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The Hunt for the Riskiest, Most Lucrative Patients

Privately run Medicare Advantage programs are squeezing money from the Medicare risk-adjustment system by coding sicknesses for maximum payout.
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Illustration: Felix Decombat for Bloomberg Businessweek

Medicare is big business for insurance companies such as UnitedHealth Group, Humana, and CVS Health’s Aetna unit. Selling private versions of the U.S. government health program for seniors—known as Medicare Advantage plans—is among the fastest-growing and most profitable markets in health care. About 26 million Americans, or 42% of all Medicare beneficiaries, choose to get their Medicare benefits through private plans, bringing more than $300 billion annually into insurers’ coffers.

Now federal authorities are raising alarms about the program’s cost. Private Medicare plans, pitched as a way to deliver better care at lower costs, have never saved the government money, according to the Medicare Payment Advisory Commission (MedPAC), a panel of independent advisers to Congress that earlier this year noted that some “policies are deeply flawed and in need of immediate improvement.”