A recent ruling by a federal judge in Texas has invalidated a key regulation from the Biden administration aimed at reforming Medicare Advantage (MA) oversight. This decision prevents the Centers for Medicare and Medicaid Services (CMS) from conducting audits of Medicare Advantage plans, which some view as essential to combatting fraud and ensuring accountability within the system.
The judge’s ruling particularly favored Humana, one of the leading health insurance companies in the United States. The decision highlights ongoing challenges in addressing issues within Medicare Advantage, where insurers have often been accused of exploiting loopholes to maximize profits at the expense of the public.
Medicare Advantage, designed as a market-oriented alternative to traditional Medicare, has come under scrutiny for its implementation. While it promises a more personalized and streamlined approach to healthcare, the reality often involves significant overpayments and fraudulent practices that ultimately burden taxpayers.
Two primary issues contribute to the dysfunction within the Medicare Advantage system. The first is known as “upcoding.” This occurs when insurance companies, including major players like UnitedHealthcare and Humana, diagnose patients with more severe conditions than they actually have. An example would be billing a patient who visits for a common cold as if they had pneumonia, leading to inflated costs for taxpayers.
The second issue revolves around the risk-adjustment protocols used by insurers to categorize patients for billing purposes. Unfortunately, this process often lacks oversight from qualified medical professionals. Many insurance companies employ non-physician representatives to conduct “health risk assessments” through questionnaires filled out by patients themselves. This raises concerns about the accuracy of these assessments and the appropriateness of insurance companies assessing patient health.
In 2024, insurers recorded over $19 billion in improper payments from the federal government, with projections indicating that this figure will likely increase in 2025. A report from the Inspector General revealed that approximately $7.5 billion of these improper payments stemmed from questionable health risk assessments conducted by insurers.
Given the expected surge in Medicare Advantage enrollment—potentially surpassing traditional Medicare by 2034—action is critical. Each new enrollee represents an opportunity for insurers to exploit the system further, exacerbating the financial drain on taxpayer resources.
The responsibility for addressing these issues extends beyond insurers; Washington must also reform its payment incentives for MA plan administrators. The recent court ruling complicates the plans of the Department of Health and Human Services (HHS) to enforce stricter oversight. Nevertheless, Congress still holds the power to enact meaningful reforms that could protect taxpayers and improve the system.
Various proposed bills could facilitate this change, including the NO UPCODE Act introduced by Senator Bill Cassidy. This legislation aims to improve the risk-adjustment model by extending its duration from one year to two and limiting the use of outdated conditions for upcoding. Despite its promise, the bill has yet to progress beyond committee consideration.
As Medicare Advantage continues to evolve, it is crucial for lawmakers to reach a consensus that safeguards taxpayer interests while enhancing the quality of care for patients. Medicare Advantage has the potential to be a significant solution to the challenges facing American healthcare, provided it can be returned to its foundational principles of market efficiency and patient choice.
Dr. Juliette Madrigal, a practicing physician for 19 years, emphasizes the importance of ensuring that Medicare Advantage serves its intended purpose rather than becoming a vehicle for financial exploitation. Without decisive reforms, the future of this program remains uncertain, casting doubt on its potential to alleviate the burdens of the American healthcare system.
