To cut ‘waste and fraud,’ reform Medicare Advantage

The program was supposed to save the government money. It doesn’t.

The Washington Post

Editorial Board

Republicans in Congress have made a lot of noise about eliminating “waste and fraud” in federal health-care spending. If they were serious about this goal, they would start by overhauling something they long have championed: Medicare Advantage.

The program, in which private insurers oversee older people’s health benefits, was designed on the idea that the private sector could deliver medical coverage more efficiently than government-run, fee-for-service Medicare. But it has proved to be a boondoggle.

Costs have exploded for the Advantage program, which now insures most Medicare beneficiaries. This year, the government is expected to pay about $84 billion more for people using Medicare Advantage than if they had used traditional Medicare, according to a report from the Medicare Payment Advisory Commission.

This is partly a result of the complicated way the government pays Medicare Advantage companies. People on these plans are typically healthier than those on traditional Medicare, so if they were on a fee-for-service model, they would be less expensive for the government to cover. Instead, with Medicare Advantage, the government pays insurers a flat fee based on the average cost of (more expensive) traditional Medicare patients.

Another big reason for the higher cost is exactly the sort of “waste and fraud” that everyone wishes to excise from government. The government developed a formula to incentivize insurers to cover sick patients by paying the companies more for patients with greater health risks. Insurers responded as might have been expected: They started playing with patients’ medical codes to make them seem less healthy than they were — and therefore more profitable.

This practice — known as “upcoding” — has been well-known for decades, but insurers have become ever more brazen in gaming the system... CONTINUE READING