Medicare Advantage Program Enforcement: Increased Publicity May Lead to Increased Scrutiny

Merle M. DeLancey Jr. and Lyndsay A. Gorton

Merle DelanceyLyndsay A. GortonOn May 19, 2015, the chairman of the Senate Judiciary Committee, Senator Charles E. Grassley (R-IA), requested information from United States Attorney General Loretta Lynch and Andrew M. Slavitt, Acting Administrator for Centers for Medicare and Medicaid Services (CMS) regarding how the agencies are working together and separately to prevent Medicare Advantage fraud. Senator Grassley’s letters rely on April 2015 investigative findings issued by the Center for Public Integrity for his assertion that there is “an increasing number of lawsuits against insurance companies” for Medicare Advantage fraud, and the Government Accountability Office’s (GAO) 2015 Annual Report, which suggests that CMS “could save billions of dollars by improving the accuracy of its payments to Medicare Advantage programs. . . .” To ensure that CMS has the appropriate “safeguards” in place to prevent fraud, Senator Grassley requested answers to the following questions by June 3, 2015:

  1. What steps has the Department of Justice (DOJ) taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores?
  2. Is DOJ working in conjunction with CMS to investigate risk score fraud? If not, why not?
  3. In the past five years, how many Medicare Advantage risk score fraud investigations has DOJ conducted? Of the investigations, how many have resulted in criminal and/or civil sanction?

Senator Grassley’s letters were sent only weeks after CMS issued its 2016 Rate Announcement and Call Letter on April 6, 2015. After accepting and reviewing comments on its Advance Notice and Draft Call Letter, which estimated a 0.95 percent decrease in revenue for plan providers, the April 6 announcement estimated a 3.25 percent increase in revenue based on finalized 2016 rates. Neither the Attorney General nor CMS has responded to Senator Grassley’s requests.

What is Medicare Advantage?

Medicare Advantage, also known as Medicare Part C, delivers Medicare Parts A and B coverage through a private insurer. CMS issues the Program’s reimbursement rates on a yearly basis. To incentivize companies to participate in Medicare Advantage, the program uses “risk scores” to determine how much a sponsor will be paid for each member of a plan. The higher the risk score of a plan member, the more the company is paid for that member’s plan. Because payments are based solely on the number of members enrolled at each risk score, and not on the services a beneficiary receives, there exists the temptation to sign up as many members as possible whether they need it or not. Recently, several whistleblower lawsuits demonstrating that very concern have been made public. One such lawsuit revealed a memorandum that allegedly was sent around a physicians’ practice encouraging the doctors to bring in elderly patients to sign up for Medicare Advantage by promising them complimentary parking and waiving copays. Though DOJ determined that there was no wrongdoing, and accordingly did not intervene in the case, the lawsuit, and others like it, highlight the concerns with and potential abuses of the Medicare Advantage program.

What Effects Would Increased Scrutiny Have for Plan Sponsors?

The potential effects of Medicare Advantage fraud enforcement include CMS enforcement actions and whistleblower lawsuits under the False Claims Act (FCA).

  1. Enforcement Actions. An “enforcement action” is the result of a plan sponsor’s substantial or repeated noncompliance with its contract with CMS. Enforcement actions may come in several forms, from civil monetary penalty up to program termination. Intermediate sanctions may include suspended plan payments or the removal of the company’s ability to enroll any new Medicare beneficiaries into its Medicare Advantage programs. Now, with heightened public scrutiny from the legislature and media on Medicare Advantage, CMS may determine that it must focus more resources on ferreting out fraud in those programs.
  2. Whistleblower Lawsuits. Whistleblowers may bring actions under the FCA on behalf of the government if they find evidence of fraud. As more sealed cases are made public, more whistleblowers could come forward with greater confidence that they will not suffer retaliation. Even if frivolous, these types of lawsuits could force sponsors to spend millions of dollars in litigation.

What Can You Do Now to Prevent Future Issues?

First, and most simply, know the law and abide by it. It is impossible for a plan sponsor that does not know what is legal and illegal to administer its plan legally. Second, confirm that all required information, including billing information, is correct and complete. Third, implement a compliance program to ensure that the plan sponsor is fulfilling the required competencies for Medicare Advantage providers. Finally, report any violations promptly. All Medicare Advantage plan sponsors are required to have a mechanism to report abuses and no sponsor may retaliate against an employee for making a report. Finding and actively resolving any violations could save millions of dollars in litigation costs years in the future.