Upcoding Is Not the Problem with Medicare Advangage Plans

I’ve written before here on Substack about my personal assessment of Medicare Advantage (MA) plans. My recommendation was to abolish all MAs and return to the straight Medicare coverage. My opinion has not changed, but I continue to see the Medicare Payment Advisory Commission (MedPAC) defend MAs. More and more I read of Congress’s attempt to try to lower the cost of the MAs by cutting payment to physicians with charges of “upcoding.” Yet, as I noted in my previous post, the MedPAC 17-member panel chaired by Michael Chernew, Ph.D, continues to defend the MA plans:

I believe the Medicare Advantage program has successfully changed patterns of care in ways that have reduced overall utilization. They have enabled plans to offer better benefits to beneficiaries, financed by the plans' efficiencies as well as the payments they've received.

There’s no doubt the MA plans have reduced overall utilization. Obviously when you deny care, you are reducing utilization. There are no research studies offered by MedPAC showing that the reduction in care is actually beneficial to the patients. When patients die because hospitals won’t accept MA plans, that certainly saves money but it can hardly be called healthcare.

MA plans were misguided efforts by the United States legislators to privatize Medicare. The MA model has failed profoundly in anything accept preventing patients from gaining access to the care they need. Sure, these plans save money for consumers if you don’t need healthcare. But if you do need medical attention, you are more likely to receive that care with standard Medicare coverage and a supplemental benefit policy. There are numerous MA plans, all different, and those selling the policies can tell you of many glorious features not covered in the standard Medicare coverage, but they can’t tell you whether you can actually get approval for those services if you have the policy.

As more providers have become wary of the bureaucracy of the MA plans, more doctors are refusing to accept them. With Medicare, you are able to choose the doctor you wish to see. MA plans are managed care plans. You will not be covered if you see a doctor outside the plan. As more and more physicians refuse to participate in MA plans, you may wind up without a doctor who accepts your MA plan.

Studies old and new have largely found that MA plans cost government more than traditional Medicare on a per beneficiary basis. The Commonwealth Fund notes:

…higher costs relative to traditional Medicare will strain federal spending and the solvency of the Hospital Insurance (Part A) trust fund. With Medicare Advantage plans predicted to soon become the dominant form of Medicare coverage, it will be important to assess beneficiaries’ experiences and the long-term sustainability of the program to ensure Medicare Advantage plans provide effective, efficient, and equitable care.

These plans have a long history of being more expensive than traditional Medicare, inefficient, and user hostile. Why is anyone still trying to figure out how to make the cost look better? Why not just declare the MA model a failure and move on? The effort and expense being poured into justifying the poor performance of MA plans from the perspective of providing the same level of care as traditional Medicare could well be spent in addressing the real problems with standard Medicare—paying physicians adequately for the care they provide patients.

The consumers most satisfied with their MA plans are the people who don’t need them. In other words, if you’re looking at a potential cost savings by staying well, and never using your plan, you will be most happy with your MA plan. On the other hand, if you need healthcare, you are likely to be disappointed.

Higher MA spending threatens the solvency of the Medicare Hospital Insurance Trust Fund and increases Medicare premiums for beneficiaries in both MA plans and traditional Medicare. So declare the experiment a failure and move on.

The Medicare Payment Advisory Commission (MedPAC) recently reported that Medicare will pay Medicare Advantage plans an estimated 123% of the cost of similar beneficiaries in traditional Medicare, on average, in 2024, factoring in rebates, coding intensity (i.e., how plans record the health conditions of enrollees for payment purposes), and favorable selection…..MedPAC now estimates that these higher payments to Medicare Advantage plans translate into $88 billion in additional Medicare spending in 2024 and $13 billion in higher Medicare Part B premiums paid by Medicare beneficiaries in 2024. 
10 Reasons Why Medicare Advantage Enrollment is
Growing and Why It Matters
Tricia Neuman, et al.

Return to traditional Medicare makes sense since the MA experiment has failed. But instead of abandoning the failed experiment, legislators are accusing MA providers of fraud. Senators Cassidy, M.D., and Jeff Merkley have introduced a bill to reduce payments to providers for patient care in MA plans.

“Federal audits have found that taxpayers have been overpaying bad actors running Medicare Advantage plans by billions of dollars every year, threatening the stability of both Medicare Advantage and traditional Medicare,” said Senator Merkley. “This fraud has to end.”  

Upcoding—labeled fraud by the government— is being blamed for the higher expenses of the MA plans than that of traditional Medicare:

Medicare fraud has been determined throughout billing for unnecessary procedures, falsified claims or diagnoses, participating in illegal kickbacks or referrals, or providers prescribed unnecessary medication, also known as upcoding.⁹ Upcoding occurs when a healthcare provider submits codes for more severe and expensive diagnoses or procedures than the provider diagnosed or performed.

Medicare pays for very little of the time and care physicians provide patients in an office visit. Physicians don’t get paid for spending hours on the phone trying to get prior authorizations or hours trying to locate a physician to accept an emergency room patient who needs to be transferred to a larger hospital. Squabbling about “upcoding” avoids dealing with the real issue: physicians are grossly underpaid by Medicare for the time they spend providing care to their patients. Period.

Darrell Huff in his How to Lie With Statistics describes how to avoid dealing with the truth in argument:

If you can’t prove what you want to prove, demonstrate something else and pretend that they are the same thing. (p. 76)

One suggested solution is to limit the ability to use older “unrelated” medical conditions to inflate the cost of care. For the 10,000th time, government should stay out of medical decisionmaking. For the most part, legislators have no idea how medicine works or the value of a patient client relationship. There’s absolutely nothing wrong with submitting an entire list of patient diagnoses. If a patient is diabetic, coming to see a physician for the flu doesn’t mean the patient is no longer diabetic.

Fraudulent physician reimbursement is not the problem here. In fact, the continual reduction in physician reimbursement is a very real problem and is only going to cause more and more physicians to refuse to take Medicare and MA plans.

It’s time to consider the experiment with privatizing Medicare a failure and discard the program. We would automatically save $101 billion a year. Tightening the noose around physician necks by continually reducing their reimbursements or repeatedly making accusations of fraudulent coding and billing is only going to cause more and more physicians to refuse to accept Medicare and MA plans. Time for MedPAC and government legislators to acknowledge the real problem—continually reducing physician reimbursement—and return medical decisions to physicians.