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Exposing Fraud in Medicare Advantage

In the February 4th issue of The New Yorker, there appeared an article by Sheelah Kolhatkar

The Personal Toll of Whistle-Blowing

It tells the story of a physician, Darren Sewell, who worked for Freedom Health, a Tampa health-insurance company, and of his decision to blow the whistle on what he said were its "brazen" floutings of the law. Though his personal  story is gripping and achingly human, I won't repeat it here, but will encourage you to click on the link above and read the entire piece -- Ms. Kolhatkar is a wonderful writer.

The reason I bring up this article is to focus on behavior of some health insurance companies whose behavior is worse than unethical: It's criminal. Kolhatkar writes:

Medicare Advantage, the program that Sewell believed Freedom was abusing, is at the center of a growing number of fraud cases, some of which involve the biggest names in the health-insurance industry. The regulations around the issue are complicated, however, and legal questions about what constitutes prosecutable fraud are still the subject of debate. In 2017, the Department of Justice joined a multimillion-dollar case against the nation’s largest insurer, UnitedHealth Group, alleging widespread fraud dating back to 2006. The Justice Department is also investigating several other health insurers, including Anthem, Humana, Cigna, Health Net, and Aetna. An analysis co-authored by Fred Schulte, at the Center for Public Integrity, estimated that insurance companies had received nearly seventy billion dollars in undeserved Medicare Advantage payments between 2008 and 2013.

Kolhatkar says that Peter Budetti, experienced in these matters, told her: 

“We’ve never been able to get a direct measure of exactly how much fraud there is, but one of the clearest indicators is that, the more money is spent on fighting fraud, the more money is recovered by the government,” he said. He now works as an attorney at Phillips & Cohen, a firm that specializes in whistle-blowing cases. Fraud perpetrated by companies in the health-care industry, he said, is especially pernicious. “On the one hand, they are stealing public money,” he told me. “And on the other hand that money is not going to where it’s supposed to go, which is to taking care of people. They aren’t stealing from people who are selling imported shoes. They are stealing from people who would otherwise be immunizing kids or delivering babies. That’s the heart of it.”

When Sewell joined Freedom Health, he began to sense that the top brass had a "general attitude of contempt toward the government." In addition, he began to notice that the company "was intentionally rooting out sicker, more expensive enrollees by having sales agents target them and then encourage them to leave Freedom, an illegal practice known as 'lemon-dropping.'"  The sales agents, he said, were offered "cash bonuses" for this illegal practice. In addition, he saw that "Freedom was engaging in service-area-expansion fraud—misrepresenting the number of health-care providers in its network in certain counties, so that it could expand the areas in which it offered Medicare Advantage." As further evidence of service-area-expansion fraud: 

Freedom was “renting” groups of doctors in various counties in order to gain C.M.S. approval to expand, and then dropping the doctors after receiving it. In one example that Sewell found, Freedom said that there would be six in-network oncologists in Duval County, a large county in Florida, but patients couldn’t find a single one. The company’s strategy seemed to be paying off: in 2009, Inc.named Freedom one of America’s fastest-growing companies.

By 2010, Sewell had secretly "blown the whistle," and an investigation began. Around then,

Sewell was moved to a different job at Freedom, in the Medicare-revenue-management department, where he reported to an executive named Mital Panara. In his new role, Sewell  ... quickly noticed many coding inaccuracies, almost all of which were in the company’s favor, resulting in higher government payments. Sewell believed that Freedom was committing risk-adjustment fraud—instructing its internal coding auditors to scour medical records for places where the codes could be amplified, a practice known as “capturing” codes .... Freedom hired a nurse and coding specialist to conduct a mock audit of its diagnosis data in order to prepare for a possible audit by the government. According to evidence that Sewell gathered, the specialist found that approximately eighty per cent of the diagnosis codes in the company’s records were unjustified—a shocking number. When the specialist reported the results to Panara, Sewell alleged, he asked her to assess the codes more “leniently.” (Panara denies this.) Medicare regulations dictate that Freedom should have reported the invalid codes to the government and reimbursed it for millions of dollars in overpayments, but, according to Sewell, the company never did so.

In 2017, about 7 years after Sewell brought his whistle-blowing law suit, Freedom decided to settle and agreed to pay the Government $31.7 million. The company admitted no guilt in the matter.

Medicare Advantage is the Government's attempt to privatize Medicare, on the theory that businessmen would be more efficient than the government, and deliver more care for the money. Instead of paying by procedure (the method used by traditional Medicare). the Medicare Advantage insurance companies are paid a fixed amount for each member enrolled. What it doesn't spend in caring for the member, the private insurance company can keep as profit.  In my view, what this scheme has ended up doing is giving to the private health insurance industry billions in profits gained not only by limiting patients' access to treatment -- by networks, pre-authorization requirements, etc. not to mention outright denials of care -- but also by the sort of shady and illegal business practices described above -- practices which have been euphemistically termed "aggressive."  While Freedom was perpetrating these shenanigans, its owner was the cardiologist Kiran C Patel. a hugely successful entrepreneur with a house that has been compared to the Taj Mahal. His philanthropies are legion, and fellow Floridians look up to him with enormous respect, and in the very year of the $31.7 million settlement a Florida publication named him "Floridian of the Year." According to Ms.Kolhatkar, "When asked about the Freedom fine, he responded, 'I decided to take it as a cost of doing business.'"

The prevalence of fraud among Medicare Advantage plans offers one more reason to adopt Single-Payer: According to an opinion piece the New York Times (2/16/2019),

A single federal payer ... may well eliminate the waste, inefficiency and corruption that make the current system so expensive and inaccessible; the experience of countries like Canada and Britain that rely heavily on one government payer suggests as much.

What we have now is a system so fragmented that it is virtually impossible to keep tabs on all the players, who treat the insurance landscape as a wild west of greed and exploitation. Single-payer would be the new sheriff in town bringing law and order. 

Until that new sheriff arrives, what we'll continue to suffer is the anarchy of every man for himself, where Patel's "cost of doing business" is business as usual.

Dio

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