Medicare Advantage Overpayments May Top $3B

He emphasizes that the GAO is not accusing health plans of upcoding, as some reports in the media implied.  Part of the problem is that in Medicare Advantage populations, providers may be doing a better job of recording specific diagnostic codes for their enrollees, perhaps because they have more of an incentive, he said.

Fee-for-service providers, on the other hand, will file a claim for "a mid-level office visit," and neglect to put in a specific diagnosis, Cosgrove explains.  In coming up with its risk adjustment formula to determine capitation rates for the plans, Medicare looked at spending for large populations based on what limited fee-for-service diagnostic information it had.

CMS officials did adjust risk scores to reduce some of the overpayment, which would have been $3.89 billion to $5.8 billion more before the correction, the report says.

But the adjustments were not enough in 2010 and beyond.  "By continuing to implement the same 3.4% adjustment for coding differences in 2011 and 2012, CMS likely underestimated the impact of coding differences in 2011 and 2012, resulting in excess payments to MA (Medicare Advantage) plans," the report says.

Robert Zirkelbach, spokesman for America's Health Insurance Plans, says the coding differences are the result of more diligence by Medicare Advantage plans.