Medicare Advantage Audits Reveal Inflated Health Conditions for Payments

Recent audits by the U.S. Department of Health & Human Services Office of Inspector General (HHS OIG) have revealed that Medicare Advantage (MA) plans operated by HumanaChoice and UnitedHealthcare in Wisconsin reported inflated member health conditions.

These findings have significant implications for the reimbursement structure in MA plans, where payments are adjusted based on the health conditions of enrollees. The goal is to ensure equitable fund distribution and minimize incentives to enroll only healthier individuals. However, inaccurately reporting more severe conditions—or "upcoding"—leads to higher Medicare payments, straining the overall system.

Audit Findings and Financial Impact

The HHS OIG investigations focused on 11 diagnosis groups considered high-risk for upcoding, which included critical conditions like heart attacks and sepsis for the years 2020 and 2021. For HumanaChoice, approximately 81% of sampled diagnoses lacked medical record support, translating to nearly $130.9 million in questionable payments when applied across the plan. UnitedHealthcare had similar issues, with discrepancies in 73% of cases and improper reimbursements estimated at $46.9 million.

Disputes and Industry Reactions

Both Humana and UnitedHealthcare have contested the audit results, critiquing the methodology used by the HHS OIG. Humana asserts its commitment to regulatory compliance and has raised concerns with the Centers for Medicare & Medicaid Services (CMS). UnitedHealthcare also emphasizes the need for modernization in evaluating data accuracy within the MA program. This situation highlights ongoing scrutiny in the MA sector, where other insurers have faced similar challenges.

• HumanaChoice: 81% of sampled cases unsupported, $130.9M in questionable payments
• UnitedHealthcare: 73% of sampled cases unsupported, $46.9M in questionable payments
• CMS aims to enhance audit scope and coding workforce

Regulatory Response and Future Implications

In response to these findings, CMS has implemented policies to ensure that MA plans are reimbursed only for conditions verified through actual medical encounters. The agency plans to expand MA audits' scope and bolster its coding workforce to maintain payment integrity and ensure accurate compensation for Medicare beneficiaries' care. Such changes signal potential shifts in regulatory oversight and insurance operations within the Medicare Advantage market.

Broader Industry Context

The MA sector has seen criticism for aggressive coding practices to boost diagnosis rates, which may lead to substantial overpayments. Past audits of other insurers, like Blue Cross and Blue Shield of Alabama, Gateway Health Plan, and Priority Health, have uncovered similar patterns. As these investigations unfold, the insurance industry should prepare for enhanced scrutiny and potentially stricter regulatory requirements.