The Medicare Payment Advisory Commission
The Medicare Payment Advisory Commission (MedPAC) is a nonpartisan group that advises Congress on issues affecting the Medicare program. For years, MedPAC has been sounding the alarm about the impact of insurers’ diagnostic coding practices on the program’s finances. The group has estimated that these practices have resulted in billions of dollars in overpayments to Medicare Advantage plans, which are privately run insurance plans that participate in the Medicare program. MedPAC has called for changes to the program to address this issue.
The recent introduction of a bill by Senators Bill Cassidy and Jeff Merkley is the latest indication that political support for reforming the program is growing. Cassidy, a Republican from Louisiana, was among the senators who signed a letter earlier this year supporting a “stable rate and policy environment” for Medicare Advantage. But his latest bill would go further by prohibiting payments for diagnoses made from medical charts and health-risk assessments, two strategies that insurers have used to inflate their payments. The bill also calls for greater transparency in coding patterns between Medicare Advantage and other parts of the program.
The Problem with Diagnostic Coding
Insurers participating in the Medicare program are required to submit diagnostic codes for the medical conditions of their members. These codes are used to determine how much the insurers are paid for their services. However, there is evidence that some insurers are using coding practices that result in higher payments than they are entitled to.
For example, some insurers have been accused of “upcoding,” which is the practice of assigning more severe diagnosis codes than are warranted by a patient’s condition. This can result in higher payments for the insurer. Other insurers have been accused of “cherrypicking,” which is the practice of enrolling healthier patients in order to reduce their costs and increase their profits.
The problem with these practices is that they result in overpayments to Medicare Advantage plans, which are reimbursed at higher rates than traditional Medicare. This means that taxpayers are footing the bill for these overpayments. MedPAC has estimated that the difference in payment rates between Medicare Advantage and traditional Medicare has resulted in overpayments of $2 billion to $5 billion annually.
The Impact on Medicare Beneficiaries
The impact of overpayments to Medicare Advantage plans is not just financial; it can also affect the quality of care that beneficiaries receive. When insurers are paid more for certain medical conditions, they may be incentivized to provide more services related to those conditions, even if they are not medically necessary. This can result in overtreatment and unnecessary procedures, which can be harmful to patients.
Additionally, when insurers engage in cherrypicking, they may enroll healthier patients and avoid enrolling sicker patients. This can result in a skewed risk pool, which can make it more difficult for sicker patients to find affordable coverage. This is particularly problematic for beneficiaries with chronic conditions, who may require more services and therefore be more expensive for insurers to cover.
Overall, the impact of overpayments to Medicare Advantage plans can lead to a two-tiered system of care, where beneficiaries enrolled in traditional Medicare receive less funding than those enrolled in Medicare Advantage. This can result in disparities in access to care and health outcomes.
The Need for Reform
The introduction of the Cassidy-Merkley bill is a welcome sign that political support for changes to the Medicare program is growing. The bill would help address the problem of overpayments to Medicare Advantage plans by prohibiting payments for diagnoses made from medical charts and health-risk assessments. This would help ensure that insurers are not inflating their payments by assigning more severe diagnosis codes than are warranted by a patient’s condition.
The bill would also require greater transparency in coding patterns between Medicare Advantage and other parts of the program. This would help ensure that payments are being made accurately and that taxpayers are not footing the bill for overpayments.
Overall, the need for reform of the Medicare program is urgent. The impact of overpayments to Medicare Advantage plans on beneficiaries and taxpayers alike cannot be overstated. The Cassidy-Merkley bill is a step in the right direction, but more needs to be done to ensure that the program is operating fairly and efficiently for all who depend on it.
