The Centers for Medicare & Medicaid Services overpaid Medicare Advantage plans between $1.2 billion and $3.1 billion in 2010, and likely overpaid even more in 2011, according to an analysis released by the Government Accountability Office.
The problem came to light after policymakers expressed concern Medicare Advantage plans were reporting greater disease severity levels for their enrollees than claims for fee-for-service beneficiaries indicated.
The formula for determining monthly capitation rates for health plans had been based on diagnostic sampling of fee-for-service populations, so the two should be relatively similar based on historical claims costs.
Asked why they weren't, James Cosgrove, the GAO's Health Care Director and lead author of the report, said that wasn't the scope of the project.
"We didn't try to get into the possibilities," he said. "What leads to this problem could be that the fee-for-service doctors are not doing a very good job in reporting diagnoses, or it could be that some of the Medicare Advantage plans are exaggerating the diagnoses that their beneficiaries have, or somewhere in the middle."