Insurers pocket $50 billion in questionable payments under Medicare program

Private insurers have allegedly pocketed $50 billion in taxpayer money for diseases that patient doctors never treated, according to a Wall Street Journal investigation.

The Journal's analysis of Medicare records from 2018 to 2021 revealed hundreds of thousands of questionable diagnoses that triggered extra payments under the Medicare Advantage program.

Insurers typically made these diagnoses, including serious conditions like HIV and diabetic cataracts, through home visits. They often enticed patients with an offer of gift cards in exchange for a quick check-up.

The Journal’s analysis found, however, diagnoses made at these appointments were often never treated in follow-ups with family doctors, and in some cases, were entirely wrong.

Records show that insurers often added HIV diagnoses (worth $3000 per year to the insurer) to patients who weren't even prescribed standard HIV medications in follow-ups with their own doctors.

Insurers also diagnosed diabetic cataracts (worth $2,700 per year), even when the patients already had the surgery that permanently cures the cataracts.

"Rampant abuse" of Medicare Advantage program

Medicare Advantage is a $450-billion-a-year program where private insurers manage Medicare plans. The government pays these companies a fixed amount per person, instead of paying for each medical service.

This approach was meant to encourage insurers to focus on preventive care and efficient health management, potentially reducing overall healthcare costs.

Unfortunately, it seems to have done the opposite.

The Medicare Payment Advisory Commission reported that Medicare Advantage has cost the government an extra $591 billion over the past 18 years compared to traditional Medicare.

"Any time you base a system like this on diagnosis codes, there's going to be rampant abuse of the system," said John Gorman, a former Medicare official and founder of two companies that conduct home visits for Medicare insurers.

He predicts that insurers "will find something else to make up the revenue."

Private insurers call analysis "inaccurate"

As expected, the insurance industry went on the offensive, attempting to discredit the analysis and defend its practices.

Trade group AHIP has denied the findings, asserting that government audits have consistently shown precise reporting among Medicare Advantage insurers.

UnitedHealth Group, the largest Medicare Advantage insurer, also disputed the Journal's analysis, calling it "inaccurate and biased" and claiming that the new program offers more affordable healthcare.

Meanwhile, Humana, the second-largest Medicare Advantage insurer, said its internal data showed higher treatment rates for certain conditions than what the Journal reported.

In response, the Centers for Medicare and Medicaid Services (CMS), which oversees Medicare, said the agency is making changes that would continue to ensure "taxpayer dollars are appropriately spent."

Starting in 2026, some frequently reported diagnoses, like diabetic cataracts, will no longer result in extra compensation or other Medicare benefits.

However, the updated list will include new conditions, such as asthma, that will now trigger higher reimbursements.