Bloomberg News

Medicare Overpaid Insurers $3.1 Billion in 2010 on U.S. Errors

February 01, 2012

Jan. 27 (Bloomberg) -- Insurers offering Medicare health plans were overpaid by the U.S. as much as $3.1 billion in 2010 because the government miscalculated how sick beneficiaries were, federal auditors said.

UnitedHealth Group Inc. of Minnetonka, Minnesota, and Humana Inc. of Louisville, Kentucky, are among the insurers offering coverage to people 65 and older through Medicare Advantage, an alternative to the traditional federal health program for the elderly and disabled. Democrats have criticized Medicare for overpaying companies for Advantage plans and the 2010 health-care overhaul reduced payments about $136 billion through 2019.

The managed-care plans remain overpaid, said the Government Accountability Office, Congress’ investigatory arm, in a report. Insurers received from $1.2 billion to $3.1 billion more than they should have in 2010 because the government overestimated how sick their customers were, a process called risk adjustment.

“We cannot afford to overpay health plans in Medicare any more than working families and businesses can,” Representative Henry Waxman of California, the senior Democrat on the House Energy and Commerce Committee, said in a statement. The report didn’t name the companies receiving overpayments.

Medicare Advantage patients often receive superior care to those in traditional Medicare, so “conclusions about whether the MA payment system appropriately pays plans should therefore not be based on GAO’s analysis,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a Washington trade group, in an e-mail.

Risk Calculation

Medicare calculates the risk of covering Advantage customers each month by considering their age, gender and any major medical conditions and disabilities. The plans get bigger payments for people with higher scores.

Enrollment in Advantage plans was about 11 million people in 2010, or about 24 percent of total Medicare beneficiaries, according to the Kaiser Family Foundation, a nonprofit research group in Menlo Park, California. The U.S. paid about $114 billion to Advantage plans in 2010, according to the GAO. Medicare cost an estimated $525 billion, according to the Centers for Medicare and Medicaid Services.

The report was requested by Waxman and three other U.S. House Democrats: Representatives John Dingell of Michigan, Pete Stark of California and Frank Pallone of New Jersey.

--Editors: Adriel Bettelheim, Andrew Pollack

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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