Up to $5.1B in Excess Paid to Medicare

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Over the past three years Medicare plans were overpaid by up to $5.1 billion due to an inadequate coding adjustment by the Centers for Medicare and Medicaid, according to a report.

Over the past three years Medicare plans were overpaid by up to $5.1 billion, according to a report from the Government Accountability Office (GAO).

The government auditors determined that from 2010 to 2012 the amount of excess payments to Medicare Advantage plans was between $3.2 billion and $5.2 billion. A coding issue caused these plans to claim their patients were sicker than similar patients in the Medicare fee-for-service program.

The Centers for Medicare and Medicaid Services (CMS) pay Medicare Advantage plans a predetermined amount per beneficiary. The payment is adjusted for health status, which is determined by a risk score.


According to the audit, CMS inadequately adjusted its risk scores because of its decision to use a 3.4% adjustment instead of the higher adjustments called for by a previous GAO analysis. The lower adjustment rate is what led to the excess payments to Medicare Advantage plans.

In 2012 the estimated risk scores for Medicare Advantage lans were 4.9% to 6.4% higher than they would have been if the same beneficiaries were enrolled in the fee-for-service program. However, those scores should actually be the same for beneficiaries that have the same health and demographic conditions.

“The existence of such excess payments indicates that CMS’s adjustment does not accurately account for differences in treatment and diagnostic coding between [Medicare Advantage] plans and Medicare [fee-for-service],” the GAO wrote in its report.

Read more:

GAO report (pdf)