Serving the home health, home care and hospice industry since 1999.

by Tim Rowan, editor

I became a Medicare beneficiary last year and selected Kaiser Colorado as my supplement. I had my reservations about choosing a Medicare Advantage HMO but had heard so many good things about Kaiser, I decided to give it a chance for a year or two.

I am also a U.S. taxpayer.

As I read the OIG report referenced and quoted by my friend Elizabeth Hogue, Esq., in this week's issue ("What Providers Should Do About Denials From Medicare Advantage Plans"), I began to have doubts about my insurance choice, and to get a little hot under the collar about how my taxes are being used. Let's break down the OIG report into its simple math:

  • This year, there are 20 million Medicare Advantage Organization (Part C) participants. In 2016, the third year of the OIG analysis, there were 17.6 million. Those Plans almost always include Medicare Part D.
  • 75% of denials of requests for care are overturned upon appeal every year (2014-2016 was the study range), adding up to 216,000 overturned denials per year.
  • MAO members and their providers appeal merely 1% of these denials.
  • 216,000 is 75 percent of 288,000. This should approximate the total number of appeals per year.
  • If 288,000 appeals is one percent of all denials, there were 86.4 million denials from 2014 to 2016, 21 million of them overturned at the first level of appeal.
  • Apply the 75% overturn rate and 21.6 million might have been overturned but weren't because no one appealed.
  • Extrapolate to this year's 20 million participants and there should be about 24 million improper denials this year unless CMS acts on OIG recommendations.

And that's not all

According to the OIG, the situation is actually worse than this. "During the same period [2014-2016], independent reviewers at higher levels of the appeals process overturned additional denials in favor of beneficiaries and providers." So the rate of improper denials is actually higher than 75 percent but the OIG report does not provide exact numbers for subsequent appeal levels.

Applying hard dollars to percentages reveals scope

As far as I know, there are no usable figures on cost per claim or cost avoided per denial. These could both range anywhere from a physician office visit to a month in the hospital. What we do know is that CMS pays MAO plans per enrollee, not a reimbursement fee per service provided. While the rate per enrollee is adjusted for local circumstances in each market, it usually falls in the $900 to $1,100 per enrollee per month range for 4-star Plans, a little less for lower-performing Plans.

Using $1,000 for simplicity, that puts the MAO industry's gross revenue at $20 billion per month, $240 billion per year. MAO members pay some of that in the form of subsidized premiums, roughly $100 per month for Part C and Part D coverage, on top of their Part B premium (regardless of what you might hear on TV commercials, there is no $0 MA plan; they do not pay the $134 per month Part B premium for members), leaving about $216 billion per year to be paid to MAO Plans from the Medicare Trust Fund.

Should this be legal?

If these insurance companies are enhancing profits by preventing their members from getting care they need, care that taxpayers thought they were helping to provide, that may make for a healthy quarterly report to shareholders and healthy support for your 401(k), but at what cost to your parents' health? The OIG has strong language in answer to this question.

"The high number of overturned denials raises concerns that some Medicare Advantage beneficiaries and providers were initially denied services and payments that should have been provided. This is especially concerning because beneficiaries and providers rarely used the appeals process, which is designed to ensure access to care and payment.

CMS audits highlight widespread and persistent MAO performance problems related to denials of care and payment. For example, in 2015, CMS cited 56 percent of audited contracts for making inappropriate denials. CMS also cited 45 percent of contracts for sending denial letters with incomplete or incorrect information, which may inhibit beneficiaries' and providers' ability to file a successful appeal. In response to these audit findings, CMS took enforcement actions against MAOs, including issuing penalties and imposing sanctions. Because CMS continues to see the same types of violations in its audits of different MAOs every year, however, more action is needed to address these critical issues." (emphasis added)

Look at that last line closely. Despite enforcement actions, penalties, and sanctions, the violations continue, not just with a few dishonest MAOs but with all of them. These Plans are absorbing CMS corrective efforts as a cost of doing business. Clearly, CMS efforts are not severe enough to change behavior. What are CMS and Congress going to do about it? We found this headline in the April 2 edition of Healthcare Finance. I think it was a mistake. They should have dated it one day earlier.

Medicare Advantage plans get a rate increase in Centers for Medicare and Medicaid Services final rule released Monday

"Medicare Advantage plans get a 3.4 percent payment increase in 2019, which is above the 1.84 percent proposed, the Centers for Medicare and Medicaid Services announced late Monday afternoon."


©2018 by Rowan Consulting Associates, Inc., Colorado Springs, CO. All rights reserved. This article originally appeared in Tim Rowan's Home Care Technology Report. One copy may be printed for personal use; further reproduction by permission only.