Madrigal: Medicare Advantage long overdue for a checkup
In a recent ruling that has significant implications for American healthcare policy, a Texas District Court judge invalidated a critical Biden-era rule aimed at enhancing oversight of Medicare Advantage (MA) plans. This decision comes on the heels of ongoing debates about the efficacy and integrity of these private insurance plans, which are intended to offer a streamlined alternative to traditional Medicare. The rule, which had empowered the Centers for Medicare and Medicaid Services (CMS) to audit MA plans more rigorously, was challenged by Humana, one of the largest insurance providers in the United States, and the court sided with them. As a result, insurers may continue to exploit the system, potentially leading to further financial burdens on taxpayers.
Medicare Advantage was initially designed as a market-driven alternative to traditional Medicare, where private insurers manage Medicare benefits. However, the reality has become fraught with issues stemming from misaligned incentives that encourage overbilling and fraud. Two primary concerns have emerged: “upcoding” and flawed risk-adjustment protocols. Upcoding occurs when insurers exaggerate patients’ health conditions to secure higher payments—imagine being diagnosed with pneumonia after a routine visit for a cold. The risk-adjustment process, which is supposed to categorize patients based on their health needs, has also come under scrutiny, particularly when non-medical personnel conduct health assessments. This has led to a staggering $19 billion in improper payments in 2024 alone, with projections indicating that this figure will rise in the coming years.
The implications of this ruling extend beyond just the insurance companies; they highlight the need for comprehensive reform in Washington. As Medicare Advantage enrollment is expected to surge, potentially surpassing traditional Medicare by 2034, it becomes imperative for lawmakers to address the systemic issues that allow insurers to exploit the system. Proposed legislation, such as Sen. Bill Cassidy’s NO UPCODE Act, aims to tackle these challenges by reforming the risk-adjustment model to reduce the incentive for upcoding. However, such measures have yet to gain traction in Congress. The responsibility now lies with lawmakers to enact meaningful reforms that not only curb insurer malpractice but also restore the original intent of Medicare Advantage as a viable, cost-effective alternative for American healthcare. The ruling may have dealt a setback, but it should galvanize efforts to ensure that the Medicare Advantage program fulfills its promise to patients and taxpayers alike.
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.
