But the risk-scoring formula has proven to be a breeding ground for billing irregularities — as much as $70 billion in "improper" payments to health plans from 2008 through the end of last year, according to government sampling data reviewed by the Center for Public Integrity.
Click here to see how changes to a risk score can boost costs
Mary Inman, a San Francisco lawyer who represents whistleblowers, said officials have been concerned for years that risk scores if abused could offer a "new way to fleece" the Medicare program. "This is a weak spot for CMS," she said, noting that it "hasn't hit the public realm yet."
The CMS RADV audits, which CMS conducts to determine whether the health plans have been paid correctly, will probe whether health plans trigger overpayments by reporting diseases that don't have any impact on health and medical care, or by exaggerating the severity of conditions — in effect making patients look sicker on paper than they actually are. Doing that leads Medicare to pay a plan more money than it deserves.
Maria Gonzalez Knavel, a health care attorney in Milwaukee, said that if insurers have been reporting risk scores accurately, the impact of these audits will be minimal. But if they reveal a lot of "loose" reporting, "that will be a whole different ball game," she said.
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Gonzalez Knavel said there's a perception in the industry that billing errors occur with some frequency. "They're humans and they don't always get it right," she said. "There will be some mistakes made."
When mistakes are made, risk scores are far more likely to be too high than too low, government records show. Nearly 80 percent of the improper payments in 2013 — $9.3 billion — were overcharges, according to the data sampling.
Whether Medicare Advantage plans are a good deal for taxpayers has been a contentious, and often highly political, question in Washington for years. Many critics, particularly Democrats in Congress, argued that the health plans marketed to healthier seniors and inflated risk scores to boost profits.
Click here to see the Center for Public Integrity's Medicare Advantage explainer
"That makes enrollees look less healthy without any actual change in health status and drives up payments to plans," Rep. Henry Waxman, then chairman of the House Energy and Commerce Committee, wrote in a March 6, 2009, letter to a top Medicare official. The letter was signed by four other senior Democrats as well.
The Center for Public Integrity's independent analysis of government data confirmed that in 2011 more than 800,000 patients across the country were enrolled in Medicare Advantage plans that the government paid at per-patient rates at least 25 percent higher than the average under the more common traditional Medicare option run by the government.