimburse. The base rate that Medicare Advantage pays to MA Plans may increase due to risk factors that make caring for beneficiaries more challenging and costly. These risk factors include a beneficiary’s health status. If a beneficiary has a chronic illness or multiple diagnoses, a risk adjustment is made to augment the monthly base rate payment for that beneficiary. This creates a perverse incentive: MA Plans can earn more by making their beneficiaries seem sicker on paper than they are in person. This is exactly what the Department of Justice has accused the major MA Plans of doing. The Department’s allegations against Kaiser Permanente (KP) are exemplary.

On October 25, 2021, the government intervened in a whistleblower lawsuit by filing a complaint against KP and its MA Plans. The complaint accuses them of perpetrating a billion-dollar fraud against Medicare Advantage.6 The suit contends that KP combined high-tech strategies (data-mining software and algorithms) and lowtech manual chart reviews to scour patient files for missed billing opportunities – diagnoses that were not made but could be added to patient files to justify upward risk adjustments and higher monthly payments. Once it identified new diagnoses, KP purportedly cajoled and pressured physicians to add them to patient records, which would then be submitted to the government, sometimes years later, for additional reimbursement.

The following allegations from the government’s complaint against KP illustrate how the scam worked: 1) one of KP’s MA Plans directed radiologists to find evidence of calcium in the aorta and to interpret the evidence as atherosclerosis; 2) data miners subsequently searched patient files for the findings and key terms that the Plan had instructed radiologists to use; 3) the Plan then prompted physicians to review the findings, diagnose atherosclerosis of the aorta, and add the new diagnosis to their patient records to justify an upward risk adjustment and higher payment per patient.7 In this way, the Plan created an assembly line of fraud that cost Medicare Advantage millions.

The government’s claims against KP, UnitedHealth, Anthem and others are just that – claims. They have not been proven in court. What is more, it is tempting to focus exclusively on the MA Plans and their alleged misconduct, but that would be shortsighted. The government bears responsibility as well. Frauds this pervasive do not happen overnight. They take time, exploit programmatic flaws and depend on lax oversight. The government’s recent enforcement efforts are overdue and insufficient. The United States healthcare system cannot enforce its way out of its Medicare Advantage problem. It must instead adopt sensible healthcare policies that prioritize people, not profit. References 1 Health Care Fraud and Abuse Control Program Report for Fiscal

Year 2021. (2021, July). Retrieved from U.S. Department of Health & Human Services, Office of Inspector General: https://oig.hhs.gov /reports-and-publications/hcfac/index.asp. 2 Part C Improper Payment Measure (Part C IPM) Fiscal Year 2021 (FY 2021) Payment Error Rate Results. (n.d.). Retrieved from Centers for Medicare & Medicaid Services: https://www.cms.gov/ files/document/fy-2021-medicare-part-c-error-rate-findings-andresults.pdf. 3 Abelson, R., & Sanger-Katz, M. (2022, October 8). 'The Cash Monster Was Insatiable': How Insurers Exploited Medicare for Billions.

The New York Times. Retrieved from https://www.nytimes.com/2022/10/08/upshot/medicare-advantage-fraud-allegations.html. 4 Remarks of Deputy Assistant Attorney General Michael D.

Granston at the ABA Civil False Claims Act and Qui Tam Enforcement Institute. (2020, December 2). Retrieved from United States

Department of Justice: https://www.justice.gov/opa/speech/remarks-deputy-assistant-attorney-general-michael-d-granston-abacivil-false-claims-act. 5 Freed, M., Biniek, J. F., Damico, A., & Neuman, T. (2022, August 25). Medicare Advantage in 2022: Enrollment Update and Key

Trends. Retrieved from KFF: https://www.kff.org/medicare/issuebrief/medicare-advantage-in-2022-enrollment-update-and-keytrends/. 6 United States ex rel. Osinek v. Kaiser Permanente, No. 3:13-cv3891-EMC (N.D. Cal.) (#110). 7 Id. at ¶¶ 244-45.

John J. LoCurto, J.D., Assistant Professor of Medical Jurisprudence & Health Policy at The University of the Incarnate Word School of Osteopathic Medicine (UIWSOM)