Oz Intensifies Spotlight on Medicare Insurers’ Payments Practice

President Donald Trump’s nominee to lead the Medicare agency is joining regulators, lawmakers, and a host of policy watchers in calling for continued scrutiny of Medicare managed care plans’ practice of exaggerating patient diagnoses in order to receive higher payments.

“Upcoding” by “scoundrel” Medicare Advantage plans is “cheating” taxpayers and shaking the confidence of MA program administrators and beneficiaries who “should all feel the system’s working for them,” Mehmet Oz testified in his confirmation hearing before the Senate Finance Committee on March 14.

Upcoding, or “coding intensity,” is projected to increase the cost of care for beneficiaries in MA plans this year by $40 billion over what it would cost to cover the same enrollees in Medicare’s traditional fee-for-service option, the Medicare Payment Advisory Commission reported last week. A recent report by FTI Consulting, however, questions the methodology that MedPAC has used in previous reports.

If confirmed to lead the Centers for Medicare & Medicaid Services, Oz, a strong supporter of Medicare Advantage, testified the agency would “have to go after places and areas where we’re not managing the American people’s money very well.” Part of that effort, he said, “is just recognizing there’s a new sheriff in town.”

Medicare Advantage plans, offered by insurers like Humana Inc., UnitedHealth Group Inc., and CVS Health Corp., cover about 33.6 million people, or 54% of eligible Medicare beneficiaries. They receive risk-adjusted monthly payments to cover each beneficiary’s cost of care.

The payments are designed to encourage MA plans to provide more efficient care. But sicker patients get higher payments, and whistleblowers and the Department of Justice have accused several major insurers of improperly inflating Medicare charges by exaggerating how ill their patients are.

At Oz’s confirmation hearing, Sen. Elizabeth Warren (D-Mass.) called upcoding “the top trick that Medicare Advantage insurers use to gouge taxpayers.” Medicare Advantage insurers have disputed the allegations.

‘More Effective Care’

“Having a more comprehensive understanding of seniors’ health” leads to “earlier detection and better, more effective care,” said a statement from Mary Beth Donahue, president and CEO of the Better Medicare Alliance, which advocates for MA plans.

“Medicare Advantage diagnoses are assessed for accuracy through the Risk Adjustment Data Validation audit process,” Donahue said. “All diagnosis codes submitted under the Medicare Advantage program must meet the same rigorous standards, whether they originate in a doctor’s office or with an in-home health assessment.”

Donahue said the alliance supports “improving payment accuracy in Medicare Advantage by auditing every plan every year.”

Americans choose Medicare Advantage plans because they provide “better care at lower costs than fee-for-service,” Mike Tuffin, president and CEO of the health insurance industry trade group AHIP, said in a statement. “We look forward to working with the administration and Congress to protect and strengthen Medicare Advantage,” he said.

But during her questioning of Oz, Warren cited media reports that MA insurers were paid $178 million last year for improperly diagnosing 66,000 beneficiaries with diabetic cataracts even though they “had already gotten cataract surgery.”

“Does that sound like Medicare fraud to you?” Warren asked Oz.

“The answer’s ‘yes,’” Oz responded. “It’s anatomically impossible.”

The bulk of upcoding-derived payments come from “health risk assessments” in which someone who’s usually uninvolved in the patient’s care visits their home and evaluates their medical conditions, according to studies by the HHS Office of Inspector General.

In 2023, a majority of $7.5 billion in enhanced payments to MA plans were derived from potentially suspect patient diagnoses based on in-home health risk assessments and HRA-linked chart reviews, a 2024 HHS OIG report found. Twenty of the MA plans in the study “generated a substantially greater share” of these payments for certain serious and chronic illnesses, such as congestive heart failure.

“If an insurance company sends someone to your home, there’s probably a reason for it,” Oz testified. “If they’re doing ultrasounds to look for minor atherosclerotic plaques, which is not really something that needs to be treated and most Americans have, it’s primarily done to upcode you.”

‘It’s Cheating’

A heart surgeon by training, Oz went even further.

“It’s cheating because you’re able to charge more for those patients. But then people who truly have lymph-threatening” heart disease, “who have that box checked in their care,” their insurance companies and physicians don’t get paid and reimbursed more “for doing what is ethically correct,” Oz testified. “So it doesn’t just help these scoundrels who are stealing from the vulnerable. It’s actually hurting the people who are trying to take care of those vulnerable populations.”

A 2023 CMS rule aims to recover about $4.7 billion over 10 years from MA plans that allegedly inflated the severity of illnesses in patients they cover, or that were paid for diagnoses not backed up by medical records.

The rule has been challenged in a 2023 lawsuit by Humana, which claims it’s arbitrary and capricious and should be thrown out.

Sens. Bill Cassidy (R-La.) and Jeff Merkley (D-Ore.) introduced legislation in 2023 that would’ve prohibited the CMS from using diagnoses collected from chart reviews or health risk assessments when determining payments based on beneficiary health status.