Insurers Bilk Medicare for $50 Billion to Treat Fictitious Illnesses

Private insurance firms running Medicare Advantage programs have been overcharging the federal government billions of dollars by making patients look sicker than they really are, according to a report in The Wall Street Journal on Monday.

The excess charges are driven by the fact that insurers in the for-profit Medicare Advantage program are paid more for providing healthcare to patients who have certain complex medical conditions. A patient with a chronic condition such as diabetic cataracts or morbid obesity, for example, is worth more to the insurer, which can charge the federal government more for their care.

In an analysis of billions of diagnoses delivered to patients in Medicare Advantage plans between 2018 and 2021, Journal investigators found that insurers added hundreds of thousands of questionable diagnoses to patient charts that resulted in higher payments, even when patients received no treatment for the specific illness involved. Insurers were paid about $50 billion more because of those added diagnoses during that time, the Journal found.

“The questionable diagnoses included some for potentially deadly illnesses, such as AIDS, for which patients received no subsequent care, and for conditions people couldn’t possibly have,” the Journal’s team of investigators wrote. “Often, neither the patients nor their doctors had any idea.”

According to the Journal, the worst offender among the five major Medicare Advantage insurers was UnitedHealth, which earned $8.7 billion in payments in 2021 from “insurer-driven diagnoses” that were not treated by doctors.

The bigger picture: Medicare Advantage was created under the assumption that private, profit-driven insurers could provide healthcare more efficiently. But the system, which now costs more than $450 billion and accounts for more than half of all Medicare spending, has proven to be more expensive than the regular Medicare system it is steadily replacing.

“Instead of saving taxpayers money, Medicare Advantage has added tens of billions of dollars in costs,” the Journal investigators wrote. “One reason is that insurers can add diagnoses to ones that patients’ own doctors submit.”