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OP-ED | Health Insurance Lobby Keeps Medicare Advantage Overpayments Flowing

by | Jun 18, 2014 8:00am () Comments | Commenting has expired | Share
Posted to: Corporate Watch, Health Care, Opinion, Health Care Opinion, Reprinted with permission from the Center for Public Integrity

Center Series Documented Abuses, But Don’t Expect Action From Congress

A year-long investigation by the Center for Public Integrity has revealed that health insurers may have fleeced taxpayers out of $70 billion in just five years.

You would think members of Congress in both parties would be so outraged they’d be launching their own investigation and railing against the “fraud and abuse” they decry on the campaign trail.

But I’m not holding out much hope. That’s because I know just how powerful and influential the health insurance industry is and how its lobbyists almost always get what they want out of Congress and the White House, regardless of who is sitting in the Oval Office.

The Center’s Medicare Advantage Money Grab investigation, led by veteran reporter Fred Schulte, found that:

  • Federal officials made nearly $70 billion in “improper” payments to Medicare Advantage plans from 2008 to 2013, mostly overbillings, by manipulating or misusing a Medicare payment tool called a “risk score.”
  • From 2007 through 2011, Medicare Advantage risk scores rose more than twice as fast as the average for people in standard Medicare in more than 500 counties nationwide;
  • Federal health officials have long kept key financial records of Medicare Advantage plans in a “black box,” inaccessible to the public and press;
  • Medicare Advantage health plans collect billions of dollars from controversial “house calls” that industry officials say help improve care but which critics argue inflate costs needlessly;
  • The findings did not come as a shock to me. During my two decades in the industry, at both Humana and Cigna, I came to understand just how much of a cash cow the Medicare Advantage program has become to insurers participating in the program. Wall Street financial analysts devote considerable attention to determining how much insurers’ Medicare Advantage business contributes to their bottom lines and how much of the money they take in from the government is actually paid out in medical claims. The less they spend on medical care, the better, from Wall Street’s perspective.

    This is a huge business, and it’s growing rapidly. This year alone, the government is expected to pay private insurers $150 billion to cover about 16 million Medicare beneficiaries. Almost one of every three Medicare enrollees now belongs to a privately operated Medicare Advantage plan.

    Because the business is so profitable, insurers spend millions of dollars on lobbying, advertising, PR and “grassroots” political activities to keep the money flowing unimpeded.

    It’s not been a secret that the government has been overpaying the private insurers. The Congressional Budget Office has provided lawmakers with estimates of the overpayments a number of times in the past. One health policy expert testified that the extra payments to Medicare Advantage plans averaged 13 percent — or $1,100 per enrollee — in 2009 alone. In an effort to fix the problem, lawmakers included a provision in the Affordable Care Act to reduce the overpayments by several billion dollars over the next several years.

    That prompted the industry to launch an intensive campaign to try to forestall those reductions. Having served on the strategic communications committee of America’s Health Insurance Plans, I can imagine how sophisticated and multi-pronged the industry’s campaign really is.

    medicarechoices.org As I noted last January, AHIP formed a front group call the Coalition for Medicare Choices to intimidate lawmakers by posting ads on Washington buses and subway trains and on TV stations serving the area. The ads, which were part of a seven-figure campaign, warned that seniors would face higher costs, fewer benefits and a loss of provider choice if Congress and the Obama administration didn’t act to keep plan rate cuts from going into effect.

    In a POLITICO story at the time, an industry source was quoted as saying that, “If CMS (the Centers for Medicare and Medicaid Services) doesn’t keep Medicare Advantage payment rates flat next year, it is going to create a huge political problem for members of Congress this fall when they have to face millions of angry seniors who just found out they are losing benefits and choices they were promised they could keep.”

    The industry has played the intimidation card many times over the years, and members of Congress, Democrats as well as Republicans, know it. When I was an industry executive, we used to joke about the “granny fly-ins” — all expenses-paid trips for hundreds of seniors to D.C. for a day of lobbying — coordinated by AHIP. 

    Even Charles Schumer of New York, who chaired the Democratic Senatorial Campaign Committee from 2005-2009 and is the third ranking Democrat in the Senate, has become a champion of the Medicare Advantage program. Schumer was among 40 members of Congress who signed a letter to CMS supporting the insurers’ cause earlier this year. Schumer and his colleagues wrote that seniors who join the plans “enjoy better health outcomes and receive higher quality care than their counterparts in the Medicare fee-for-service program.”

    The effort paid off. Health plan executives and financial analysts were happy that the relatively minor reductions were “not material to earnings,” to use Wall Street jargon.

    Former CIGNA executive-turned-whistleblower Wendell Potter is writing about the health care industry and the ongoing battle for health reform for the Center for Public Integrity.

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    (7) Archived Comments

    posted by: Bulldog1 | June 18, 2014  11:20am

    Seventy Billion dollars in improper payments.  All courtesy of the sainted Private Sector.  Who drown our bought and paid for Federal Legfislators with a combination of cash and the threat of what more cash could buy to hurt them.

    I think some one this site said yesterday “I love how much CEO’s make, it’s great.”  I wonder if this is what he had in mind.

    Not much good here for the ordinary citizen though.

    posted by: OutOfOutrage | June 18, 2014  4:38pm


    I’ve got to believe that the progressive misunderstanding of corporate responsibility stems from willful ignorance. Its simply too pervasive to be the result of a lack of knowledge.  All I see in these articles and their comments is how corporate America lacks some moral standard. Well what a revelation! No kidding!  I don’t understand what point people hope to make by these statements.  The only moral obligation of the corporation is to seek profit for its investors. Any altruistic motives it may have, beyond an increase in the corporation’s good will, would be considered waste.  It is the government’s role to make the rules by which these corporations play and the corporations’ role to maximize their profit within the law.  So when the government allows companies to lobby the legislature and corrupt it with money, how is that the corporation’s fault?  And if the corporations are to operate by some set of moral principles beyond the law, whose principles should they be?  Yours? Mine? Wendell’s?  If only there were a group of people who represented us who could set up such a set of principles by which the corporations should operate so that we could avoid being taken advantage of.

    posted by: gutbomb86 | June 18, 2014  4:45pm


    @Matt - Morality exists regardless of whether corporate entities are governed one way or another. Humans always have a choice when they engage in any activity. Our sense of morality guides us. Plenty of people conduct themselves and their business in a fashion compatible with good morality. You’re suggesting that failing to operate in only the most profit-oriented manner is something you can’t understand and which should be held blameless. I think you *can* understand it, and should give that some thought. There are always choices. And there are always consequences. :-)

    posted by: Bulldog1 | June 19, 2014  9:28am

    @Matt - I think you missed the point.  Those that decry the money and boots on the ground Unions provide politicians during election season never make a peep when corporations drop oodles of cash on those that they want to buy.  Just remember that the ratio of corporate money to union money is about 25:1.

    It isn’t morality or altruism that’s at issue here, it’s laws that ought to exist to protect taxpayers.  There’s an employment future here for an army of forensic accountants to follow the money and put some of these guys in the can.  But I doubt the Pols (and perhaps some of the folks who post to the right here) have the stones to allow/demand that it happen.  Here in lovely CT we don’t even have the will to hire several dozen tax enforcement personnel to go after the businesses that take sales tax from you and I and then put it in their pockets. Could be millions annually collected that might actually help the State budget or do we celebrate the guys in “business” who do that?

    I have no problem with corporations maximizing profits.  Without doing business we don’t eat.  But I do expect them to earn those profits rather than steal them.  Good arguement here for single payer.  Cut these rats out of their corporate dole.  Why are we so focused on making Wall Street and CEO’s rich on the taxpayers dime?

    posted by: OutOfOutrage | June 19, 2014  11:10am


    Gut: 1) Thanks for the lesson on morality but the statement that “our sense of morality guides us” correctly assumes that everyone has their own set of values by which they operate. Everyone’s set is different. So to whose moral code should corporations adhere? Yours?  This leads me to point 2) I am not “suggesting that failing to operate in only the most profit-oriented manner is something [I]can’t understand”. I am suggesting that failing to operate in only the most profit-oriented manner IS IN AND OF ITSELF IMMORAL. The corporation has a duty to the shareholders and that is its only duty.  Now, does that mean a corporation should harm people or break laws? Of course not. That would not be in the best interest of the shareholder.  Charitable events, gifts, employee benefit programs, etc, all serve to increase the companies good will and ultimately benefit the company.  However, when lobbying legislators is legal and is known to be a reliable method of gaining a competitive advantage, it would be a violation of the corporation’s duty to its shareholders not to pursue such an opportunity which brings me back to point 1.  Lets take profit out of it and say everyone operates based on their own moral code. One CEO decides its moral to lobby congress b/c if his company can gain an advantage they can expand into CT and hire 200 workers at no cost to the state and another CEO decides its not moral b/c he read Wendell’s article and decided to repent his ways. Then he loses market share to the first CEO and has to lay off 200 people. Who is right? 
    Bulldog: No one wants to punish those who violate the law more than I. And I’m all for making it illegal to lobby.  I’d prefer to get all the money out of politics b/c its nothing but corruption. Unfortunately right now it is the law and my point is that people here are acting like a dentist who scolds the 3yr old for eating too much sugar b/c the parent gives them whatever they ask for.

    posted by: Bulldog1 | June 19, 2014  3:48pm

    @Matt - Thanks for the response.  But I would have enjoyed an answer to the question in the last sentance of the last paragraph.

    posted by: OutOfOutrage | June 23, 2014  1:43pm


    Bulldog: Sorry I didn’t address it but my answer would follow the same logic as my first post: I don’t believe anyone is focused on making Wall St. rich. They are quite adept at doing that themselves. But all that is needed for evil to succeed is that good men do nothing.  The government has created a regulatory environment where these companies have been allowed to climb the ladder and then pull it up behind them. In exchange for campaign support, these corporations are invited to draft (or weigh in on) regulations, which, surprise, surprise, are favorable to them and often not favorable to the people. The companies make record profits as a result and predictably, the CEOs make millions.  Look at the housing crash. Everyone in the country was calling for someone to go to jail but the truth is, Wall St. was by and large operating within the law.  The administration would have loved to find someone to blame it on but they really couldn’t.  You really think all the Wall St. banks got together and decided to break the same laws? No, teams of compliance officers and lawyers reviewed those transactions before they took place in order to protect the bank from violating the law and to protect it from the other bank(s) in the same transaction.  The problem was that it was all legal. As far as a lack of enforcement goes, I couldn’t agree more. The regulators are woefully behind the curve and they are clearly not getting the job done.  That’s what happens when gov’t tries to be a jack of all trades.  It ends up being a master of none.  I say more simple & transparent gov’t regulation with very vigorous oversight.

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