Madrigal: Medicare Advantage long overdue for a checkup
In a significant setback for Medicare reform, a Texas District Court judge recently struck down a Biden-era rule that enabled the Centers for Medicare and Medicaid Services (CMS) to closely audit Medicare Advantage (MA) plans. This ruling comes amid ongoing concerns about the integrity of the MA system, which is supposed to offer a free-market alternative to traditional Medicare. Instead of improving patient care, the current system has been plagued by issues such as overbilling and fraud, largely benefiting insurance companies like Humana and UnitedHealthcare at the expense of taxpayers. With improper payments from MA plans projected to exceed $19 billion in 2024, the need for rigorous oversight has never been more critical.
The judge’s decision has raised alarms among healthcare advocates, who argue that MA plans often engage in practices like “upcoding,” where insurers exaggerate patient diagnoses to secure higher payments from the government. For instance, a routine visit for a cold could be misrepresented as a severe illness, leading to inflated bills that do not reflect actual patient care. Additionally, the reliance on non-physician representatives to conduct health risk assessments further complicates the issue, as these assessments can lead to improper billing practices. With Medicare Advantage enrollment expected to surge in the coming years, the potential for further exploitation of the system looms large, necessitating immediate action from Congress to reform payment incentives and enhance oversight.
Despite the judicial ruling, the fight for Medicare reform is far from over. Lawmakers have the opportunity to introduce meaningful legislation to address the flaws in the Medicare Advantage system. Proposed bills, such as Senator Bill Cassidy’s NO UPCODE Act, aim to refine the risk-adjustment model used by insurers, extending its duration and limiting the use of outdated conditions that encourage upcoding. As enrollment in Medicare Advantage plans is anticipated to surpass traditional Medicare by 2034, it is imperative that Congress acts swiftly to implement reforms that not only protect taxpayer dollars but also ensure that patients receive the quality care they deserve. The future of American healthcare policy hinges on the ability of legislators to hold insurers accountable and return Medicare Advantage to its intended purpose as a beneficial alternative for seniors.
As if shutting the government down in the name of health insurance subsidies wasn’t enough, a federal judge took an axe to another meaningful way to reform American health policy – auditing bad actors in Medicare Advantage.
A District Court judge in Texas recently invalidated a Biden-era HHS rule that allowed the Centers for Medicare and Medicaid Services to examine Medicare Advantage plans and the insurance companies profiting from them more closely. It’s not surprising that Humana, a top-100-ranked company in the U.S. by market cap, disputed this rule and won the case.
Insurers will continue to try to take advantage of the average taxpayer to boost their bottom line. But this ruling doesn’t mean that the government should give up the fight to clean up Medicare Advantage. If anything – they need to get more creative about the solution.
Here’s the situation: Medicare Advantage (MA) is a working free-market alternative to Medicare in theory. Private administrators, in the form of insurance companies, take the reins of Medicare plans and offer a more personalized, streamlined plan in lieu of a traditional Medicare plan.
In practice, the system is all but broken due to misaligned government incentives. MA plan administrators create massive amounts of overpayments and fraud all on the American taxpayer’s dime, with not a cent of that overpayment going to treat patients.
For MA plan administrators, we can distill their faults into two different buckets.
The first bucket is colloquially known as “upcoding.” Upcoding happens when an insurance company like UnitedHealthcare or Humana aggressively diagnose patients with conditions far worse than what they actually have. Consider visiting the doctor for a common cold and then being billed for something as severe as pneumonia.
A second bucket is Medicare Advantage’s risk-adjustment protocols. Insurers love to categorize patients into different risk-adjusted pools to accurately bill them, and therefore, the government. Except that entire process gets called into question when the ones doing the risk-adjusting are not medical professionals.
Non-physician risk-adjustment programs are all too common for the insurance giants in America. Often, these companies send their own representatives and provide patients with “health risk assessments,” which are essentially glorified questionnaires that patients must complete on their own. Insurance companies shouldn’t be the ones diagnosing patients – that’s a job for doctors.
Medicare Advantage administrators combine these two issues into a murky mixture of overbilling and inadequate attention to real patient care, instead focusing on billing departments. Insurers racked up over $19 billion in improper payments from the federal government in 2024, with the figure expected to rise in 2025. Furthermore, an Inspector General’s report found that an increasing amount of these improper payments is directly from insurer Health Risk Assessments, amounting to approximately $7.5 billion.
Regulators and lawmakers must control this overbilling problem now. Medicare Advantage enrollment is expected to skyrocket in the next decade, potentially eclipsing traditional Medicare enrollees by 2034. Each new enrollee is another opportunity for insurance companies to game the system and drain taxpayer dollars.
But importantly, the blame shouldn’t rest only with insurers. It takes two to tango, and Washington needs to do its part to fix its payment incentives for MA plan administrators.
The District Court’s decision certainly throws a wrench into any future plans from HHS to keep insurers in check. But that doesn’t mean the fight should end in Washington. Now, it’s up to Congress to pass legislation to reform Medicare Advantage and keep insurers in check equally.
Existing bills from lawmakers can do this well. Sen. Bill Cassidy’s NO UPCODE Act would fix the risk-adjustment model by extending its duration to two years instead of one and limiting the use of outdated conditions to upcode more frequently. But NO UPCODE hasn’t gone past a committee introduction. It’s up to Congress to reach a fair deal that saves taxpayers’ money, which could provide a significant boost in time for the midterm elections.
Medicare Advantage should be one of the best solutions for American health policy woes. It keeps costs in check and allows patients the freedom to choose providers they like. To make it the best version it can be, Washington needs to return it to its free market roots.
Dr. Juliette Madrigal has been a practicing physician for 19 years.
