To finance Reconciliation 3.0, lawmakers should fix Medicare Advantage fraud

Chad Savage

Submitted photo/InsideSources

Medical diagnoses should come from physicians, not insurance billing departments. Insurers are responding to the incentives Washington created, but those incentives do not serve patients. When government reimbursement policies reward adding or exaggerating diagnoses, the system begins to serve reimbursement rather than patient care.”

OPINION — Lawmakers in Washington are in the midst of trying to pass Reconciliation 3.0, a fast-tracked spending bill that would include major investments in the military and other priorities.

To fund those investments, lawmakers are facing a familiar challenge: finding enough spending reductions to pay for the bill without raising taxes. 

Congress doesn't have to look far. 

A significant source of waste in the federal budget is Medicare Advantage, where insurers have spent years exploiting flaws in the program’s payment system to collect billions in improper taxpayer dollars. Washington built a reimbursement system that rewards insurers for gaming it. Reforming those incentives would protect the popular Medicare Advantage program and generate significant savings that could be used to finance reconciliation. 

Medicare Advantage allows private insurers to administer Medicare benefits, with the federal government reimbursing plans based on how sick their enrollees appear to be. Patients with more-serious medical conditions receive higher “risk scores,” and insurers receive larger government payments to cover their care. 

When the government pays more for higher-risk scores, insurers predictably respond by maximizing those scores. They do this primarily through two practices: health-risk assessments and upcoding. 

Health-risk assessments are in-home or virtual evaluations where insurers or their contractors identify diagnoses that may never have been made by a treating physician but nonetheless increase government payments. Upcoding involves recording legitimate diagnoses as more severe than medical records support, again increasing taxpayer reimbursements. 

The abuses are widespread. Last month, two healthcare companies and an executive agreed to pay $56.5 million to resolve allegations that they submitted unsupported diagnoses through health-risk assessments. Meanwhile, the Health and Human Services Office of Inspector General found that every acute-stroke diagnosis it reviewed in a nationwide Medicare Advantage audit lacked support in patients’ medical records, contributing to $462 million in overpayments in a single year. 

The economic consequences are staggering. Analysts estimate Medicare Advantage overpayments could cost taxpayers $1.3 trillion over the next decade. In 2026 alone, the Centers for Medicare & Medicaid Services is projected to overpay insurers by $76 billion. Separately, a Health Affairs study estimated that restricting the effect of health-risk assessments on Medicare Advantage risk scores could reduce Medicare spending by up to $12.3 billion annually. 

The damage extends beyond wasted taxpayer dollars. 

Medical diagnoses should come from physicians, not insurance billing departments. Insurers are responding to the incentives Washington created, but those incentives do not serve patients. When government reimbursement policies reward adding or exaggerating diagnoses, the system begins to serve reimbursement rather than patient care. Inflated diagnoses can also create downstream problems when physicians’ medical records conflict with insurers’ coding, contributing to treatment delays and coverage disputes. 

A bill that would address this abuse — the No UPCODE Act — should be passed without delay. The No UPCODE Act would modernize Medicare Advantage’s risk-adjustment system by reducing opportunities to inflate diagnoses, limiting outdated coding practices and ensuring Medicare pays only for medical conditions that are actually relevant to a patient’s care.  

Rather than attempting to police every insurer individually, the bill fixes the incentives that encourage abuse in the first place. The reforms would preserve Medicare Advantage while restoring accountability to a program that has become increasingly vulnerable to abuse. 

Lawmakers have made eliminating waste, fraud and abuse a defining priority. Medicare Advantage presents one of the clearest opportunities to turn that promise into policy. 

Rather than asking taxpayers to shoulder new costs or searching for politically difficult spending cuts elsewhere, Congress should begin by fixing the government policies that reward inflated diagnoses and improper payments. The answer is not to demonize insurers for responding to Washington's incentives, it is to change those incentives so insurers succeed by delivering better care, not generating higher billing codes.  

Passing the No UPCODE Act would protect patients, strengthen Medicare and provide the kind of fiscally responsible offset lawmakers need to advance their reconciliation agenda. 

Chad Savage is a family physician in Michigan. He wrote this for InsideSources.com. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.