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General News    H1'ed 6/27/14

Investigating a $150 billion Medicare 'black box'

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Message Trudy Lieberman

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CPI did stellar reporting on the Medicare Advantage "money grab," despite agency stonewalling-- here's how others reporters can dig in

In a year-long investigation of Medicare Advantage (MA) plans, Fred Schulte, David Donald, Erin Durkin, and Chris Zubak-Skees of The Center for Public Integrity did a masterful job exposing government hypocrisy and stonewalling, regulatory neglect, insurance company greed, and corporate exploitation of a program hailed as the fiscal savior for Medicare. If you haven't yet read their three-part series published earlier this month--with three sidebars and two interactive features--you should. It underscores the acute need for more accountability and oversight not only from the Obama administration but also from the press, which has all but abandoned reporting much of anything about Medicare (see this exception), let alone mining the depths of the $150 billion Medicare Advantage program. For its expose, the Center deserves a CJR laurel. I talked to Schulte this week about CPI's work and we collaborated on some tips for reporters on this beat (more on that further along).

Schulte and colleagues paint a disturbing picture of how the popular Medicare Advantage program works with the government, spreading around billions to placate insurers, consultants, home care agencies, and, most important, the managed care industry some government officials desperately want to replace traditional Medicare, historically a social insurance model with the federal government providing the benefits. While Medicare managed care has been around since the 1980s, it never quite took off until Congress passed the prescription drug benefit in 2003 and paid health plans much more than it cost the government to provide benefits under the traditional program. The industry wasted no time cashing in, and the extra money has allowed plans to provide extra benefits like eyeglasses and gym memberships and offer low or no monthly premiums in some parts of the country, which explain the program's growing popularity.

There's a significant downside, though. "The plans have sharply driven up costs in many parts of the United States--larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are," the CPI team reported. The Center analyzed Medicare Advantage enrollment data from 2007 through 2011 and thousands of pages of government audits and other documents. Its investigation showed that billions of tax dollars are misspent every year because of billing errors linked to a payment tool called a risk score. The sicker the patient, the higher the score, the more money plans make. So there's a big incentive for managed care plans to inflate those scores and rake in the dough. Risk score errors triggered almost $70 billion in "improper" payments to MA plans from 2008 through 2013.

What's more, those inflated scores have contributed to a problem that just won't disappear--the government continues to pay health plans more to provide benefits to seniors in these private arrangements than it costs to provide them under traditional Medicare. The Center found a sharp increase in risk scores in "at least 1,000 counties nationwide between 2007 and 2011" that resulted in the government paying more than $36 billion over the estimated costs of caring for patients who were getting government-provided benefits from traditional Medicare. Put another way: in many of those counties, the cost to the government is at least 25 percent higher than the cost of providing standard Medicare benefits.

With Obama's election, those overpayments were to be a thing of the past. During the 2008 campaign, Candidate Obama vowed to cut those overpayments, but then President Obama met the power of the insurers, and cuts were turned into increases through the magic of strong-armed lobbying, which the Center dissects. A stand-out in CPI's series was a sidebar showing the hypocrisy of Democratic lawmakers, in particular Minnesota Sen. Al Franken, who once supported cutting those overpayments but later changed his mind. While in 2012 Franken railed against insurers that were getting too much money, less than four months later he was one of some 160 lawmakers who were publicly thanked by industry surrogates for helping kill, CPI reported, "the same Medicare Advantage cuts he'd previously supported so forcefully."

What's particularly impressive is that the CPI team showed, in several instances, how Medicare made little effort to recoup the amounts the managed care plans overbilled and how it backed off of other rules the Centers for Medicare & Medicaid Services (CMS) had proposed for fixing the payment problems. (There's usually little press interest when Medicare backs away from a proposal.) The Center described one tactic managed care plans use for boosting Medicare income: They make visits to their members' homes looking for undiagnosed illnesses that may result in more reimbursment. The Center reported that there's a "paucity of evidence showing that home visits make people any healthier," and Medicare had proposed a rule to restrict such visits. In April, after objections from insurers, Medicare announced it was not finalizing the rule.

Notably, the Center got zero help from the CMS, a problem other reporters are having with government health agencies. Schulte told me "unless they completely manipulate the news flow, they are not interested in talking." In the old days, he said, you could get the top agency people on the phone pretty readily. Last time the CPI did a big investigation involving CMS, in 2012, the agency accepted written questions. "This time we got no interviews, no written questions, stonewalling and it was basically screw you," he added. The Center has filed an FOIA lawsuit in federal court to shake loose more data. "CMS owns the data on overpayments. They don't tell you who gets the money and what efforts they've made to get it back," Schulte says. "We want to see the audits and who has been overpaid. The program is like a black box."

What can reporters do in the meantime to better cover the Great Medicare Give Away? Schulte and I collaborated on some suggestions.

Move beyond the Medicare cuts scare story. That election year canard from the GOP that the president is cutting Medicare benefits to the tune of $500 billion (the 2010 claim) and $700 billion (the 2012 claim)? Drop it. Look into where elected representatives stood and now stand on this government waste story, like CPI did with Sen. Franken.

Realize you don't always need people or patients to make a story compelling. Patient anecdotes were not an option for CPI's story, since the payment manipulation and risk scoring chronicled in the series go on behind the scenes and policyholders see only low premiums and gym memberships. Schulte used the Q & A technique to explain why all this matters to beneficiaries in MA plans, to all Medicare beneficiaries, and to all taxpayers. Overpayments can ultimately weaken the whole program.

Make friends in the industry. Seek out consultants, actuaries, and others who know what's going on and who can explain the nitty-gritty. Use social media like LinkedIn to find insiders and look at industry list servs and what people are saying.

Look at investor and analyst calls available on company websites. See what questions financial analysts are asking. After a while, when they stop asking questions about certain issues, that may be a signal they are no longer worried about something. Then you need to find out if a "fix" is in--from a regulator, for instance.

When an announced rule is pulled back or taken off the table, look into it. This is usually a red flag that something's going on and reporters should take a closer look. Some of the best stories may be found here. (See more on this theme here.)

Finally, Schulte says, reporters should have a sense of consumerism. There's a whole side to medicine that deals with dollars and cents. It's not just cures. And you need a little police reporter in you as well to spot the scams and realize when a company or an official is lying to you, he advises. This is critical for people assigned to the health beat. Too often reporters "don't have a sense of the past," Schulte says. That's particularly important with Medicare. "Medicare managed care was a complete disaster, and then they opened the flood gates. It's annoying that you don't see government learning from previous mistakes." And that's where we reporters come in--to chronicle the efforts of well-heeled stake holders to milk the program for financial gain.

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Trudy Lieberman, a journalist for more than 40 years, is a contributing editor to the Columbia Journalism Review where she blogs about health care and retirement at Her blogposts are at She is also a fellow at the Center for Advancing Health where she blogs about health at (more...)
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