Plans overseen by insurers through Medicare Advantage, the private sector alternative to Medicare, the enormous public health program for the nation’s elderly, are coming under criticism for a pattern of “pervasive overcharging.”

Audits by the Centers for Medicare & Medicaid Services of 37 Medicare Advantage plans in 2007 found that many of them overbilled the federal government, often by exaggerating the severity of a patient’s condition.

The audits from nearly a decade ago were only recently made public because of an open records request from the Center for Public Integrity, an investigative reporting organization.

When trying to rein in the cost of traditional Medicare, the focus has been on providers that have been ordering too many tests or recommending unnecessary expensive procedures or medications.

The issue with Medicare Advantage, according to a number of audits, are the insurers overseeing the plans.

The overbilling is tied to the way that Medicare Advantage plans are reimbursed for their services. Unlike the traditional fee-for-service model, the amount Medicare Advantage plans are paid is based on the patient’s “risk score.” The sicker the patient, the higher the reimbursement.

Overstating a patient’s sickness may be an even easier (and less costly) way for insurers or providers to bilk the federal government for money than ordering up unnecessary tests, since the latter does in fact cost the provider.

Insurers overbilled by at least $2,000 for at least 3,500 patients in 2007, when Medicare Advantage was still relatively new. For 150 patients, the overbilling was over $10,000.

Nine years later, however, some of the insurers are still in the midst of disputing the findings of that audit. Some have refunded the feds for their alleged overcharges.

The two health plans that were not identified as culprits — Group Health Plan Cooperative and Kaiser Foundation Health Plan of California — are both nonprofits in the Golden State.

While there is not much publicly-available data on the issue of overbilling or “upcoding” more recently, a report by the Government Accountability Office earlier this year warned that it remained a serious issue.

"We think that CMS has a lot of work to do," James Cosgrove, the head of the GAO's health care division, told NPR.

Instant Insights /

Audits show overcharges for Medicare Advantage plans

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