Jan 4, 2019

Health insurers collect big Medicare overpayments from bad guesses

Taxpayers spent $100 billion on Medicare Part D in 2017. Photo: Universal Images Group via Getty Images

From 2006 to 2015, health insurers and pharmacy benefit managers that run Medicare's prescription drug program reaped $9.1 billion in additional taxpayer funds because they overestimated how much their members would spend on drugs, according to a Wall Street Journal investigation.

The bottom line: Medicare's complex rules allowed companies — including UnitedHealth Group, CVS Health and Humana — to pocket most or all of those overestimated funds instead of paying them back to the federal government.

The background: The Medicare Payment Advisory Commission for years has flagged problems with certain payment policies in the Medicare Part D program, which is run by private insurers but funded by the public. The policies in question are called "risk corridors" and "reinsurance."

  • The WSJ analyzed publicly available data and obtained confidential company data to show how those payments were actually panning out.

The big picture: The $9.1 billion in overpayments discovered by the WSJ equals a little more than 1% of the $637 billion spent on the Medicare Part D program from 2006-2015, according to Medicare data.

  • Yes, but: That means the program is still squandering taxpayer money. The WSJ's analysis also shows how health insurers are able to reap sizable windfalls — dollars that make a difference in earnings projections — even when they are only tinkering with a small amount of overall spending.

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