A federal judge in Texas has invalidated a rule initiated under the Biden administration aimed at improving oversight in the Medicare Advantage (MA) program. This ruling, which affects the ability of the Centers for Medicare and Medicaid Services (CMS) to audit MA plans, poses significant implications for how the government regulates health insurance companies profiting from this sector.
The judge’s decision has raised concerns about the potential for continued overbilling and fraud within the Medicare Advantage system. Major insurance providers, such as Humana, challenged the rule, leading to a ruling that suggests the government may struggle to rein in practices that have led to substantial taxpayer losses.
Medicare Advantage is intended as a market-driven alternative to traditional Medicare. In theory, private insurance companies administer these plans, offering personalized services. However, the reality is that the system is plagued by misaligned incentives, resulting in significant overpayments and fraudulent claims that do not benefit patients.
Two primary issues contribute to the problems within Medicare Advantage. The first is known as “upcoding,” where insurers diagnose patients with more severe conditions than they actually have. For instance, a patient who visits a doctor for a cold might be billed for pneumonia, inflating costs dramatically. The second issue revolves around risk-adjustment protocols. Insurers often categorize patients into risk pools based on assessments that are not conducted by medical professionals. Instead, insurance representatives administer “health risk assessments,” which often lead to inflated billing without a proper medical evaluation.
In 2024 alone, insurers accumulated over $19 billion in improper payments from the federal government, with projections indicating that this figure could rise in 2025. Notably, approximately $7.5 billion of these improper payments stemmed directly from questionable health risk assessments conducted by insurers.
With Medicare Advantage enrollment expected to surge in the coming decade—potentially surpassing traditional Medicare by 2034—the urgency for regulatory reform becomes even more critical. Each new enrollee presents an opportunity for insurers to exploit the system, further draining taxpayer funds.
The responsibility for reform, however, does not lie solely with the insurers. The federal government must also address its payment incentives for MA plan administrators. Following the District Court’s decision, there remains a pressing need for legislative action in Washington.
Currently, there are initiatives in Congress aimed at reforming Medicare Advantage. One noteworthy proposal is the NO UPCODE Act, introduced by Sen. Bill Cassidy. This legislation seeks to extend the duration of risk-adjustment models and restrict the use of outdated conditions that allow for excessive upcoding. Unfortunately, this bill has yet to progress beyond committee discussions.
As Congress deliberates on these issues, it is crucial for lawmakers to establish a balanced approach that protects taxpayer interests while ensuring that Medicare Advantage can fulfill its potential as a viable solution to the challenges facing American healthcare. By returning to its free market roots, Medicare Advantage could offer a cost-effective alternative that empowers patients to choose their preferred healthcare providers.
Dr. Juliette Madrigal, a practicing physician for 19 years, emphasizes the importance of reforming Medicare Advantage. She argues that without significant changes, the program risks becoming increasingly dysfunctional, undermining the very purpose it was designed to serve. The time for action is now, as the implications of inaction will reverberate far beyond the healthcare sector, affecting millions of Americans who rely on these essential services.
