For the past year or so, we have watched courts treat Medicare Advantage Organizations (MAOs) as if they were on equal footing as the federal government acting in the best interest of the Medicare Trust Funds. 

Jennifer Jordan

The courts have manipulated murky laws and regulations to give MAOs reimbursement rights that Congress did not expressly address at the time Medicare Part C was placed into law in 1997. And all the while assisting MAOs recover, these courts never hold them to the same recovery policies and practices as the government, nor hold them accountable for their own questionable claims practices.

Yet consistently throughout these court decisions, the one thing that is painfully apparent is that allowing MAOs to more easily recovery “improper” Medicare payments is done to somehow protect the Medicare Trust Funds — even though none of the recovered funds are ever returned there — and is ultimately good public policy.

So isn’t it interesting that the United States government is currently suing UnitedHealth, its largest provider of Medicare Advantage plans, under the False Claims Act? The U.S. Department of Justice filed a lawsuit on May 2 in a Los Angeles federal court, claiming that the insurer did not disclose the correct information pertaining to the health status of patients registered in their MAPs.

The 39-page complaint alleges that the insurer had been presenting the government with many diagnosis codes inconsistent with patient records, and when this was brought to its attention, failed to take any action. This information caused the government to make overpayments, which renders the claims false on the part of UnitedHealth.

One might ask how this would cost the Medicare program anything, given that MAOs are paid on a capitated basis per beneficiary who enrolls in its plans. The answer lies in risk adjustment payments.

While most people, including the judges responsible for this vast body of case law, believe that MAOs carry the risk associated with the makeup of the enrollment pools beyond the fixed capitated rate, the truth is that risk adjustments were implemented to adjust payments for demographics, such as age and gender, and health status. The older and sicker a beneficiary appears to be, the more valuable he or she can be to the MAO.

It is alleged that UnitedHealth funded chart reviews conducted by HealthCare Partners in order to increase risk adjustment payments, simultaneously ignoring when the review revealed invalid diagnosis that would have required reimbursements to Medicare.

UnitedHealth disputes such claims, stating that the company complied with “relevant rules” and was transparent “about how [it] interpreted the government’s murky policies.” Given how “murky” all laws and regulations concerning MAOs seem to be, it is probably true that “technically” the insurer did what it was supposed to do, under the Medicare Act at least. Unfortunately for the insurer, it is the FCA with its treble damages, civil monetary penalties and lessened intent requirements resulting from the 2009 FERA Amendment that it is facing here.

Regardless of the outcome, this litigation will hopefully shed some light on the infrastructure of the Medicare Advantage Plan and remind the courts that MAOs are, first and foremost, private insurance companies operating as businesses and not some altruistic extension of the federal government.

If the plans were not profitable, these private insurance companies would cease to offer MAPs and risk adjustments — just one example of how the government has financially incentivized MAOs to stay in the system. But it is apparent that in all the fervor surrounding “protecting Medicare’s interests” since the turn of the century that courts have not taken adequate measures to recognize the difference between the two ways Medicare benefits are delivered.

Fundamentally, from a beneficiary’s standpoint, it is all the same, but from a legal perspective, the differences in the two delivery systems can make all the difference in the world in the outcome of these cases. It is long overdue that courts be properly educated on this matter, or even better: Delegate the issue to a specialty court.

More importantly, legislative reform should be sought to clarify all of the “murky” issues surrounding Medicare Advantage. This program has matured, and our economy and technology have changed since 1997, so it is unreasonable to continue to manipulate what was written 20 years ago and try to make it work today.

Jennifer Jordan is Medval's chief legal officer. This blog post is republished here with permission.