Medicare Advantage (MA) companies receive higher risk-adjusted payments from the Centers for Medicare & Medicaid Services (CMS) for sicker enrollees. This helps ensure that plans receive sufficient payments to cover increased care costs and that enrollees have access to plans. However, a new report states that taxpayers are footing the bill for billions of dollars in overpayments to these companies every year based on unsupported diagnoses for MA patients.

In the report, the Department of Health and Human Services Office of Inspector General (OIG) identified two sources of enrollee diagnoses – health risk assessments (HRAs) and chart reviews – as vulnerable to misuse by MA companies.

This new evaluation updated the OIG’s previous findings, which determined whether vulnerabilities persist regarding the appropriateness of resulting risk-adjusted payments and the quality of care for enrollees with diagnoses reported only on HRAs and no other service records in the 2022 data. It also examined how MA companies use chart reviews of information gathered as part of HRAs to add diagnoses that increase risk-adjusted payments.

“Diagnoses reported only on enrollees’ HRA and HRA-linked chart reviews and not on any other 2022 service records resulted in an estimated $7.5 billion in MA risk-adjusted payments for 2023,” the OIG reported. “The lack of any other follow-up visits, procedures, tests or supplies for these diagnoses in the MA data for 1.7 million enrollees raises concerns that either the diagnoses are inaccurate and the payments are improper or enrollees didn’t receive needed care for serious conditions.”

In-home HRAs and HRA-linked chart reviews generated almost two-thirds of the estimated $7.5 billion in risk-adjusted payments. This method may be more vulnerable to misuse because these assessments are often administered by the MA companies or third-party vendors, not the enrollees’ health care providers. Diagnoses reported only on these records heighten concerns about their validity or care coordination for MA enrollees.

The OIG reported that just 20 MA companies drove 80% of the estimated $7.5 billion in payments. Two companies, UnitedHealth Group (NYSE: UNH) and Humana (NYSE: HUM), were cited as receiving the highest payments of the group, about $3.7 billion and $1.7 billion, respectively. However, those two are also the largest MA administrators.

Eight of these companies mainly offered special needs plans (SNPs), and at least 90% of their enrollees were dually eligible for Medicare and Medicaid. CMS requires the companies offering SNPs to conduct HRAs and take additional measures to address these populations’ specific health care and care coordination needs. Given these additional requirements, OIG said that it is concerning that enrollees in SNPs would potentially lack follow-up care.

UnitedHealth Group defended its use of in-home HRAs earlier this year, arguing that these assessments help members access the care they need and help plans gain greater insight into a patient’s whole health picture.

For each patient enrolled, MA companies receive a fixed payment reflecting the expected cost of providing care. Because treatments vary, these companies submit data justifying higher reimbursement for patients with more complex health issues.

“The risk-adjustment payment policy creates financial incentives for MA companies to misrepresent enrollees’ health statuses by submitting unsupported diagnoses to CMS for additional conditions that inappropriately inflate their risk-adjustment payments,” the OIG report said. “Unsupported risk-adjustment payments have been a major driver of improper payments in the MA program.”

The OIG recommended that CMS impose additional restrictions on the use of diagnoses reported only on in-home HRAs or chart reviews linked to in-home HRAs for risk-adjusted payments, conduct audits to validate diagnoses reported on these reports, and determine whether select health conditions that drove payments from these reviews may be more susceptible to misuse among MA companies. CMS agreed with the third recommendation but not the first two, according to the OIG.

“In the MA program, HRAs are generally part of annual wellness visits and are often conducted during other visits in non-clinical settings,” CMS Administrator Chiquita Brooks-LaSure wrote in a letter to OIG. “In recent years, HRA-type assessments, or visits that do not incorporate a formal HRA but may have the same purpose of identifying diagnoses that may not be used for follow-up care, have been conducted in the home. Diagnoses associated with these assessments submitted by MA organizations are eligible for use in risk adjustment when they are documented in the medical record and are associated with a risk-adjustment allowable procedure code.”

All diagnoses used for risk adjustment may be subject to risk adjustment data validation (RADV) audits to ensure they meet program rules. CMS is committed to ensuring that diagnoses submitted for risk adjustment by MA organizations, including those associated with HRAs conducted in the home, are accurate and can be validated through medical record reviews, according to Brooks-LaSure.

CMS has issued guidance to ensure MA organizations are using HRAs appropriately. It has encouraged plans to adopt a core set of components for their in-home assessments, including administration, under the Center for Disease Control and Prevention’s model HRA framework.

In addition, CMS reportedly continues to consider the role HRAs play in the MA program and acknowledges that there is increasing concern that these assessments could lead to increased MA coding growth.

“CMS will continue to consider the relationship of HRAs to the care provided to beneficiaries,” Brooks-LaSure wrote. “While home visits may be valuable in meeting beneficiaries’ care and social needs and identifying early interventions, CMS recognizes the concern that these visits often may be primarily for assessments that lead to diagnoses that never result in early intervention, follow-up care or care coordination in the home or otherwise. Any evaluation of concerns and exploration of policy solutions around HRAs needs to address the complexities of whether it is possible to identify diagnoses from home visits that are primarily used for coding assessments versus home visits where the primary purpose is treatment, and if so, how these differences can be identified.”