Audit Cites Overpaid Medicare Insurers & cheated patients

Audit Cites Overpaid Medicare Insurers
By Robert Pear
The New York Times
Monday 10 September 2007

Washington - Private insurance companies participating in Medicare have been allowed to keep tens of millions of dollars that should have gone to consumers, and the Bush administration did not properly audit the companies or try to recover money paid in error, Congressional investigators say in a new report.

The investigators, from the Government Accountability Office, said the money could have been used to reduce premiums or provide additional benefits to older Americans.

Under federal law, Medicare officials are supposed to audit the financial records of at least one-third of the insurance companies each year. But the investigators said the Bush administration had fallen far short of that goal and had never met the "statutory requirement."

Indeed, they said, the proportion of companies audited by Medicare declined steadily - to 14 percent in 2006 from 24 percent in 2001 - despite a steady growth in Medicare payments to the plans. Those payments now total $75 billion a year, about one-fifth of all Medicare spending.

The Bush administration did not take issue with the findings.

"We welcome constructive suggestions for improving the audit process," said Tim Hill, chief financial officer at the Centers for Medicare and Medicaid Services. An agency spokesman said it might need additional legislative authority to clarify its power to recoup money from insurers.

Administration officials have strongly encouraged insurance companies to participate in Medicare and have urged beneficiaries to enroll in private plans. Some plans, known as Medicare Advantage plans, cover a wide range of services, including doctor's visits and hospital care. Others provide only prescription drug benefits.

The purpose of the audits is to determine whether insurers correctly calculated their costs and premiums and delivered the services promised to Medicare beneficiaries. Insurers typically receive fixed monthly payments, set in advance, for serving Medicare patients. Drug plans can receive extra payments if their costs exceed their expectations.

Likewise, if private plans hold down costs, they are supposed to share some of the savings with beneficiaries and the government.

In 2003, Medicare audited 49 of the 220 organizations participating in the program. Auditors found significant errors at 41 companies, but Medicare officials took no action on the findings. As a result of the errors, the auditors said, insurers kept "$59 million that beneficiaries could have received in additional benefits, lower co-payments or lower premiums." The report did not identify the companies.

Paul Caban, assistant director of the financial management team at the Government Accountability Office, said the Medicare agency's response was puzzling. "What is the value of conducting these audits if you do not act on the findings?" Mr. Caban asked.

Two influential members of Congress expressed dismay.

"Congress required audits for good reason," said Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee. "There's a lot of taxpayer money being spent, and we need to know where it goes. We also need consequences for spending that isn't proven to serve beneficiaries."

Mr. Grassley said Medicare officials had done "a poor job of bringing accountability here," and he added, "I want to see concrete action to fix this."

Representative Pete Stark, the California Democrat who is chairman of the Ways and Means Subcommittee on Health, said the Medicare agency "is not doing its job to protect beneficiaries."

In separate action, the Bush administration is vigorously pursuing money that it says is owed to insurance companies by Medicare beneficiaries. The Medicare agency has sent letters to more than 135,000 people saying they still owe premiums for prescription drug coverage provided in 2006. In most cases, the premiums were supposed to have been withheld from monthly Social Security checks, but the government withheld the wrong amounts or nothing at all.

Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services, said, "I am intently focused on this matter and will make it a priority to correct the errors and minimize them in the future."

Insurers submit bids to Medicare each year, saying how much they expect to be paid to provide specified benefits. If the government accepts these proposals, it signs contracts with the insurers.

The Medicare agency contends that it does not have the legal authority to force insurers to return money to beneficiaries or to the Medicare trust fund when auditors find "errors, incorrect or unreasonable assumptions or other misstatements" in company bids.

The Government Accountability Office insisted that Medicare officials "had the authority to pursue financial recoveries," but did not use it.

Medicare hires private firms to conduct many audits. Insurers said that in many cases the auditors were not well versed in the intricacies of Medicare. Moreover, they said, Medicare has not provided clear guidance on how to define important items like administrative costs.

Medicare officials said they found significant errors in bids from 18 of the 80 organizations audited last year. But the Government Accountability Office said "there is a low probability of the audits identifying intentional misrepresentations," because Medicare relies heavily on actuaries who prepare the bids to certify their accuracy.

Under a 2001 law, every federal agency is supposed to have a program for "recovering any amounts erroneously paid to contractors."

The Bush administration told the Government Accountability Office that "general federal contract laws do not apply to the payments made under Medicare contracts."