Humana Inc. overcharged Medicare by nearly $ 200 million, federal audit says

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A Humana Inc. health plan for the elderly in Florida improperly raised nearly $ 200 million in 2015 by overestimating the illness of some patients, according to a new federal audit, which aims to recover the money.

Health and personal services Office of the Inspector General The recommendation to reimburse, if finalized, would be “by far the biggest” audit sanction ever imposed on a Medicare Advantage company, said Christopher Bresette, a deputy regional inspector general for HHS.

“This [money] must come back to the federal government, ”he said in an interview.

Humana strongly contested the findings of the audit, which was due to be released on Tuesday. A company spokesperson said Humana will work with Medicare officials “to resolve this review” and noted that the recommendations “do not represent final decisions, and Humana will have the right to appeal.”

Medicare Advantage, a fast-growing private alternative to original Medicare, has registered more than 26 million people, according to US Health Insurance Plans, an industry trade group. Humana, based in Louisville, Ky., Has approximately 4 million members and is one of the largest of these insurers.

Although popular with the elderly, Medicare Advantage has been the target of several governments surveys, Department of Justice and whistleblower lawsuits and Medicare audits this concluded that some plans were increasing their government payments by exaggerating the severity of the illnesses they were treating. A 2020 report estimated irregular payments to plans topped $ 16 billion the previous year.

But efforts to recover even a tiny fraction of overpayments in recent years have stalled amid strong industry opposition to government audit methods.

Now, the OIG is deploying a series of audits that could, for the first time, test health plans from reimbursing tens of millions of dollars or more to Medicare. The OIG plans to publish five to seven similar audits within a year or two, officials said.

The Humana audit, conducted from February 2017 to August 2020, linked the overpayments to medical conditions that pay the health plans extra because they are expensive to treat, such as some cases of cancer or diabetes which lead to severe medical complications.

The auditors examined a random sample of 200 patient medical records to ensure that patients had the diseases that the health plans were paid to treat, or that the conditions were as serious as the health plan claimed.

For example, Medicare paid $ 244 per month – or $ 2,928 per year – for a patient with severe complications from diabetes. But medical records provided by Humana did not confirm this diagnosis, meaning the health plan should have received $ 163 less per month for patient care, or $ 1,956 for the year, according to the. audit.

Likewise, Medicare overpaid $ 4,380 in 2015 for the treatment of a patient whose throat cancer had been resolved, according to the audit. In other cases, however, auditors said Medicare underpaid Humana by thousands of dollars because the plan had incorrect billing codes.

Ultimately, auditors said Medicare overpaid Humana by $ 249,279 for the 200 patients whose medical records were scrutinized in the sample. Based on these 200 cases, the auditors used a technique called extrapolation to estimate the prevalence of such billing errors in the health plan.

“As a result, we estimated that Humanana received at least $ 197.7 million in net overpayments for 2015,” the audit said, adding that Humanana’s policies to avoid these errors “were not always effective ”and need to be improved.

The OIG notified Humana of its findings in September 2020, according to the audit. The final decision on collecting the money rests with the Centers for Medicare & Medicaid Services, or CMS, which manages Medicare Advantage. Under federal law, the OIG is responsible for identifying waste and mismanagement in federal health care programs, but can only recommend reimbursement. CMS did not comment.

Although controversial, extrapolation is commonly used in medical fraud investigations – with the exception of Medicare Advantage investigations. Since 2007, the industry has criticized the extrapolation method and, therefore, liability avoided for widespread billing errors.

Industry protests aside, OIG officials say they are confident their improved audit tools will stand up to scrutiny. “I think what we have here is solid,” said Bresette, head of the BIG.

Michael geruso, an associate professor of economics at the University of Texas-Austin who has researched Medicare Advantage, said the extrapolation “makes perfect sense” as long as it is based on a random sample.

“It appears to be a healthy step forward for the OIG to protect the American taxpayer,” he said.

The OIG used the extrapolation technique for the first time in February Audit of Blue Cross and Blue Shield of Michigan who discovered $ 14.5 million in overpayments for 2015 and 2016. In response, Blue Cross said it would take action to uncover payment errors in other years and repay $ 14.5 million. Blue Cross spokeswoman Helen Stojic said the process “is still ongoing.”

But Humana, with a lot more money at stake, retaliates. Humana “takes great pride in what the company considers to be its cutting edge approach” to ensuring correct billing, wrote Sean O’Reilly, the company’s vice president, in a December 2019 letter to the OIG which criticized the ‘audit.

O’Reilly wrote that Humana “has never received any comments from CMS indicating that their program is flawed in any way.”

The nine-page letter argues that the audit “reflects misunderstandings relating to certain statistical and actuarial principles and legal and regulatory requirements”. Forcing Humana to reimburse the money “would represent a serious departure from the legal requirements underlying the [Medicare Advantage] payment model, ”the company said.

Humana persuaded the OIG to reduce its initial estimate of the overpayment by about $ 65 million. In 2015, Medicare paid the plan about $ 5.6 billion to treat about 485,000 members, mostly in South Florida.

Humana is not alone in disapproving of audits.

AHIP, the industry’s trade group, has long opposite extrapolation of payment errors, and in 2019 called for a CMS proposal to start doing so “fatally flawed”. The group did not respond to requests for comment.

Healthcare industry consultant Richard Lieberman said insurers remain “fiercely opposed” and would likely go to court to try to avoid any multi-million dollar penalty.

Lieberman noted that CMS has “hesitated” in deciding how to protect taxpayer dollars because Medicare Advantage plans have grown rapidly and cost taxpayers more than $ 200 billion a year. CMS says it hasn’t finished yet its own audits dating from 2011, which have been overdue for years.

The dispute has been largely invisible to patients, who are not directly affected by overpayments to the plans. Many seniors sign up because Medicare Advantage offers benefits not included in the original Medicare and may cost them less, although this limits their choice of doctors.

But some critics argue that inaccurate medical records pose a risk of inappropriate treatment. Dr Mario Baez, physician from Florida and Alert launcher, said older people can be “put at risk because of false information in their medical records.”

Kaiser Health news is an independent newsroom and a program of the Kaiser Family Foundation and is not affiliated with Kaiser Permanente.



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