Medicare Advantage is a super-popular alternative to traditional Medicare, but some experts say it has a hidden flaw that could break the system. People love the program because many of its plans have zero-dollar premiums, lower out-of-pocket spending, and benefits that traditional Medicare doesn’t offer. There is, however, a catch……and it’s a big one. A series of lawsuits by the Department of Justice has exposed a problem that cost taxpayers $7.5 billion in a single year. Simply put, health insurance companies get paid more for enrolling sicker people into Medicare Advantage. That gives them a perverse incentive to identify diseases without treating them. By adding diagnoses to a patient’s record that no doctor has ever found, an insurance company can increase its revenue, even though the patient may never have sought treatment. It’s called “upcoding” and it’s illegal. Four large insurers have settled lawsuits with the Department of Justice over this issue, with two cases remaining open. Federal administrators are considering reforms that would make it more difficult to upcode. In the meantime, the DOJ is using data-mining to flag upcoding and are launching automated investigations.
