Improper Payments in Medicare and Medicaid: Who's at Fault?

Republicans and Democrats took two very different approaches Tuesday to the issue of improper payments made by the Medicare and Medicaid programs.

"For fiscal year 2023, GAO [the Government Accountability Office] reports that Medicare reported approximately $51.1 billion in improper payments, and Medicaid is reporting $50.3 billion," said Rep. Morgan Griffith (R-Va.), chair of the House Energy & Commerce Oversight & Investigations Subcommittee, at a hearing on improper payments. "These staggering figures not only highlight the magnitude of the problem, but also signal deep-rooted systemic issues at CMS. Amidst the highest inflation in decades, and facing increased costs across all fronts, the government's fiscal irresponsibility here is unacceptable. The American people deserve better."

Rep. Frank Pallone (D-N.J.), ranking member of the full Energy & Commerce Committee, took a different approach. Although rooting out fraud and abuse in Medicare and Medicaid is important, "unfortunately, too often the existence of improper payments has been used by some as justification to undermine Medicaid and harm patients who depend on this vital program," he said. "And these [improper payment] rates most commonly represent procedural and documentation-related errors, and improper payments do not capture the rates that people are inappropriately denied or kicked off of coverage in the Medicaid program -- a problem we know is plaguing American families."

Witnesses at the hearing offered some very specific solutions. "I believe that the Medicaid improper payment estimates are understated -- as high as they are -- because there needs to be more attention in the managed care area," said Gene Dodaro, the U.S. Comptroller General. "In the Medicare area, we think that there needs to be revalidation of over 230,000 providers that were enrolled during the period where waivers were given and requirements were relaxed during the pandemic."

In addition, CMS should ask Congress for permission to use recovery auditors for pre-payment reviews in addition to post-payment reviews, "and we've recommended that Medicare make more timely audits of Medicare Advantage contracts," Dodaro said. "They've been languishing for a long time, and therefore you don't get timely repayment of improper payments."

HHS Inspector General Christi Grimm said that although the work of her office pays dividends for taxpayers, "much more can and needs to be done. We are unable to keep pace with a healthcare industry that has ballooned to one-fifth of the economy."

"We're declining 300 to 400 viable fraud cases per year because we don't have agents to work them," she continued. She gave several examples, including Medicare patients who were falsely informed that they had a fatal disease and then put into hospice care, and physicians trading opioids "for cash or worse."

"The most important thing that can be done is for Congress to take a look at that legislative proposal that would rebase our HCFAC [Health Care Fraud and Abuse Control] program, which would provide an immediate [cash] infusion," she added. "We would be able to, in the first year, hire 100 agents to get to some of the backlog and some of the serious cases that I have described."

Timothy Hill, MPA, a member of the Medicaid and CHIP Payment and Access Commission, told subcommittee members that "improper payments are not necessarily caused by fraud and may be attributable to administrative errors ... Many audits find unintentional provider errors when submitting claims" because Medicaid submissions can be very complicated.

Several Democrats on the committee noted that Medicare Advantage (MA) plans -- which get paid a set amount per patient that varies depending on how sick the patient is -- have been getting paid more on a per-patient basis compared to what the patients would have cost under the fee-for-service system, with one report estimating that MA plans were overpaid by $27 billion in 2023. But that might not be due to fraud, said Michael Chernew, PhD, chair of the Medicare Payment Advisory Commission.

Part of the reason "is the extent to which Medicare Advantage plans are better able to capture disease than in fee-for-service -- sometimes that's fraud, sometimes it's not," he said. In addition, within a group of patients who have a particular disease, the ones that tend to enroll in MA are a little healthier, but MA plans still get paid more for enrolling them due to their diagnosis, "and that raises payments as well," he noted.

The higher payments to MA "create an imbalance between Medicare Advantage and the fee-for-service system," he added. "And over time, if that were to continue, the entire Medicare Advantage program would unravel because of the way the payments in Medicare Advantage are based on fee-for-service. So I think we're at a point in the system where really rethinking the Medicare Advantage payment model is going to be necessary for fiscal reasons, for quality reasons, and for the stability of the Medicare program."

Rep. Jan Schakowsky (D-Ill.) noted that MA is run by private, for-profit insurance companies. "I think greed is part of it," she said. "Right now, we are seeing thousands and thousands of people denied care. I hear it in my office all the time. When denials are checked, we find that 80% should be overturned. The problem is that doctors are so swamped with [work] that they can't always make these complaints, so lots of people are denied the care."

While there may be some medical conditions that MA plans are better at covering, there is also the issue of plans "upcoding" their enrollees' diagnoses to make more money, Schakowsky said. "I believe that traditional Medicare -- if we could do it right and make sure people get their supplemental insurance -- that would be the way to go."

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