When someone files a claim with their health insurance company, they expect that it will be processed fairly. What goes on behind the scenes is a complicated process — many people outside the system don’t understand it — and patients have to trust that this network of strangers is working in their best interests. They don’t really have another choice.
Unfortunately, health insurance companies do not always act honestly when reviewing claims made by their policy holders. While some may grudgingly accept that there will always be “a few bad apples” in any system, the evidence of widespread fraud in Medicare Advantage is truly shocking and screams for immediate reform.
Several investigations and government audits have shined a light into a secretive industry that is focused entirely on maximizing profits. Tens of thousands of claims are denied for improper reasons while other claims are inflated to swindle more money from the government.
What Is Medicare Advantage?
Unlike Medicare, where the government pays for benefits when an individual receives them, Medicare Advantage plans are managed by private companies. Those companies receive money per patient according to the patient’s health needs. The Medicare Advantage company organizes payments for care and keeps the money left over as profit.
This is called a capitated payment system. It was designed to incentivize cost-effective behavior, but the reality has been the opposite. Companies are easily able to manipulate the data they report to the government. In 2016, the Government Accountability Office (GAO) estimated that $16 Billion dollars was improperly payed out to Medicare Advantage companies.
The private sector always boasts that its companies are more nimble and efficient than the government. Instead of providing better care to their customers, these private-sector companies have used their agility to defraud taxpayers of billions and left thousands of individuals struggling in the face of a denied claim.
How Companies Defrauded the Government
Two recent investigations into Medicare Advantage were triggered by whistleblowers under the False Claims Act. Employees within the company recognized dishonest behavior and worked with the government in order to bring justice.
In 1 investigation, the Department of Justice (DOJ) ordered a Medicare Advantage provider to pay $270 Million for manipulating the information they gave the government. Essentially, the company over-reported the care they provided, for which they received unnecessary Medicare payments, and failed to report cases where they should have reimbursed the government.
The strategy is clearly dishonest. In the words of U.S. Attorney Nick Hanna, “This case involved illegal conduct in which patients’ medical conditions were improperly reported and were not corrected after further review – all for the purpose of boosting the bottom line.”
In December 2018, the DOJ announced that they would join another whistleblower lawsuit against a Medicare Advantage provider. In this case, the company systematically submitted fake diagnoses for their patients in order to get bigger payouts.
Audit by Inspector General Reveals Thousands of Claims Denied Improperly
Along with inflating claims, Medicare Advantage providers have increased profits in another despicable way — by denying the legitimate claims filed by its members. An audit by the Office of the Inspector General of the U.S. Department of Health and Human Services (HHS) raised significant concerns about the extraordinary number of denied Medicare Advantage claims.
Looking at data from 2014-2016, the audit discovered that more than 500,000 denials were overturned by appeals. This means that more than 200,000 patients each year were initially denied coverage that they deserved. An overturned denial does not necessarily mean that the claim was inappropriately denied, yet:
“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.”
When a person’s claim is denied, it turns their world upside down — gone is the security of having the coverage they need to live a healthy life. Now they are vulnerable, left wondering what to do. Their doctor told them they needed a certain treatment or medication, and the insurance company has overruled them. What happens next?
According to the Inspector General, 82% of denials were payments for care that patients had already received. In these cases, individuals are now holding a bill for services that they thought were covered. Sadly, the audit also found that only 1% of patients or their providers appealed the denials for coverage.
In short, an untold number of people have been denied care they deserve or are left paying for care that should have been covered by their insurer. This causes a host of problems for people who have misplaced their trust in a broken system. As the Inspector General observes:
“. . . each overturned denial represents a case in which beneficiaries or providers had to file an appeal to receive services or payment that are covered by Medicare. This extra step creates friction in the program and . . . may be especially burdensome for beneficiaries with urgent health conditions.”
The appeals process is complex, time-consuming, and to make matters worse, many companies have been cited for “sending denial letters with incomplete or incorrect information, which may inhibit beneficiaries' and providers' ability to file a successful appeal.” Depending on the type of care being denied, patients experience a needless hurdle, or suffer while they await care.
The appeals process is meant to be a check on the system, not a method for health insurance companies to avoid paying their fair share. And yet, 75% of appeals are overturned at the first level. If they were being honest and judicious about denying claims, that number would be much lower.
Bad Faith Is a Crime
These lawsuits and audits are important victories, but they take years. During that time, people with serious health issues were stuck trying to appeal for the care they needed. Delays in care cost lives. Aetna was ordered to pay $25.5 Million to a man whose wife was denied cancer treatment. Had Aetna paid their fair share when it was due, the woman would likely be alive.
Unreasonably delaying and denying care due to policy holders is a crime. As massive corporations with virtually bottomless resources, insurance companies have many tricks to avoid paying for expensive drugs and services they promised to cover. It’s unfair, and it’s not legal.
Insurance companies are required to act in good faith and deal fairly with their customers. The law recognizes the power difference between a corporation and an individual, and most states have set up laws to protect Americans from crooked schemes. Insurance companies will have to deny claims occasionally, but the Medicare Advantage numbers are very suspect.
People who have had a claim denied in the past several years need to be aware of the red flags that are now coming up. Medicare Advantage providers deceitfully drained the system of resources at the same time they denied the urgent health needs of real Americans. This problem is not unique to Medicare Advantage and may affect people with long term disability.
Bad faith laws vary state to state, but there is usually a statute of limitations, which means that a policy holder who was wrongly denied coverage has a limited amount of time to act. If you have questions about treatment or services that were denied, talk to one of our team members today and find out your options.