U.S. pays extra $5 billion a year due to upcoding by Medicare Advantage and taxpayers suffer

Medicare Advantage, a health insurance program which is managed by a private healthcare organization for the federal government, serves as a substitute for the actual Medicare program. Anyone eligible for original Medicare has the option of receiving benefits through one of these private health plans. About 16 million Americans enrolled in Medicare Advantage plans in 2014.

A recent study by the National Bureau of Economic Research suggests that the Government is paying an extra $5 billion a year to Medicare Advantage plans because they are “upcoding”, an illegal method of making the patients appear sicker than they really are in order to make more money.

The paper on the study is authored by University of Texas Professor Michael Geruso and Harvard Research fellow Timothy Layton. They estimate that enrollees in private Medicare Advantage plans have 6% to 16% higher diagnosis based risk scores than the same enrollees would have under fee-for-service Medicare.

Other Government agencies have raised concerns including the Government Accountability Office which said in a report that cumulative Medicare Advantage risk scores were 4.2% higher in 2010 than they would have been in traditional Medicare. Health and Human Services’ Office of Inspector General has said that in 2015 it will review medical record documentation to ensure that it supports the diagnoses that health organizations submit to Medicare.