MW Medicare Advantage crisis deepens as Dr. Oz launches 'aggressive' audits

By Brett Arends

The plan to investigate the private health-insurance companies that run Medicare Advantage has been drastically expanded

If the Medicare Advantage program isn't in crisis, it's doing a terrific impersonation of something that is.

The latest blow comes from Mehmet Oz, the physician and former TV personality turned MAGA Republican who now runs Medicare on behalf of the Trump administration. This week he announced a dramatically expanded plan to investigate the private health-insurance companies that run the program, auditing their invoices going back years.

And he wasn't mincing words. "We are committed to crushing fraud, waste and abuse across all federal healthcare programs," Oz said in a statement. "While the Administration values the work that Medicare Advantage plans do, it is time CMS faithfully executes its duty to audit these plans and ensure they are billing the government accurately for the coverage they provide to Medicare patients."

The health-insurance companies responded as if this were little more than routine. "Oversight of Medicare Advantage is critically important, and annual audits are a welcome step," AHIP, the insurers' trade association, said in a statement. "Those audits must be rooted in methodology that is transparent, statistically valid and legally sound and we look forward to working with CMS to ensure the methodology meets that standard."

Well, maybe.

But Oz clearly seems to think there's something there. So much so that he's breaking with standard MAGA protocol, which is to fire everyone you can (and many you can't), and is instead hiring 2,000 more staff - within the next three months - to investigate all the bills.

Read: The current Republican tax bill could cut $500 billion from Medicare - 'This bill just gets more and more cruel'

Oz cited federal data suggesting that the private insurers could be pocketing as much as an extra $40 billion a year by overbilling the federal government for health services through the program.

Past audits of Medicare Advantage bills by the Centers for Medicare and Medicaid Services found that overpayments totaled between 5% and 8% of total expenditures, he said, a range that would amount to $25 billion to $40 billion based on the current size of the program. This would tally with the estimates made by the independent Medicare Payment Advisory Commission, or MedPac, Oz said, which reckoned overbilling "could be as high as $43 billion per year."

These figures were far above the previous estimates of $17 billion, he added.

The stock market is also worried. Shares in Medicare Advantage insurer Humana $(HUM)$ plunged 7% on news of the audits. Elevance Health (ELV) fell 4%. UnitedHealth $(UNH)$ fell 2%.

This is just the latest blow against the Medicare Advantage program, through which the federal government outsources Medicare to private companies.

Industry giant UnitedHealth, a member of the Dow Jones Industrial Average, is in full-blown corporate meltdown, in large part due to spiraling costs in its Medicare Advantage division. Its chief executive just stepped down. The company this week sought to dismiss allegations, first raised by the Guardian newspaper, that it has been paying nursing homes to keep elderly patients out of hospitals even when they needed them.

UNH isn't alone in having trouble. The U.S. Justice Department is now suing major Medicare Advantage insurers and insurance brokers, accusing them of running a massive and illegal "kickback" scheme for years with the express purpose of defrauding senior citizens by selling them MA plans that aren't in their best interest.

Actually the allegations would be much worse than merely selling people the wrong plan. If you move a senior citizen into a suboptimal health plan, you don't just rip them off. You endanger their health and their life.

Read: 'Medicaid and food stamps are easy targets': House bill makes unprecedented cuts to Medicaid and SNAP

The companies being sued have all denied the charges and say they plan to fight them.

All of these things may simply be symptoms of a more fundamental issue: The program makes very little sense. Medicare Advantage involves the taxpayers hiring a private insurance company to collect insurance premiums and pay out benefits on its behalf.

That might make sense if those companies were able to do that more efficiently than the government, but the evidence points the other way. Out of every dollar that the taxpayers hand them, the insurance companies spend about 14 cents on themselves - on administration, profits and so on.

Out of every dollar that the taxpayers hand original Medicare to do the same thing, it spends about 1.4 cents - one-tenth as much.

Even if you add all of Medicare's "improper payments," which come to another 7.6 cents, it's still a lot cheaper than Medicare Advantage. And most analysts accept that the bulk of those improper payments are things like coding errors and incomplete paperwork rather than fraud.

If the shortest distance between two points is a straight line, the cheapest way to get money from A to B is usually directly, without engaging a for-profit middleman - least of all one that pays its CEO $60 million.

MedPac already claims that Medicare Advantage is costing taxpayers an extra $84 billion a year. (The insurance companies dispute the claim, arguing the methodology is flawed.)

At a time when the federal budget is in crisis and the administration says it is determined to root out all "waste, fraud and abuse," Medicare Advantage would seem to be an obvious target for cost savings.

As the private insurers are already struggling with rocketing costs and collapsing profits, this raises the obvious question: Will they keep writing these insurance policies if they can't make enough money?

Read: Opinion: This is how Americans are blowing their retirement money - again

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 23, 2025 10:42 ET (14:42 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.