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Massachusetts Attorney General Andrea Joy Campbell recently sued UnitedHealthcare for defrauding the state’s Medicaid program of $100 million. The allegations will not surprise anyone who has followed the rapid growth of fraud, waste, and abuse in government-funded healthcare. And nowhere is that problem more pervasive or costly than in Medicare Advantage
Medicare Advantage is a popular alternative to Medicare that allows beneficiaries to select among competing private plans, giving them more and better choices. In the last year, it has grown to serve about 35 million enrollees, 385,000 of which are Bay Staters
But the program’s long-term financial sustainability could be compromised by major Medicare Advantage insurers that follow bad government incentives to rate their patients as sicker than they are and collect higher government reimbursement rates. Massachusetts Senator Elizabeth Warren projected these “upcoding” practices to cost around $54 billion annually. Larger estimates put total costs at $1.3 trillion over the next decade, enough to mail every Medicare beneficiary a check for $44,000.
Instead of catching upcoding after it happens, Massachusetts lawmakers can proactively realign the program’s faulty incentives. If policymakers drag their feet, Medicare Advantage’s waste, fraud, and abuse problems could erode public trust, drive up taxpayer costs, and threaten the long-termulation relies on
As it stands, Medicare Advantage insurers have designed processes to maximize government reimbursements by exaggerating patient diagnoses, according to an analysis by Sen. Chuck Grassley’s office. According to the report, UnitedHealth sends nurses to enrollees’ homes to conduct “health risk assessments,” placing enrollees into reimbursement categories based on their diagnoses, medical records, and overall risk profile. And they use coding worksheets designed to help them identify additional diagnoses based on probability rather than actual testing.
Beyond home-visit risk assessments, UnitedHealth contracts with outside providers and uses company-designed coding workflows that can shape how physicians document patient conditions, creating further opportunities to increase risk scores and government reimbursements, according to the Grassley report
For example, investigators found that UnitedHealth encouraged providers to diagnose opioid dependence in patients who simply took prescribed opioids as directed, diagnose dementia without a full dementia evaluation, and diagnose chronic obstructive pulmonary disease without the standard lung-function testing typically used to confirm the condition
Beyond adding diagnoses, insurers can also increase reimbursement by exaggerating the severity of existing conditions, or upcode. Insurers may record diagnoses or levels of severity that generate higher Medicare Advantage payments even when patients are not receiving treatment consistent with those conditions
Diagnosis should be determined by medical professionals treating patients, not insurer billing departments. And those diagnoses should be accurate, giving Medicare Advantage a transparent and honest report of the patient’s condition to inform reimbursement
Instead, risk adjustment has turned into a profit-centered strategy, not a patient-centered one
Bad Medicare Advantage incentives do more than waste taxpayer dollars. They distort competition by rewarding insurers that maximize coding intensity rather than those that deliver better care. They also undermine confidence in the healthcare system by allowing insurers to generate diagnoses that treating physicians may never have documented or acted on
It is encouraging that officials like Attorney General Campbell are taking healthcare fraud seriously, but lawmakers should focus on eliminating the incentives that encourage it in the first place. Massachusetts lawmakers can start by supporting federal legislation like the No UPCODE Act that would tighten oversight of Medicare Advantage risk adjustment, prohibit the use of unsupported diagnoses to increase payments, and help ensure taxpayers are paying for legitimate care rather than manipulated billing practices.
According to a J.D. Power report, trust in Medicare Advantage plans fell by 39 points last year, a troubling sign for a program built on consumer choice. Medicare Advantage’s promise of more options and better care remains achievable, but it is being undermined by incentives that reward aggressive coding practices rather than better outcomes for patients
The good news is that these problems are fixable. Massachusetts has an opportunity to lead by supporting reforms that eliminate upcoding incentives, strengthen accountability, and restore confidence in a program that hundreds of thousands of Bay Staters depend on. If lawmakers fail to act, the greatest threat to Medicare Advantage will not be its critics, but the abuses committed under its name
Charles Sauer is president of the Market Institute
