By Robert Pear
WASHINGTON — Medicare Advantage plans, the popular private-insurance alternative to the traditional Medicare program, have been improperly denying many medical claims to patients and physicians alike, federal investigators say in a new report.
The private plans, which now cover more than 20 million people — more than one-third of all Medicare beneficiaries — have an incentive to deny claims “in an attempt to increase their profits,” the report says.
The findings, by the inspector general at the Department of Health and Human Services, come as policies in Washington are creating new incentives for older Americans to enroll in Medicare Advantage plans. Some experts predict that the share of Medicare patients in the private plans could grow to one-half in a few years.
“Because Medicare Advantage covers so many beneficiaries, even low rates of inappropriately denied services or payment can create significant problems for many Medicare beneficiaries and their providers,” said the report by the inspector general, Daniel R. Levinson.
Medicare’s annual open enrollment period starts on Monday, and beneficiaries can join Medicare Advantage plans, switch plans or return to original Medicare. A vast majority of beneficiaries will have access to 10 or more private plans.
But the inspector general’s report underlines potential concerns for consumers. Investigators found “widespread and persistent problems related to denials of care and payment in Medicare Advantage.”
Relatively few people appeal the denial of claims, leaving insurers free to avoid payment. But those who do appeal often succeed. About 75 percent of appeals are successful at the first level of review.
More and more beneficiaries are choosing Medicare Advantage because, as the name indicates, the plans offer potential advantages, including a doctor who can coordinate care. Private plans have an annual limit on out-of-pocket expenses; traditional Medicare does not.
Federal officials predict that enrollment in Medicare Advantage plans will climb next year to 22.6 million, or 36 percent of beneficiaries. The total number of people covered by Medicare is expected to reach 72 million by 2025, up from 60 million today.
Even as the inspector general’s report was issued, on Sept. 27, doctors and patients and members of Congress were expressing concern about some practices of Medicare Advantage plans.
“Patients may be encountering barriers to timely access to care that are caused by onerous and often unnecessary prior authorization requirements,” said a letter sent to the Trump administration this past week by a bipartisan group of more than 100 lawmakers.
Insurers defend the requirements. They “protect patients from unnecessary and inappropriate care” and help reduce costs, said Matt Eyles, the president and chief executive of America’s Health Insurance Plans.
The growth of Medicare Advantage is driven not only by consumer choice, but also by policies set in Washington. Several factors have contributed to a favorable environment for Medicare Advantage plans, allowing them to reduce premiums or add benefits:
■ The Trump administration approved a big increase in payments to private plans for 2019, saying it was “committed to unleashing and strengthening the Medicare Advantage program.”
■ In addition to the general business tax cuts enacted last year, Congress provided additional tax relief to health insurers for 2019, suspending a fee imposed on them by the Affordable Care Act.
■ Medicare Advantage plans will be able to offer extra benefits, which could include transportation to the doctor’s office, home delivery of hot meals and safety features in the home like wheelchair ramps and bathroom grab bars. Such benefits, which are generally not available in the traditional Medicare program, may be attractive to older Americans who want to combine social and medical services.
“One in two American seniors will be in Medicare Advantage by 2021, given the industry-friendly rate and tax policies of the Trump administration,” said Ana Gupte, a health care analyst at Leerink Partners in New York.
John K. Gorman, a former Medicare official who is a consultant to many insurers, offered a similar forecast, predicting that 50 percent of beneficiaries would be in Medicare Advantage plans by 2025.
Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said the agency was not trying to steer beneficiaries to Medicare Advantage rather than original Medicare.
“We think it’s very important for our beneficiaries to make the choices that are going to work best for them,” she said, adding, “We are not steering any Medicare beneficiary anywhere.”
Medicare plans receive fixed monthly payments from the government. In return, they are supposed to provide the full range of services that patients need. If they keep patients healthy and reduce the need for hospitalization, they can often keep costs below what they are paid by Medicare.
But denying services can also keep down costs. In the last two years, Medicare has imposed more than $10 million in fines and taken other enforcement actions against private plans for overcharging beneficiaries, denying or delaying coverage for prescription drugs, and failing to respond to patients’ complaints.
When a health plan refuses to authorize a service, the beneficiary may go without it. And when doctors are improperly denied payment for services provided, the report said, they sometimes try to bill patients.
“Some Medicare Advantage beneficiaries and providers were denied services and payments that should have been provided,” the inspector general concluded.
Insurers have for years been accused of similar tactics in other lines of business. “They save money when they don’t provide care,” said David A. Lipschutz, a lawyer at the nonprofit Center for Medicare Advocacy.
Medicare evaluates the performance of private plans and uses a five-star rating system, with five being the best rating. Officials encourage beneficiaries to consider the ratings when selecting a plan.
But federal investigators questioned the usefulness of the ratings as a tool for beneficiaries. Health plans cited for serious violations of Medicare rules “can still receive high star ratings” and the bonus payments that go along with high grades, the inspector general reported.
Beginning in 2019, the report said, “audit violations will no longer be reflected in star ratings.”
New ratings will give additional weight to patients’ experiences, as reported by beneficiaries. Insurers say that 90 percent of people in Medicare Advantage are satisfied with their plans.
Administration officials accepted the inspector general’s recommendation that they step up the supervision of Medicare Advantage plans and “provide beneficiaries with clear, easily accessible information about serious violations” of Medicare requirements.