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Risk adjustment fraud is a growing problem in healthcare

On Behalf of | Nov 10, 2022 | Healthcare Fraud, Medicare / Medicaid Fraud

Fraudulent billing continues to be a major issue throughout the healthcare industry. We have discussed various cases and settlements over time. A topic within this realm that seems to grow in importance is the risk adjustment fraud that occurs concerning the increasingly popular Medicare Advantage plan.

What is risk adjustment fraud?

This occurs when insurers work with the federal government to provide coverage for beneficiaries. The government’s goal for managed care plans is to gain coverage for beneficiaries who are likely to be more expensive to treat than healthy beneficiaries. The carriers and others working with them attempt to take advantage of the government’s managed care models by inflating or exaggerating a patient’s risk profile with more expensive illnesses. Carriers encourage medical staff to upcode patients to a higher risk of illness, enabling them to charge more for services.

Medicare Advantage

There are different Medicare plans. Medicare C (Medicare Advantage) is a comprehensive alternative to Medicare A, which covers hospital services, and Medicare B, which is physician services. The so-called “advantage” of the comprehensive plan is that it reduces the cost of care by using a coordinated approach to managed care plans.

The private insurance carrier in Medicare C covers all the beneficiary’s costs in exchange for monthly payments by the government. This is different from the traditional fee-for-services of Medicare A and B, which directly pays bills to the hospitals and doctors.

Not a good sign

The New York Times recently dug into the numbers surrounding Medicare Advantage. It found that half of all Medicare beneficiaries will be covered under Medicare Advantage by 2023. While people are entitled to make their own choices about health care coverage, most of the prominent carriers involved in the program (United Health Group, Humana, CVS, and others) have already been accused of fraud and overbilling.

The Justice Department is already involved in 12 of the 21 healthcare fraud cases currently made public, but there are also sealed whistle-blower cases under investigation. Unfortunately, analysts point out there is not likely to be new legislation on stronger regulations for Medicare soon as politicians warily regard it as a politically lethal third rail. Critics believe this is because the industry is making too much money to stop the risk adjustment upcoding.

We will continue to follow this increasingly important issue.