Medicare overpaid PacifiCare $424M for unsupported diagnoses

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California health insurer PacifiCare, which is owned by UnitedHealth, may have been overpaid by more than $420 million to administer its Medicare Advantage plan, according to a new report from the U.S. Department of Health & Human Services' Office of Inspector General.

The report found that PacifiCare's risk assessments often made its members sicker than they were. Because Medicare pays insurers a higher rate for members with more serious conditions, PacifiCare inappropriately received too much money to insure the patients, reported California Watch.

In a review of 100 sample cases, the OIG found that 45 of the members' medical records conflicted with the billing codes that PacifiCare submitted to Medicare, many of which were for cancer or a dangerous bloodstream infection.

The OIG, therefore, is ordering PacifiCare to refund the $224,388 it was overpaid based on those faulty billing codes. And it estimated that, based on the sample rate of overbilling, PacifiCare likely inappropriately billed for 188,000 members during 2007, the year of the investigation, totaling the overpayments at $424 million.

However, UnitedHealth claimed the OIG's sample size is too small and can't be applied to hundreds of other members, noted California Watch.

"The audit does not follow Medicare's own guidelines, standards or accepted methodology for validating risk-adjustment payments," according to a statement by UnitedHealthcare Medicare & Retirement. "In fact, it differs significantly from (Medicare's) adopted methodology. The OIG appears to have relied instead on a methodology of its own making." 

To learn more:
- here's the HHS OIG report (.pdf)
- read the California Watch article

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