Pressed to make significant savings to reduce the deficit, some Senate Republicans are taking a closer look at Medicare Advantage reform in light of reports that insurance companies are racking up billions of dollars in extra profits by overdiagnosing older patients.
But the idea of cracking down on Medicare Advantage overpayments to insurers is dividing Republicans, who have traditionally championed the program.
Proponents of the Medicare Advantage reform expect to face stiff opposition from the insurance industry, one of the most powerful special interest groups in Washington.
Senator Bill Cassidy (La.), the top ranking Republican on the Senate Committee on Health, Education, Labor and Pensions, is leading the push to reduce Medicare overpayments.
“Medicare is going bankrupt. If we don’t do anything, it will go bankrupt. We have the full package, everything is bipartisan, and we do it basically to have something out there so that if someone decides to do something, there will be things that are vetted, considered and bipartisan” to vote on, he said.
“I come with many things. We thought through the policy and thought that was the policy that could solve it,” he said.
Cassidy’s office says its bill could extend Medicare’s solvency by saving as much as $80 billion in federal funds over the next decade without cutting benefits.
He emphasized that it would not cut Medicare Advantage benefits, but that criticism of the law would certainly challenge the claims.
“We’re not underestimating Medicare Advantage,” he said.
“In fact, I would say this is a better alternative to what CMS is doing under the rules,” he added, referring to the Biden administration’s new rulemaking action to recover overpayments in Medicare Advantage through the Centers for Medicare & Medicaid Services.
The Medicare Payment Advisory Panel estimates that Medicare Advantage plans accumulated $124 billion in overpayment from 2008 to 2023. They accumulated approximately $44 billion in overpayment in 2022 and 2023 alone, according to MedPAC.
Unlike Medicare with traditional service fees, Medicare Advantage plans are offered by private companies. Both are funded by the taxpayer through general income, payroll taxes, and beneficiary premiums.
Cassidy also leads a bipartisan working group to reform Social Security to expand its solvency. Members include Sens. Angus King (I-Maine) and Mitt Romney (R-Utah).
“To have a significant impact on fiscal policy, you have to look at rights,” said Romney, who called Medicare Advantage “an area that we’re going to look at pretty soon — the committee is going to look at Medicare Advantage, Medicare Advantage costs…. It’s become more expensive than the old paid Medicare.”
In a follow-up interview Thursday, Romney said senators also saw reform to Pharmaceutical Benefits Managers, companies that serve as go-betweens between drug manufacturers, insurers and pharmacies.
Romney said, “in the past, Medicare Advantage has been a less expensive way to provide Medicare than paid Medicare.”
“If that changes, I want to understand why and make sure we don’t get in the way of lower-cost Medicare Advantage,” he said.
Senator Mike Braun (R-Ind.) said Medicare Advantage overpayments were “definitely” a “reform issue.”
“I have been the loudest voice in healthcare reform and it is an idea that makes sense,” he said. “Whatever it takes to lower health care costs.
“I’m one of the free market people here, but the healthcare industry is not a free market. It’s like an unregulated utility,” he said. “There is so much ambiguity.”
But some Republicans have tried to paint efforts to reduce overpayments as cutting Medicare Advantage.
“The problem with Medicare Advantage is President Biden is cutting $540 per member per year. That’s the problem. Medicare Advantage has been very successful,” said Senator Roger Marshall (R-Kan.), an OB/GYN who has practiced medicine for more than 25 years.
National Republican Senator Committee Chairman Steve Daines (R-Mont.) accused Biden of “proposing cutting Medicare Advantage” when the president accused some Republicans of wanting to cut Medicare in his Feb. 7 State of the Union address.
Medicare Advantage is growing in popularity among Democrats and the number of blue state enrollees in the program is soaring. The number of Americans enrolled in Medicare Advantage has nearly doubled over the last 12 years, according to the Kaiser Family Foundation.
Cassidy’s proposal, which he introduced with progressive Sen. Jeff Merkley (D-Ore.) on Monday, could spark broader interest from Republicans.
Senator John Cornyn (R-Texas), advisor to the GOP Senate leadership, called Medicare Advantage a “success.”
“That doesn’t mean it should be immune from scrutiny, so I’d be interested to see what they have to say,” he said.
Cassidy and Merkley say Medicare Advantage plans have a financial incentive to make beneficiaries appear sicker than they really are because they are paid a standard rate based on each patient’s health. Their bill, the No Unreasonable Payment, Coding or Diagnoses for the Elderly (No Upcode Act) will require a more extensive risk model based on diagnostic data over a two-year period.
It would also limit the ability of insurers to use old or unrelated medical conditions to increase treatment costs and ensure that Medicare only charges for treatment related to the relevant medical condition, according to a summary provided by the senator’s office.
The goal is to narrow differences in how patients are assessed by traditional Medicare and Medicare Advantage.
Studies and audits conducted by CMS and the Department of Health and Human Services inspector general found that insurers racked up billions of dollars in overpayments because of diagnoses that were later not supported by applicant medical records.
The Kaiser Family Foundation reported in August that more than 28 million people — or about 48 percent of the eligible Medicare population — are enrolled in Medicare Advantage plans by 2022. They account for $427 billion, or 55 percent of total federal Medicare spending.
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