Humana Medicare Advantage plan overcharged Medicare nearly $200M, audit finds

A Humana Inc. health plan for seniors in Florida improperly collected nearly $200 million in 2015 by overstating how sick some patients were, according to a federal audit.

The federal Department of Health and Human Services’ Office of Inspector General’s recommendation to repay, if approved, would be “by far the largest” audit penalty imposed on a Medicare Advantage company, said Christopher Bresette, an HHS assistant regional inspector general.

“This [money] needs to come back to the federal government,” Bresette said.

Humana disputed the findings and noted that the recommendations “do not represent final determinations, and Humana will have the right to appeal.”

Medicare Advantage, a fast-growing private alternative to Medicare, has enrolled more than 26 million people, according to America’s Health Insurance Plans, an industry trade group. Humana, based in Louisville, Kentucky, is one of the largest of these insurers, with about 4 million members.

Medicare Advantage has been the target of multiple government investigations, Justice Department and whistleblower lawsuits and Medicare audits that concluded some plans boosted their government payments by exaggerating the severity of treated illnesses. A 2020 report estimated improper payments to the plans topped $16 billion the previous year.

But efforts to recover even a tiny fraction of the overpayments have stalled amid intense industry opposition to the government’s audit methods.

Now, the HHS inspector general’s office is rolling out a series of audits that for the first time could put health plans on the hook to refund tens of millions of dollars or more to Medicare. It’s planning to release five to seven similar audits over the next year or two, officials said.

The Humana audit, conducted from February 2017 to last August, tied overpayments to medical conditions that pay health plans extra because they’re costly to treat, such as some cancers or diabetes with serious medical complications.

Auditors examined a random sample of 200 patients’ medical charts to make sure they had the diseases the health plans were paid to treat and that the conditions were as severe as the health plan said.

Medicare paid $244 a month — $2,928 for a year — for one patient said to be suffering from serious diabetes complications, but medical records Humana supplied failed to confirm that diagnosis, meaning it should have received $163 less per month — $1,956 for the year — for the care, the audit found.

Medicare paid $4,380 too much in 2015 for treatment of a patient whose throat cancer had been resolved, according to the audit.

In other cases, auditors said Medicare underpaid Humana thousands of dollars because the plan submitted incorrect billing codes.

Overall, the auditors said Medicare overpaid Humana $249,279 for the 200 patients whose medical charts were examined. They extrapolated from that and, “as a result, we estimated that Humana received at least $197.7 million in net overpayments for 2015,” the audit says, calling Humana’s policies to prevent these errors “not always effective.”

A final decision on collecting the money rests with the federal Centers for Medicare & Medicaid Services, known as CMS, which had no comment.

Extrapolation commonly is used in medical fraud investigations — except for investigations of Medicare Advantage. Since 2007, the industry has criticized the method and, as a result, largely avoided accountability for pervasive billing errors.

But Bresette said of the findings, “I believe what we have here is solid.”

Michael Geruso, an associate professor of economics at the University of Texas-Austin who has researched Medicare Advantage, calls extrapolation based on a random sample “a healthy step forward . . . to protect the U.S. taxpayer.”

The inspector general used the technique for the first time for a February audit of Blue Cross and Blue Shield of Michigan that uncovered $14.5 million in overpayments for 2015 and 2016. In response, Blue Cross said it would move to ferret out mistakes from other years and refund $14.5 million, a process the company’s Helen Stojic said “is still pending.”

LinkedIn

Humana, with more money on the line, is fighting back. It “takes great pride in what the company believes to be its industry-leading approach” to ensuring proper billing, Sean O’Reilly, a Humana vice president, wrote in December 2019 to the inspector general, saying Humana “has never received feedback from CMS that its program is deficient in any respect.”

His letter said the audit “reflects misunderstandings related to certain statistical and actuarial principles and legal and regulatory requirements.”

Requiring Humana to repay the money “would represent a serious departure from the statutory requirements underlying the [Medicare Advantage] payment model,” the company said.

Humana persuaded the inspector general’s office to shave about $65 million from its initial overpayment estimate.

In 2015, Medicare paid the plan $5.6 billion to treat about 485,000 members, mostly in South Florida.

AHIP, the industry trade group, has opposed extrapolation of payment errors, in 2019 calling a CMS proposal to start doing it “fatally flawed.” The group did not respond to requests for comment.

Healthcare industry consultant Richard Lieberman said insurers remain “vehemently opposed” and will likely go to court to try to sidestep any multimillion-dollar penalties.

Lieberman said HHS has “waffled” in deciding how to protect tax dollars as Medicare Advantage plans have grown rapidly, costing taxpayers more than $200 billion a year. The Centers for Medicare & Medicaid Services has yet to complete its own audits dating to 2011, now years overdue.

The dispute has been largely invisible to patients, who aren’t directly affected by overpayments. Many seniors sign up because Medicare Advantage offers benefits not included in original Medicare and might cost them less, though it restricts their choice of doctors.

But some argue that inaccurate medical files pose a risk of improper treatment. Dr. Mario Baez, a Florida physician and whistleblower, said seniors can be “placed in harm’s way due to false information in their medical records.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues.