Understanding the Problem With America’s Managed Care Organizations

Efforts should be undertaken to audit Medicare payers, since it’s not always providers who commit fraud.

Today I am going to write about America’s managed care problem. We always talk about providers getting audited. It is about time that the payers get audited. In particular, for Medicaid, states contract with managed care organizations (MCOs), which are prepaid, and for Medicare, Medicare Advantage (MA) companies, which are also prepaid.

Managed care in Medicare is MA organizations. Managed care in Medicaid is MCOs. These MCOs and MAs need to be held accountable for the misuse of funds.

Today, capitated managed care is the dominant way in which states deliver services to Medicaid enrollees. And MA is becoming the dominant way to receive Medicare:

Under these prepaid programs, these private companies are paid a flat fee per month, depending on the number of consumers, to provide whatever care is required for the patients based on age, gender, geography, and health risk factors. The more diagnoses a person has, the more the company is prepaid. To compensate plans and providers for potential costs of care for individual patients with long-term conditions such as diabetes, heart disease, or cancer, Medicare boosts the monthly payment to Medicare Advantage plans under a “risk adjustment” for each additional condition. The system differs from the traditional “fee for service” payment, in which Medicare pays hospitals and doctors directly each time they provide a service.

If companies add more risk adjustment codes to a Medicare Advantage beneficiary’s medical record to receive higher payment, but don’t spend money on the additional care, they make more money. Same as MCOs denying care or terminating providers, the tax dollars line the executive pockets instead of reimbursing providers for providing medically necessary care.

Maybe the answer is remaining with the fee-for service model. Prepaying entities creates a financial incentive to bolster beneficiaries’ health problems, then to cross one’s fingers that the health problems never come to fruition, either because the beneficiary remains healthy or the health problem was fabricated.

MCOs and MA companies must be supervised by a single agency. These companies cannot have the ability to refuse medically necessary services or terminate providers at will for whatever reason, with no repercussions. It’s not fair to the recipients or providers. Maybe it’s time to switch our telescopic lens from auditing providers to auditing MCOs and MAs. Let’s get these Recovery Audit Contractors (RACs), Zone Program Integrity Contractors (ZPICs), and Targeted Probe-and-Educate (TPE) auditors focused on the stewards of our tax dollars: the prepaid entities.

42 CFR §431.10 dictates that a single state agency must oversee Medicaid, which is typically the health department in each state. The Centers for Medicare & Medicaid Services (CMS) is the single agency in Medicare. CMS and state departments are ultimately responsible for the private MCOs and MAs, but really are allowing these companies autonomy, to the detriment of our tax dollars.

If you’ll recall, earlier this year the American Hospital Association urged the U.S. Justice Department to use its authority under the False Claims Act to create a fraud task force to investigate commercial insurers that routinely deny patients access to services. This was due to the April 2022 U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) report that “Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns about Beneficiary Access to Medically Necessary Care.”

Instead of audits of providers (or concurrently, along with audits of providers), we need to audit the payers. Both MCOs and MAs.

What’s good for the goose is good for the gander.

Programming Note: Listen to Knicole Emanuel’s live RAC Reports every Monday on Monitor Mondays at 10 Eastern.