Public Integrity has a good report on Medicare Advantage over-coding. The Center for Medicare and Medicaid Services (CMS) conducts annual audits of Medicare Advantage carriers to see if the chart data supports the diagnosis codes that build a case that a member is more expensive and needs a bump payment from CMS to make the insurer whole. CMS conducted 37 audits in 2007 and thirty four of the plans had at least 10% of their claimed risk adjustment cases judged to be unsupported by the medical records. One carrier had, in my mind, de minimis variation (2%) and two carriers were spot on. On the other hand seven carriers or about 20% of the sample had at least 60% of their risk adjustment claims judged to be unsupported by documentation in the chart.
Why is this important?
It is important for a couple of reasons. First, this is a rip-off of public money. Medicare Advantage has a history of upcoding the risk adjustment model. The same patient in traditional Fee for Service Medicare looks a lot healthier based on claims data than if they are in an aggressively upcoded Medicare Advantage plan. That means the Medicare Advantage plan gets extra bump payments that are either sent back to members as added benefits, sent to provider as higher payments or consumed by company insiders and owners as hookers and blow.
Secondly, there has been tentative industry discussion/advocacy to move the Exchange/QHP risk adjustment model of revenue neutral flows towards the Medicare HCC bump payment system. That would change the Red Queen race incentive that rewards technically sophisticated coding operations at the expense of naive or data poor coding operations towards a Cash Dash against the Federal government. I’m not too thrilled with this idea.
So how does CMS stop it? There are three ways that limit overpayments and one that could reduce legitimate discrepancies.