Dive Brief:

• Plans operated by the two largest Medicare Advantage insurers jointly overcharged the government almost $180 million in 2020 and 2021 by exaggerating the health needs of their members, according to new audits from a federal watchdog that could intensify concerns about insurers gaming the privatized Medicare program.
• HumanaChoice and UnitedHealthcare of Wisconsin frequently submitted diagnosis codes to Medicare that weren’t backed up by medical documentation, generating an extra $131 million and $47 million in reimbursement, respectively, over the two years, according to the HHS Office of the Inspector General.
• The HHS OIG suggested that the insurers refund the estimated overpayments to the CMS and beef up compliance procedures to make sure they’re not submitting unsupported codes. Humana and UnitedHealthcare both said the audit methdology was flawed and that they don’t plan to return the funds.

Dive Insight:

In MA, the federal government pays private insurers a per member, per month fee for managing the health of Medicare seniors. That payment is adjusted up or down depending on the health needs of a particular member, so that insurers are paid more for seniors who are expected to require more medical care and therefore more expensive to cover.

The purpose of this system is to level the playing field and keep plans from cherrypicking healthier members. But it also creates a significant incentive for insurers to exaggerate health needs of their members to receive higher reimbursement, a practice known as upcoding.

CMS determines MA enrollees’ health statuses by collecting diagnosis codes from MA insurers. Certain diagnoses are at a higher risk of upcoding, which is why the HHS OIG set out on a series of investigations to see whether high-risk diagnosis codes for conditions like acute stroke, heart attack, embolism and sepsis were being misused.

The watchdog’s latest audits published Tuesday zeroed in on plans operated by the two largest MA insurers in the U.S.: UnitedHealthcare and Humana, which collectively cover almost 15 million seniors in the privatized Medicare program.

The HHS OIG focused on 11 groups of high-risk diagnosis codes for the 2020 and 2021 payment years. Researchers stratified the plans’ members who had one or more of these high-risk conditions into a metric called “enrollee-years,” to parse out data for specific conditions in each time period.

Of the 220 enrollee-years the HHS OIG sampled for HumanaChoice, 178 weren’t supported by medical records, the HHS OIG found. That equates to almost $670,000 in overpayments, or about $130.9 million when extrapolated to HumanaChoice’s entire contract.

For UnitedHealthcare of Wisconsin, medical documentation didn’t support diagnoses for 183 of the 250 sampled enrollee-years, according to the HHS OIG’s report. That generated roughly $722,000 in overpayments, causing the enforcement agency to estimate the plan received at least $46.9 million in improper reimbursement for 2020 and 2021.

Types of improper coding varied, but generally boiled down to the plans recording a more severe version of a member’s actual medical condition, or including codes for diseases that a member used to have but had since recovered from, according to the report.

Both Humana and UnitedHealthcare said they disagreed with the audits’ conclusions, in part because the methodology was skewed toward finding overpayments.

The insurers told the HHS OIG they have no obligation to return the funds or perform additional reviews of their coding practices.

“Humana takes its compliance responsibilities seriously and remains committed to working with CMS and policymakers to find ways to preserve affordable coverage and effective healthcare services for older Americans,” a spokesperson for the Kentucky-based insurer said. “We strongly disagreed with the OIG’s methodology and findings, and that we have repeatedly shared our concerns about the methodology with CMS. As the OIG acknowledges, its findings and recommendations do not represent final determinations.”

“While we welcome government reviews of our Medicare Advantage program, we disagree with the current approach to validating data,” a UnitedHealthcare spokesperson said. “The flawed methodology in this report from the Office of the Inspector General is further evidence that modernization is needed, and we remain committed to working with both CMS and the OIG to improve the program and their audit processes.”

It’s not the first time the MA giants have found themselves in the spotlight over improper coding. UnitedHealthcare in particular has faced censure for its coding practices, with a Senate investigation earlier this year finding the company employs an army of coders to review medical records, incentivizes external providers to assess for certain conditions and takes other steps to aggressively capture diagnoses and maximize members’ risk scores.

Smaller insurers have also faced scrutiny. This spring, the HHS OIG audited Blue Cross and Blue Shield of Alabama, Gateway Health Plan and Priority Health and found the three insurers’ improper submissions of high-risk diagnoses drummed up $7 million, $4.3 million and $4.4 million in overpayments in 2018 and 2019.

The CMS has taken some steps to crack down on upcoding, finalizing a policy meant to stop MA plans from getting paid for diagnoses that aren’t tied to an actual medical encounter in April.