Biden Plan to Cut Billions in Medicare Fraud Ignites Lobbying Frenzy

The Biden administration has proposed changes to how it would pay private Medicare Advantage plans.


Reed Abelson and Margot Sanger-Katz

March 22, 2023

“How’s the knee?” one bowler asked another across the lanes. Their conversation in a Super Bowl ad focused on a Biden administration proposal that one bowler warned another would “cut Medicare Advantage.”

“Somebody in Washington is smarter than that,” the friend responded, before a narrator urged viewers to call the White House to voice their displeasure.

The multimillion dollar ad buy is part of an aggressive campaign by the health insurance industry and its allies to stop the Biden proposal. It would significantly lower payments — by billions of dollars a year — to Medicare Advantage, the private plans that now cover about half of the government’s health program for older Americans.

The change in payment formulas is an effort, Biden administration officials say, to tackle widespread abuses and fraud in the increasingly popular private program. In the last decade, reams of evidence uncovered in lawsuits and audits revealed systematic overbilling of the government. A final decision on the payments is expected shortly, and is one of a series of tough new rules aimed at reining in the industry. The changes fit into a broader effort by the White House to shore up the Medicare trust fund.

Without reforms, taxpayers will spend about $25 billion next year in “excess” payments to the private plans, according to the Medicare Payment Advisory Commission, a nonpartisan research group that advises Congress.

The proposed changes have unleashed an extensive and noisy opposition front, with lobbyists and insurance executives flooding Capitol Hill to engage in their fiercest fight in years. The largest insurers, including UnitedHealth Group and Humana, are among the most vocal, according to congressional staff, with UnitedHealth’s chief executive pressing his company’s case in person. Doctors’ groups, including the American Medical Association, have also voiced their opposition.

“They are pouring buckets of money into this,” said Mark Miller, the former executive director of MedPAC, who is now the executive vice president of health care at Arnold Ventures, a research and advocacy group. Supporters of the restrictions have begun spending money to counter the objections.

The insurers say the new rule would harm the medical care of millions, particularly in vulnerable communities.

The change would force the companies to reduce benefits or increase premiums for Medicare beneficiaries, they say, with less money available for doctors to treat conditions like diabetes and depression.

The changes are “stripping funding from prevention and early disease,” said Dr. Patrick Conway, a former Medicare official who is now an executive with Optum, a subsidiary of UnitedHealth that owns one of the nation’s largest physician groups. “As you lower payments for those conditions, you are going to have direct impact on patients.”

Since the proposal was tucked deep in a routine document and published with little fanfare in early February, Medicare officials have been inundated with more than 15,000 comment letters for and against the policies, and roughly two-thirds included identical phrases from form letters. Insurers used television commercials and other strategies to urge Medicare Advantage customers to contact their lawmakers. The effort generated about 142,000 calls or letters to protest the changes, according to the Better Medicare Alliance, one of the lobbying groups involved and the one behind the bowling commercial.

The showdown underscores just how important — and lucrative — Medicare Advantage has become to insurers and doctors’ groups that are paid by the federal government to care for older Americans. Roughly $400 billion in taxpayer money went to these private plans last year. Profits on Medicare Advantage plans are at least double what insurers earn from other kinds of policies, according to a recent analysis by the Kaiser Family Foundation.

To the surprise of many in the industry, leaders in Congress have not stepped forward to vigorously defend the private plans.

In interviews this month, top administration health officials said they would not be swayed by the loud outcry from the industry.

“We need strong oversight of this program,” said Dr. Meena Seshamani, Medicare’s top official, adding that the agency was committed to “holding the industry accountable for gaming the system.”

Stacy Sanders, an adviser to Xavier Becerra, the Health and Human Services secretary, said:

“We will not be deterred by industry hacks and deep-pocketed disinformation campaigns.”

Older Americans have flocked to Medicare Advantage, finding that many policies offer lower premiums and more benefits than the traditional government program.

The insurers receive a flat rate for every person they sign up — and get bonuses for those with serious health conditions, because their medical care typically costs more.

But numerous studies from academic researchersgovernmentwatchdog agencies and federal fraud prosecutions underscore how the insurers have manipulated the system by attaching as many diagnosis codes as possible to their patients’ records to harvest these bonus payments.

Four of the largest five insurers have either settled or are currently facing lawsuits claiming fraudulent coding. Similar lawsuits have also been brought against an array of smaller health plans.

Medicare officials propose eliminating more than 2,000 specific diagnosis codes — about one-fifth of all codes — from the payment formula for these private plans. Regulators homed in on diagnoses that were not associated with more medical care. A handful of diagnoses were removed because they were prone to abuse by the private plans.

Insurers have focused their objections on three common illnesses for which codes would be removed: mild depression; vascular disease; and “diabetes with complications.”

Read More: NY Times