70 billion reasons why Medicare Advantage just got harder to defend

Welcome to Health Reform Watch, Jason Millman's regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Jason with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, or sign up here to receive it straight from your inbox. Read previous columns here.

For the past two years, the Obama administration has backed down from making steeper cuts to the Medicare Advantage program after intense lobbying efforts from the insurance industry and lawmakers across the political spectrum. Such cuts, they warned, could force insurers participating in the optional health-care program for seniors to hike premiums and reduce benefits.

Obamacare is supposed to cut the Medicare Advantage program by $156 billion over a decade to reduce the bloated program serving about 16 million seniors. Insurers as of 2009 had been reimbursed 14 cents more on the dollar for Medicare Advantage beneficiaries compared to seniors in the traditional program, and the Affordable Care Act is supposed to close that gap.

Now, a new investigation from the Center for Public Integrity finds that insurers have been taking in much more money than they should have from the $150 billion-a-year program. Between 2007 and 2011, insurers netted $70 billion in improper payments from a program design flaw, according to the center's review of enrollment data, government audits, research papers and other documents.

CPI's report describes how insurers are bringing in the extra payments through Medicare Advantage's "risk scoring" system, which pays insurers higher rates for patients in worse health. It's been known for a while that insurers have been benefiting from the risk scoring system — essentially reporting that patients are sicker than they actually are — but CPI's investigation finds the problem is much larger than previously described.

A 2012 report from the Government Accountability Office found overly generous risk scoring amounted to $3.9 billion to $5.8 billion in overpayments to insurers in just 2010. Another GAO report the following year found that excessive payments due to risk scoring increased each year between 2010 and 2012.

So, what do Medicare officials have to say about this? Perhaps tellingly, the Centers for Medicare and Medicaid Services "repeatedly refused" interviews or to answer written questions, CPI said. A spokeswoman for America's Health Insurance Plans, the industry's top lobbying group, told CPI that it's "working together" with federal officials to improve risk scoring.

Obamacare's cuts to Medicare Advantage have, not surprisingly, been used against Democrats as a political weapon. That goes to explain why Medicare eased off on proposed cuts the past two years, and why HHS created a temporary $8 billion Medicare Advantage demonstration program that the GAO said the department had no authority to create.

The CPI report, though, makes it harder to defend further over-subsidizing the program, and it could put pressure on HHS to release more information on Medicare Advantage payments. CPI last week filed a Freedom of Information Act lawsuit against HHS to provide information about billing data, program audits and health plans suspected of overcharging.

HHS has taken important steps in the past year to provide greater Medicare transparency, like releasing hospital pricing data and detailing what Medicare pays doctors. Though, the doctor payment data was only released after a court order and over the very vocal objections of doctors themselves.

Medicare Advantage seems like the next obvious place for some more sunlight.

Top health policy reads from around the Web:

Fixing broken state exchanges ain't cheap. "Five states that launched health exchanges under the Affordable Care Act expect to spend as much as $240 million to fix their sites or switch to the federal marketplace, a Wall Street Journal analysis shows. ... Funds may come from the states, remaining federal grants and new federal requests. The fresh spending is fueling a pitched debate in some states that could shape how residents buy their health insurance. Some local lawmakers say upgrading or sustaining the exchanges could deplete funding for roads, education or other vital programs." Stephanie Armour in the Wall Street Journal.

An Obamacare supporter's fix for the employer mandate. "One provision of the ACA that cries out for repair is the employer mandate. The Urban Institute has recently raised the question, 'Why Not Just Eliminate the Employer Mandate?' Conservative advocacy groups have called for its repeal for some time. Repeal of the employer mandate might, in fact, not be such a bad idea, as long as the current mandate was replaced with a better alternative." Timothy Jost in Health Affairs.

Another renewed push for mental health reform. "Members of Congress are again talking about how to prevent gun violence, but the conversation has shifted away from changing firearm laws to reforming mental health programs. The renewed push for reform comes nearly two weeks after a man with a documented history of mental illness killed six people in Isla Vista, Calif. ... Instead of focusing on the weapon used, [Rep. Tim] Murphy and several of his colleagues are pushing for changes in federal government programs for the 'severely mentally ill' so more people can get treatment before it is too late." Jackie Kucinich in the Washington Post.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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