Medicare Advantage health plans are blasting a government proposal this week that would keep their reimbursement rates flat next year while making other payment changes.
But some health policy experts say the plan could help reduce billions of dollars in overcharges that have been common in the program for more than a decade.
On Jan. 26, Centers for Medicare & Medicaid Services officials announced they planned to raise rates paid to health plans by for 2027, far less than the industry expected. Some of the largest, publicly traded insurers, such as UnitedHealth Group and Humana, saw their as a result, while industry groups threatened that people 65 and older could see service cuts if the government didn鈥檛 kick in more money.
In Medicare Advantage, the federal government pays private insurance companies to manage health care for people who are 65 and older or disabled. But less noticed in the brouhaha over rates: CMS also proposed restricting plans from conducting what are called 鈥渃hart reviews鈥 of their customers. These reviews can result in new medical diagnoses, sometimes including conditions patients haven鈥檛 even asked their doctors to treat, that increase government payments to Medicare Advantage plans.
The practice has been criticized for more than a decade by government auditors who say it has triggered billions of dollars in overpayments to the health plans. Earlier this month, the Justice Department announced a record $556 million settlement with the nonprofit health system Kaiser Permanente over allegations the company added about half a million diagnoses to its Advantage patients鈥 charts from 2009 to 2018, generating about $1 billion in improper payments.
KP did not admit any wrongdoing as part of the settlement.
鈥淚 do think the administration is serious about cracking down on overpayments,鈥 said Spencer Perlman, a health care policy analyst in Bethesda, Maryland.
Perlman said that while the Trump administration strongly supports Medicare Advantage, officials are 鈥渢roubled鈥 by plans that rake in undue profits by using chart reviews to bill the government for medical conditions even when no treatment was provided.
In a , CMS Administrator Mehmet Oz said curbing this practice would ensure more accurate payments to the plans while 鈥減rotecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs.鈥
鈥淭hese proposed payment policies are about making sure Medicare Advantage works better for the people it serves,鈥 Oz said.
Richard Kronick, a former federal health policy researcher and a professor at the University of California-San Diego, called the proposal 鈥渁t least a mildly encouraging sign,鈥 though he said he suspected health plans might eventually find a way around it.
Kronick has argued that switching seniors to Medicare Advantage plans has cost taxpayers tens of billions of dollars more than keeping them in the government-run Medicare program, because of unbridled medical coding excesses. The insurance plans have grown dramatically in recent years and now enroll , or more than half of people eligible for Medicare.
David Meyers, an associate professor at the Brown University School of Public Health, called the proposed restriction on chart reviews 鈥渁 step in the right direction.鈥
鈥淚 think the administration has been signaling pretty strongly they want to cut back on inefficiencies,鈥 he said.
The outcry from industry, mostly directed at the proposal to essentially hold Medicare Advantage payment rates flat, was quick and sharp.
鈥淚f finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026,鈥 said Chris Bond, a spokesperson for AHIP, formerly known as America鈥檚 Health Insurance Plans.
CMS is accepting public comments on the proposal and says it will issue a final decision on the payment rates and other provisions by early April.
Meyers said health plans often claim they will be forced to slash benefits when they aren鈥檛 satisfied with CMS payments. But that rarely happens, he said.
鈥淭he plans can still make money,鈥 he said. 鈥淭hey mostly are very profitable, just not as profitable as shareholders expected.鈥
The government pays Medicare Advantage plans higher rates to cover sicker patients. But over the past decade, dozens of whistleblower lawsuits, government audits, and have alleged that health plans exaggerate how sick their customers are to pocket payments they don鈥檛 deserve, a tactic known in the industry as 鈥渦pcoding.鈥
Many Medicare Advantage health plans have hired medical coding and analytics consultants to review patients鈥 medical charts to find new diagnoses that they then bill to the government. Medicare rules require that health plans document 鈥 and treat 鈥 all medical conditions they bill.
Yet federal audits have shown for years that many health plans鈥 billing practices don鈥檛 hold up to scrutiny.
A by the Department of Health and Human Services inspector general found that the health plans 鈥渁lmost always鈥 used chart reviews to add, rather than delete, diagnoses. 鈥淥ver 99 percent of chart reviews in our review added diagnoses,鈥 investigators said.
The report found that diagnoses reported only on chart reviews 鈥 and not on any service records 鈥 resulted in an estimated $6.7 billion in payments for 2017.
This week鈥檚 proposal is not the first time CMS has tried to crack down on chart reviews.
In January 2014, federal officials drafted a plan to restrict the practice, only to abruptly back off a few months later amid what one agency official described as an 鈥渦proar鈥 from the industry.
The health insurance industry has for years relied on aggressive lobbying and public relations campaigns to fight efforts to rein in overpayments or otherwise reduce taxpayers鈥 costs for Medicare Advantage.
What happens this time will say a lot about whether the Trump administration is serious about cracking down on controversial, long-standing payment practices in the program.
Perlman, the policy analyst, said it is 鈥渜uite common鈥 for CMS to partially backtrack when faced with opposition from the industry, such as by phasing in changes over several years to soften the blow on health plans.
David Lipschutz, an attorney with the Center for Medicare Advocacy, a nonprofit public interest law firm, said finalizing the chart review proposal 鈥渨ould be a meaningful step towards reining in overpayments to Medicare Advantage plans.鈥
But in the past, he said, even a minor change to Advantage payments has led the industry to protest that 鈥渢he sky will fall as a result, and the proposal is usually dropped.鈥
鈥淚t鈥檚 hard to tell at this stage how this will play out,鈥 Lipschutz said.
