New Analysis: Medicare Advantage and the False Claims Act

Health Information & the Law project researchers, Jane Hyatt Thorpe and Elizabeth Gray, recently published a brief discussing how the Medicare program continues to transform to better support high-quality value-based care, yet the federal fraud and abuse legal framework has not kept pace with that shift. The authors highlight challenges associated with application of the current fraud and abuse framework to the Medicare Advantage program specifically and the importance of protecting against Medicare fraud and abuse while encouraging innovative healthcare payment and delivery systems.
 “Medicare is rapidly shifting away from the traditional fee-for-service model to capitated and other payment systems that can offer beneficiaries higher value health care,” said Jane Hyatt Thorpe, JD, a professor of health policy and management at GW's Milken Institute School of Public Health (SPH), and one of the authors of the analysis. “At the same time, we must modernize the legal and regulatory framework so that it keeps up with innovative payment models that are focused on quality and outcomes of care.”
“The Medicare Advantage program and other capitated payment models are at the forefront of a revolution in delivering care to the nation’s senior citizens,” adds Elizabeth Gray, JD, MHA, a research scientist at Milken Institute SPH and co-author of the report.
Capitated plans are fundamentally different from the traditional fee-for-service (FFS) model, the authors say. Under the FFS system, Medicare reimburses providers after the fact for each service provided to patients. This system financially rewards providers that offer more services to beneficiaries—regardless of whether the services are medically necessary or not.
In contrast, capitated payment models transfer the financial risk from Medicare to private Medicare Advantage plans as well as to integrated delivery systems under certain value-based models. No matter how much care these plans and systems provide to beneficiaries, Medicare still pays a single flat fee per beneficiary.
“At the same time, capitated payment models, like the longstanding Medicare Advantage program, have been proven to successfully provide quality care yet still lower the cost of care per beneficiary,” Thorpe said.
The federal False Claims Act (FCA) prohibits arrangements aimed at boosting services simply to increase Medicare payments. “The FCA is one of the most powerful weapons that the federal government can use to fight fraud and abuse in the fee-for-service context,” Thorpe said. “But as Medicare and the private sector shift to paying for value and outcomes, unless the FCA is adapted alongside this system transformation, the law will stifle innovative payment models that by design eliminate the direct incentive for volume.” 
Thorpe and Gray note that there are a number of ways that policymakers could adjust the current fraud and abuse system to ensure that it works more effectively with capitated payment models.  Whether the recommendations in this paper or others are pursued, the legal and regulatory framework must be modernized as health care delivery and payment models continue to evolve to a value-based system, the authors said.
The Anthem Public Policy Institute funded the report as part of its efforts to inform public policy and contribute to healthcare innovation and transformation. The views expressed in this paper are those of the authors.
The analysis, “Medicare Advantage and the False Claims Act,” can be accessed here.