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Medicare Audits Target Overpayments to Private Health Plans

Humana Inc., UnitedHealth Group Inc. and other insurers running Medicare managed-care plans may have to refund the government as much as $370 million next year if audits find the companies were overpaid.

About 11 percent of government payments to the health plans were erroneous in 2011, the U.S. Centers for Medicare and Medicaid Services estimates. Government audits of 30 unspecified plans will examine whether clinical records justify payments made for medical services, the agency said today.

“We’re absolutely confident that this is a valid sample to do these audits,” said Jonathan Blum, deputy administrator of Medicare, in a telephone interview.

About 25 percent of the 45 million Americans enrolled in Medicare belong to private Medicare Advantage plans, which are paid a fixed fee to provide the program’s traditional insurance benefits along with extras such as gym memberships and eyeglasses.

UnitedHealth, based in Minnetonka, Minnesota, had the most Medicare Advantage customers in the fourth quarter, with 2.2 million, followed by Louisville, Kentucky-based Humana, with 1.9 million, according to data compiled by Bloomberg.

The government estimates it may have overpaid the industry as much as $12.4 billion last year. The 11 percent error rate for private plans compares with an 8.6 percent rate in traditional Medicare, the government said.

Source of Anxiety

The idea that Medicare might seek to recover overpayments to the plans “is a perennial source of anxiety” for investors, said Alec Vachon, president of Hamilton PPB, a health-care consulting firm in Washington, by phone.

Each audit will examine the medical records of 200 patients and calculate the percentage of improper payments, Blum said. Medicare will recoup any overpayment by reducing future payouts to the companies, he said.

Medicare decided to only audit one year’s worth of claims, instead of looking back as far as 2007 as it initially proposed a year ago, Blum said.

The decision “provides important clarity on the alignment of audit methodology and payment methodology for Medicare Advantage plans,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a Washington, D.C. trade group, in an e-mail.

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