It's time to stop the Medicare 'Advantage' scam before Medicare is dead
William Shatner (AFP)

Congress must pass a law to stop the deceptive advertising of Medicare Advantage plans. Only Medicare should be able to call itself Medicare.

Unless you’ve been out of the country for the past few years, you’ve seen the ads on TV featuring Joe Namath, Jimmy Walker, or William Shatner hawking so-called “Medicare Advantage” plans.

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Medicare Advantage is not Medicare.

It’s private health insurance being offered to people over 65, with the bill paid for by Medicare. Once you get on an Advantage plan it’s very difficult to get off, and if you’ve been on for more than a year you may not be able to go back to regular Medicare with a Medigap plan at all.

It’s also one of the most effective ways that insurance companies are using to kill Medicare for All before it's even birthed, since almost half of all people who think they’re on Medicare are actually on these privatized plans instead.

Nearly from its beginning, Medicare has allowed private companies to offer plans to seniors that essentially compete with it, but they were an obscure corner of the market and didn’t really take off until the Bush administration and Republicans in Congress rolled out the Medicare Modernization Act of 2003.

This was the GOP’s (and a few corporatist Democrats’) big chance to finally privatize Medicare, one bite at a time.

Bush’s law authorized giant insurance companies to offer for-profit health insurance to people over 65 that competes directly with Medicare and — most egregiously — it lets those companies pretend that they’re offering Medicare by using the brand name “Medicare Advantage.”

Seniors buying Medicare Advantage plans often think — even though they know they’re getting the plan through an insurance company — that they’re somehow still in Medicare or backstopped by Medicare. The reality is they’re neither.

With Medicare Advantage, they’re at the total mercy of the insurance company providing the Advantage plan. They can deny care (and frequently do), refuse to pay for tests, and even refuse to authorize or pay for surgeries and other life-saving procedures.

This is their business model, in fact, just like with regular health insurance. The more they can deny care and claims, the more profit they make.

Most Advantage companies screw their customers just as enthusiastically and aggressively as they do customers of their regular plans, including denials, co-pays, and deductibles. And, because many elderly people don’t have the mental or technical bandwidth to challenge denials of care, the companies get away with it far more easily.

The only real difference is that these companies are paid by Medicare to do this to people, instead of by their customers. And that works out really, really well for the insurance industry, because they regularly lie to Medicare about how sick their customers are so they can make huge profits.

They can pull this off because they don’t get reimbursed directly on a person-by-person, procedure-by-procedure basis (which is how real Medicare works).

Instead, they’re guaranteed payments whether people get sick or not (just like regular health insurance premiums). That’s why the classic strategies of tying people to in-network providers, denying procedures routinely during first-pass authorization attempts, and having high out-of-pocket caps and co-pays are carried over from regular health insurance systems to Medicare Advantage to keep costs low and profits high.

Worse, though, every year, Advantage providers can submit a summary to the federal government of the aggregate “risk score” of all their customers and, practically speaking, get paid ever year a massive additional lump sum for their “increased risk.”

The higher their risk score, the larger the payment. In theory, a plan with mostly very ill people in it should get much larger reimbursements than a plan with mostly healthy people. After all, sick seniors will be costly to keep alive and healthy, while healthy seniors won’t cost much at all.

But profit-seeking insurance companies, being the predators that they are, have found a number of ways to raise their risk scores without raising their expenses. And the more they do this, the faster they drain Medicare’s trust fund straight into their money bins.

For example, many Medicare Advantage plans promote an annual home visit by a nurse or physician’s assistant as a “benefit” of the plan. What the companies are doing, though, is trying to “upcode” their customers to make them seem sicker than they are to increase their overall Medicare reimbursement risk score.

“Heart failure,” for example, can be a severe and expensive condition to treat — or a barely perceptible tic on an EKG that represents little or no threat to a person for years or even decades. So these visiting nurses look for the tiniest tick in an EKG.

Depression is similarly variable; if it lasts less than two weeks, there’s no reimbursement; if it lasts longer than two weeks, it’s called a “major depressive episode” and rapidly jacks up a risk score. So they could ask things like, “Have you ever felt down for three weeks after the death of a friend or relative?”

The home health visits are designed to look for illnesses or codings that can increase risk scores. They very much are not looking for conditions that require medical intervention. This “free home health visit” scam is so profitable that an entire industry has sprung up of companies that send nurses out on behalf of the insurance companies.

In summer 2014, the Center for Public Integrity (CPI) published an in-depth investigative report titled Why Medicare Advantage Costs Taxpayers Billions More Than It Should.

They found, among other things, that one of the most common scams Advantage companies were running involved that very scoring of their customers as being sicker than they actually are, so that their reimbursements were way above the cost of caring for those people.

Here are a few quotes from the report:

  • *“Risk scores of Medicare Advantage patients rose sharply in plans in at least 1,000 counties nationwide between 2007 and 2011, boosting taxpayer costs by more than $36 billion over estimated costs for caring for patients in standard Medicare.”
  • *“In more than 200 of these counties, the cost of some Medicare Advantage plans was at least 25 percent higher than the cost of providing standard Medicare coverage.”
  • *The report documents how risk scores rose twice as fast for people who joined a Medicare Advantage health plan as for those who didn’t.
  • *Patients, the report lays out, never know how their health is rated because neither the health plan nor Medicare shares risk scores with them—and the process itself is so arcane and secretive that it remains unfathomable to many health professionals.
  • *“By 2009, government officials were estimating that just over 15 percent of total Medicare Advantage payments were inaccurate, about $12 billion that year.”
  • *Based on its own sampling of data from health plans, the report shows how Medicare has estimated that faulty risk scores triggered nearly $70 billion in what officials deemed “improper” payments to Medicare Advantage plans from 2008 through 2013.
  • *CMS decided, according to the report, not to chase after overcharges from 2008 through 2010 even though the agency estimated through sampling that it made more than $32 billion in “improper” payments to Medicare Advantage plans over those three years. CMS did not explain its reasoning.
  • *The report documents how Medicare expects to pay the health plans more than $150 billion this year [2014, the year the study was published].

Companies are almost never nailed for these overcharges, and when they are, they usually pay back pennies on the dollar.

For example, when the Office of Inspector General, Health and Human Services (which oversees Medicare), audited six out of the hundreds of plans on the market in 2007, they found that just those six companies they looked at “had been overpaid by an estimated $650 million” for that one year.

As the Center for Public Integrity states:

“Medicare settled five of the six audits for a total repayment of just over $1.3 million.”

The Centers for Medicare and Medicaid Services (CMS) also, in 2012, decided to audit only 30 plans a year going forward. As CPI noted, “At that rate, it would take CMS more than 15 years to review the hundreds of Medicare Advantage contracts now in force.” And that’s 15 years to audit just one year’s activity!

Things haven’t improved since that 2014 investigative report from CPI. In September 2019, Senator Sherrod Brown of Ohio and five Democratic colleagues sent a letter to President Donald Trump’s CMS administrator, Seema Verma.

“The recent HHS Payment Accuracy Report exposes that taxpayers have overpaid Medicare Advantage plans more than $30 billion dollars over the last three years,” Brown wrote. “This report comes on the heels of a 2016 Government Accountability Office (GAO) report and a 2013 GAO report on [Medicare Advantage] plan overcharges and the failure of the Centers for Medicare and Medicaid (CMS) to recoup billions of dollars of improper payments from Advantage plans.”

With a tiny slice of these huge profits, Advantage companies then will pay small parts of dental, vision, hearing or even give people a bit of cash every month. It’s pure marketing, though: in exchange for what sounds like a deal, customers must put up with fewer diagnostics, regular denials of care, co-pays, and deductibles.

The National Bureau of Economic Research (NBER) compared Medicare Advantage with traditional Medicare and found the Advantage programs to be mind-bogglingly profitable: “MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending for enrollees in MA is 25 percent lower than for enrollees in [traditional Medicare] in the same county and [with the same] risk score.”

In other words, they are paid more and deliver less, keeping the balance as their profit. And it is hundreds of billions of dollars.

According to that NBER study, people with Medicare Advantage got 15 percent fewer colon cancer screening tests, 24 percent fewer diagnostic tests, and 38 percent fewer flu shots.

And it’s causing real disasters for real people.

A fellow I’d known decades ago recently bubbled back into conversation among a few of us who’d hung out together in New York back in the 1970s. Sam, I’ll call him, had turned 65 and hadn’t had employer-provided health insurance in years. He spent a few hours trying to figure out how to sign up for Medicare and then gave up, totally confused, figuring he’d try again in a few months.

Unfortunately, his prostate intervened. When Sam started experiencing pain urinating, he visited a local “doc in a box” urgent care clinic, where they gave him a PSA test. The result was shocking: his PSA was so high that it was a virtual certainty he had prostate cancer, and possibly it had even metastasized, a situation that is the second-leading cause of cancer death in American men.

Telling him that he’d be facing hefty doctor and hospital bills regardless of the outcome, the urgent care clinic signed him up for a Medicare Advantage plan offered by an affiliate that almost certainly paid them a commission for the sign-up. Sam was excited, though, because he now had insurance, and it was a “no dollar” plan that didn’t cost him a penny.

Sam then got on the phone to find a urologist who specialized in cancer. He found that the best worked out of Memorial Sloan Kettering Cancer Center in New York, and, telling them he was “on Medicare,” he made an appointment to see one of their top docs. A month later, when his appointment finally opened up, the person who was checking him into the system told him that he’d have to pay cash because his Advantage plan didn’t include Sloan Kettering.

In fact, more than a third of all Medicare Advantage plans nationwide do not include any of the National Cancer Institute centers, and none of the Advantage plans offered in the New York City area include the nation’s most famous one, Memorial Sloan Kettering Cancer Center.

Shocked, Sam contacted Medicare to see if he could transfer from Medicare Advantage to regular Medicare. This all happened in fall 2020, so they told him that he could make the change during the “open enrollment period” of October 15 to December 7. He made the change and called Sloan Kettering back.

This time, they wanted to know what Medigap policy he’d signed up for to fill in the 20 percent of billing that Medicare doesn’t cover. That sent Sam back to the internet and, ultimately, to an insurance agent, who told him that while Medigap plans can’t refuse you because of preexisting conditions when you first sign up when you turn 65, if you shift from Medicare Advantage back to traditional Medicare after that first enrollment, particularly if you’re older or sick, they can simply refuse to cover you.

Reporter Mark Miller wrote for the New York Times in February 2020 about Ed Stein, a 72-year-old man with bladder cancer and a Medicare Advantage plan that didn’t cover the cancer docs in his area who specialized in his type of cancer. He tried to shift back to traditional Medicare to cover what promised to be complex and expensive surgery and chemotherapy.

As Miller wrote:

“That was when he ran up against one of the least understood implications of selecting Advantage when you enroll in Medicare: The decision is effectively irrevocable.”

And when those customers get really, truly sick they’re sometimes in for a world of hurt.

The New York Times did an exposé of the problem last year, in an article titled “Medicare Advantage Plans Often Deny Needed Care, Federal Report Finds.” It tells the story of “Kurt Pauker, an 87-year-old Holocaust survivor in Indianapolis” who’d bought an Advantage policy from Humana:

“In spite of recommendations from Mr. Pauker’s doctors, his family said, Humana has repeatedly denied authorization for inpatient rehabilitation after hospitalization, saying at times he was too healthy and at times too ill to benefit.”

This is not at all uncommon, the Times notes:

“Tens of millions of denials are issued each year for both authorization and reimbursements, and audits of the private insurers show evidence of ‘widespread and persistent problems related to inappropriate denials of services and payment,’ the investigators found.”

If you have “real” Medicare with a Medigap policy to cover the 20% Medicare doesn’t, you never have to worry.

Your bills get paid, you can use any doctor or hospital in the country who takes Medicare, and neither Medicare nor your Medigap provider will ever try to collect from you or force you to pay for what you thought was covered.

Neither you nor your doctor will ever have to do the “pre-authorization” dance with real Medicare: those terrible experiences are part of the past.

But if you have Medicare Advantage — which is not Medicare, but privatized insurance that came about because of George W. Bush’s 2003 law to privatize Medicare — you’re on your own.

And even if you think you have a great Medicare Advantage plan, read the fine print. Every year they can change the terms of your plan without your consent, and they frequently do.

As the Times laid out:

“About 18 percent of [Advantage] payments were denied despite meeting Medicare coverage rules, an estimated 1.5 million payments for all of 2019. In some cases, plans ignored prior authorizations or other documentation necessary to support the payment. These denials may delay or even prevent a Medicare Advantage beneficiary from getting needed care…”

If Congress and the Biden Administration really want to continue to allow giant insurance companies to exploit and rip off consumers and drain the Medicare Trust Fund, there’s probably not a lot we can do, given that almost half of all seniors now have so-called Advantage plans. Unwinding this scam will be very, very difficult at this point.

But — at the very least — let’s stop the egregiously deceptive advertising. Only Medicare should be able to call itself “Medicare.”

Instead of saying on TV, “You can get Medicare and get dental and vision.” they should have to say, “You can get a private insurance plan for seniors that gives you dental and vision.”

Congress, therefore, needs to act. They should amend the 2003 Medicare Modernization Act to explicitly say that private health insurance plans of all types are forbidden from using the word “Medicare” to describe their plans in any way.

Let’s bring truth in advertising to health care for seniors and stop the destruction of what’s left of real Medicare.

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