Medicare ‘Upcoding’ Has Cost Seniors $11 Billion Over the Last Decade

medical billingThe Center for Public Integrity (CPI) has released a study on doctors’ increasing use of more complex, and consequently more expensive, medical billing codes for their Medicare patients — a practice that CPI estimates has cost the seniors on Medicare an extra $11 billion dollars.

Medicare billing codes were established in order to provide doctors with a simple method of indicating how much time and effort their Medicare patients were costing them. Using billing codes, doctors can charge Medicare for their services based on the complexity of each patient’s medical problems and the amount of time spent with each Medicare patient. Accordingly, doctors who take on patients with more difficult, time-consuming medical issues can be appropriately compensated by using a higher billing code number. Of course, this means that seniors who are deemed to have more complex problems or take up more time during a doctor’s visit are billed at considerably higher rates than those with more common ailments.

Doctors with Medicare patients have almost full discretion over which codes to use for their patients, so the billing and coding system works more-or-less on an honor code. However, the Center’s examination of a decade’s worth of Medicare claims and government audits shows that, while doctors have invoked higher-level codes, there does not appear to be a corresponding increase in the nature or complexity of services rendered:

Medical groups argue that the fee hikes are justified because treating seniors has grown more complex and time-consuming, both due to new technology and declining health status. […] But the Center’s analysis of Medicare claims from 2001 through 2010 shows that over time, thousands of providers turned to more expensive Medicare billing codes, while spurning use of cheaper ones. They did so despite little evidence that Medicare patients as a whole are older or sicker than in past years, or that the amount of time doctors spent treating them on average was rising.

While it’s impossible to know precisely why doctors and hospitals moved to better-paying codes in recent years, it’s likely that the trend in part reflects “upcoding” — the practice of charging for more extensive and costly services than delivered, according to Medicare experts, analysis of the data and a review of government audits.

Although the report explores difficulties experienced by doctors who serve Medicare patients, including the inability of repayment rates to stay on par with medical office inflation, the sharp increases in high-fee code use are striking. According to CPI’s research, the percentage of the three least complex and expensive patient-visit billing codes (Codes 99211-99213) have been trending steadily downward for the last decade, especially the last three years. By contrast, use of the second-most expensive billing code (Code 99214) has sharply risen each year since 2001, ballooning to 36% of all Medicare patient visits in 2010, nearly double its rate in 2001.

To get an idea of what this means for Medicare beneficiaries’ expenses, CPI explains that Code 99211 — which indicates a simple medical problem and short office visit — charges approximately $20 from Medicare, whereas a more complex medical visit under Code 99215 charges about seven times that amount at $140. And if billing fraud and coding errors in Medicare are left unchecked, those numbers will only go up even further, increasing the cost of care for America’s seniors.