Teresa Ross had been raising objections at work for months when her bosses brought in a psychologist hoping to make her question her own sanity.
A longtime manager at a Seattle health plan called Group Health Cooperative, Ross had opposed changes to the way the company billed Medicare. With the help of a new vendor, the insurer identified new diagnoses for patients, bringing in millions of extra dollars from the government. Ross insisted much of it was fraud. She says she was cut out of meetings.
Then she was invited to one with the psychologist. He asked how she was feeling and revealed that a senior executive had sent him to discuss her objections.
“People aren’t seeing you as a team player,” she recalls him saying. “They’re concerned that you have a loud voice within the organization. And you're objecting to this thing that's making us lots of money and everybody’s happy.”
Ross felt blindsided and insulted. The visit made no difference.
Ross had already filed a sealed whistleblower suit against the company, which later merged with Kaiser Permanente in 2017. After years of investigating, the Justice Department took up her case last year. Other whistleblowers came forward too, with allegations accusing Kaiser and some of its competitors of inflating how sick their members appeared to be to get higher payments from Medicare.
The industry vehemently contests the allegations and says that plans get paid appropriately for the risk they take on. But the disputed billing practices at the heart of Ross’s case have become central to the health-care business and, as baby boomers retire, to America’s fiscal future. Medicare covers 64 million people and will spend $900 billion this year, or 4% of U.S. gross domestic product. Almost half of people on Medicare now get their benefits through Medicare Advantage — private plans like the one Ross worked for, which get paid more for patients with more severe illnesses. That means a growing share of Medicare’s billions flows through arrangements susceptible to the kind of manipulation that Ross described.
Each year, the plans submit giant data files to Medicare with diagnostic codes meant to reflect their members’ illnesses. Those codes determine how much they get paid. A federal watchdog warned in March that coding differences brought Medicare Advantage plans $12 billion in excess payments in 2020, compared to what traditional Medicare would have paid to cover the same population. The cumulative extra payments since 2007 will soon top $100 billion, according to the Medicare Payment Advisory Commission, or MedPAC.
Those payments mounted as American seniors flocked to the private version of Medicare. Enrollment in Medicare Advantage doubled in the last decade to more than 26 million people, on pace to cover a majority of Medicare beneficiaries.
Insurance companies have built billion-dollar businesses propelled by this growth. UnitedHealth Group Inc., Humana Inc., and CVS Health Corp.’s Aetna unit combined enroll more than half of Medicare Advantage members. Kaiser Permanente, with about 7% of the market, isn’t far behind, according to data from the Kaiser Family Foundation, a research group unaffiliated with the health plan.
The industry calls the program a win-win. Medicare Advantage caps members’ out-of-pocket costs and offers extra benefits like dental, vision and hearing coverage that traditional Medicare doesn’t. Private plans also send clinicians on house calls, deliver meals and offer rides to medical appointments, stitching together medical care with services intended to address members’ social needs.
The program’s growing popularity has made it politically powerful. Republicans extoll its private-sector innovation while Democrats know that enrollees are disproportionately low-income and people of color. An industry coalition recently touted a letter signed by 346 U.S. representatives — more than 80% of the House — urging the Biden administration to “provide a stable rate and policy environment” for the program. Soon after, Medicare proposed payment rates for 2023 that an analyst for Veda Partners called “surprisingly good news for industry.”
Yet rising Medicare Advantage enrollment has also prompted warnings about the cost. The program’s hospital trust fund is projected to be depleted in 2026. “Failure to stem the excess spending created by coding intensity further jeopardizes the Medicare program’s already challenging fiscal sustainability,” MedPAC wrote in a comment letter to Medicare officials in March.
The industry has billions at stake in how the payments are calculated. In February, UnitedHealth asked the Supreme Court to review a case it lost on appeal challenging a policy to make insurers return payments for unsupported diagnoses. The policy “imposes potentially billions of dollars in additional payment obligations” on plans and would destabilize the Medicare Advantage program, the company said in its petition. Letting the decision stand threatens to reduce benefits and increase costs for seniors in the program, UnitedHealth argued.