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Whistleblower Lawsuits Allege Cost-Inflation by Medicare Advantage Providers

— April 27, 2015

It must be noted that the Center for Public Integrity (CPI) is on quite a roll lately. A few weeks ago, the investigative non-profit and 2014 Pulitzer Prize winner released an Earth-shattering report about the small circle of panel experts, many with ties to big tobacco that decides a large portion of food ingredient safety standards. This past week, the organization brought another systematic abuse to the forefront. Although Medicare fraud is not a new subject, court records uncovered by CPI reveal that at least 6 lawsuits involving Medicare Advantage, a private Medicare insurer, have been brought forth by whistleblowers under the False Claims Act for inflating “risk scores” since 2010. This includes two recent discoveries that include allegations against Blue Cross of South Carolina, and Utah-based Deseret Mutual Insurance Company. These suits indicate a loophole in the system that encourages price-inflation through risk score manipulation. Risk scores determine the degree of sickness of patients, as well as the amount of financial reimbursement by the Centers of Medicare and Medicaid Services (CMS) to the health plans that use the Medicare Advantage program. For the most part, the sicker an enrollee is determined to be, the higher the risk score and the more money that enrollee’s health provider is paid. These revelations come just months after lobbyists for Medicare Advantage won a major financial victory that circumvented planned budget cuts by CMS, in accordance with Obamacare guidelines.

Medicare Advantage enrolls nearly 17 million seniors, about a third of total Medicare enrollees, and growing both in numbers and in lobbying strength. This marks the 3rd straight year that the company has successfully prevented planned budget cuts. Generally speaking, both seniors and policy analysts have praised the program, citing that the managed care plans have low out-of-pocket costs compared to the quality of service that seniors receive. Risk score inflation by Medicare Advantage is not a new revelation to CMS, however, as an unpublished study commissioned by the agency in 2009 began tracking risk-scorings by the company since 2004. The study noted that risk scores grew twice as fast from 2004-2008 than with standard Medicare, and a 2013 Government Accountability Office (GAO) report discovered that risk scores were 4.2 percent higher from 2007-2010 under Medicare Advantage plans than they likely would have been under standard Medicare. The GAO also estimated improper payments to Medicare Advantage plans at roughly $12 billion in 2014. The company generates nearly $150 billion of the $600 billion total Medicare reimbursements and growing.

Although allegations of risk score manipulation have persisted for nearly a decade, The CPI discovery gives concrete evidence of the issue and it runs concurrent with a recent Department of Justice investigation into Humana, among other companies, regarding risk score manipulation and its cost on taxpayers. It is difficult to ascertain exactly the detailed scope of the problem because CMS, the sole-payer of these reimbursements, audits their own records. Currently, CPI is suing under Freedom of Information Act guidelines to make records of these audits public. It is also difficult to obtain the exact number of, or specific details regarding many risk score lawsuits beyond the 6 that CPI uncovered because cases under the False Claims Act are generally sealed pending completion of a government investigation. The odds are that there are several more suits, both pending and forthcoming. In addition to Humana, Deseret Mutual, and Blue Cross of South Carolina, other providers accused in these lawsuits include: Molina Healthcare of California, WellPoint, Anthem Blue Cross Blue Shield, and the parent company of 2 accused Puerto-Rican plans, Aveta Inc., among several others.



Center for Public Integrity – Fred Schulte

Healthcare Finance – Anthony Brino

Modern healthcare – Lisa Schencker

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