Hard-pressed to come up with significant savings to reduce the deficit, some Senate Republicans are taking a closer look at reforms to Medicare Advantage in light of reports that insurance companies are collecting billions of dollars in extra profits by over-diagnosing older patients.
But the idea of cracking down on Medicare Advantage overpayments to insurance companies divides Republicans, who have traditionally championed the program.
Proponents of Medicare Advantage reform anticipated it will face strong opposition from the insurance industry — one of the most powerful special interest groups in Washington.
Sen. Bill Cassidy (La.), the top-ranking Republican on the Senate Health, Education, Labor and Pensions Committee, is leading the push to reduce Medicare overpayments.
“Medicare is going insolvent. If we don’t do anything, it’s going to go insolvent. We have a whole package of things, all of them bipartisan, and we’re doing it essentially to have something out there so that if somebody decides to do something, there will be things that are examined, considered and bipartisan” to vote on, he said.
“I come up with lots of stuff. We thought it through policy and think it’s policy that can make it all the way through,” he said.
Cassidy’s office says his bill could extend the solvency of Medicare by saving as much as $80 billion in federal funds over the next decade without cutting benefits.
He emphasizes that it would not cut Medicare Advantage benefits, but critics of the legislation are sure to challenge that claim.
“We’re not undermining Medicare Advantage,” he said.
“In fact, I would say this is a better alternative than what CMS is doing by rule,” he added, referring to a new rule-making action by the Biden administration to recover overpayments in Medicare Advantage through the Centers for Medicare & Medicaid Services.
The Medicare Payment Advisory Panel estimates that Medicare Advantage plans collected $124 billion in overpayments from 2008 to 2023. They collected an estimated $44 billion in overpayments in 2022 and 2023 alone, according to MedPAC.
Unlike traditional fee-for-service Medicare, Medicare Advantage plans are offered by private companies. Both are funded by taxpayers through general revenues, payroll taxes and beneficiaries’ premiums.
Cassidy is also leading a bipartisan working group to reform Social Security to extend its solvency. Members include Sens. Angus King (I-Maine) and Mitt Romney (R-Utah).
“To have a significant impact on fiscal policy, you’d have to look at entitlements,” said Romney, who called Medicare Advantage “an area we’re going to be looking at very shortly — the committee will be looking at Medicare Advantage, the cost of Medicare Advantage … It’s become more expensive than the old fee-for-service Medicare.”
In a follow-up interview Thursday, Romney said senators are also looking at reforms to Pharmacy Benefit Managers, the companies that serve as intermediaries between drug manufacturers, insurance companies and pharmacies.
Romney said, “in the past, Medicare Advantage has been a lower-cost way of providing Medicare than fee-for-service Medicare.”
“If that’s changing, I’d like to understand why and make sure we don’t create impediments to the lower-cost Medicare Advantage,” he said.
Sen. Mike Braun (R-Ind.) said Medicare Advantage overpayment “definitely” is a “reform issue.”
“I’ve been the loudest voice on reforming health care and that’s a commonsense idea,” he said. “Whatever it takes to bring down health care costs.
“I’m one of the most free-market people here, but the health care industry is not a free market. It’s like an unregulated utility,” he said. “There’s so much opaqueness.”
But some Republicans are already trying to paint efforts to reduce overpayments as cuts to Medicare Advantage.
“The problem with Medicare Advantage is President Biden is cutting $540 per member per year. That’s the problem. Medicare Advantage has been very successful,” said Sen. Roger Marshall (R-Kan.), an OB/GYN who practiced medicine for more than 25 years.
National Republican Senatorial Committee Chairman Steve Daines (R-Mont.) accused Biden of “proposing Medicare Advantage cuts” when the president accused some Republicans of wanting to sunset Medicare at his Feb. 7 State of the Union address.
Medicare Advantage is getting more popular among Democrats as well as the number of blue state enrollees in the program soars. The number of Americans enrolled in Medicare Advantage has nearly doubled over the last 12 years, according to the Kaiser Family Foundation.
Cassidy’s proposal, which he introduced with progressive Sen. Jeff Merkley (D-Ore.) on Monday, could draw broader interest from Republicans.
Sen. John Cornyn (R-Texas), an adviser to the Senate GOP leadership, called Medicare Advantage a “success.”
“That doesn’t mean that it should be immune from oversight, so I’ll be interested to see what they have to say,” he said.
Cassidy and Merkley say that Medicare Advantage plans have a financial incentive to make beneficiaries appear sicker than they are because they are paid a standard rate based on the health of individual patients. Their bill, the No Unreasonable Payment, Coding or Diagnoses for Elderly (No Upcode Act) would require risk models based on more extensive diagnostic data over a period of two years.
It would also limit the ability of insurance companies to use old or unrelated medical conditions to inflate the cost of care and ensure that Medicare is only charged for treatment related to relevant medical conditions, according to a summary provided by the senators’ offices.
The goal is to narrow the disparity in how patients are assessed by traditional Medicare and Medicare Advantage.
Studies and audits conducted by CMS and the Department of Health and Human Services’ inspector general found that insurance companies collected billion of dollars in overpayments because of diagnoses that were not later supported by enrollees’ medical records.
The Kaiser Family Foundation reported in August that more than 28 million people — or about 48 percent of the eligible Medicare population — were enrolled in Medicare Advantage plans in 2022. They accounted for $427 billion or 55 percent of total federal Medicare spending.