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Frank Cappello: [00:00:00] Hello and welcome to Lever Time, I'm producer Frank Capello filling in for David Sirota. on today's episode we will be talking about how private health insurance companies are now using artificial intelligence and computer algorithms to deny their customers health care coverage. Today, myself and The Lever's senior editor and reporter Andrew Perez spoke with journalist Bob Herman from Stat News, who co authored a report detailing how UnitedHealth, the country's largest health insurer, has been using AI to deny rehabilitation services to older and disabled patients enrolled in the privatized Medicare Advantage health plans. That interview will be coming up in a few minutes. For our paid subscribers, we're always dropping bonus episodes of Lever Time into our Lever Premium Podcasts feed. This past Monday, we published my interview with journalist Cole Stangler about his new book, Paris Is Not Dead, Surviving [00:01:00] Hypergentrification in the City of Light, Which explores how gentrification has been affecting the cultural make up of Paris, as well as the public housing policies that have actually maintained the city's diverse working class character.

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Alright, we're going to get right into our interview today about artificial intelligence in the healthcare industry.

Over the past few years, commercial AI technology has exploded in terms of its capabilities and accessibility. Now it feels like every corporation is racing to find new and exciting ways for artificial intelligence to decrease their operating costs and increase their revenue.

From customer service companies, to supply chain management, to even the entertainment industry, it seems like everyone wants in on the [00:02:00] AI boom to help juice their bottom line. Now the health insurance industry is the latest to buy in on artificial intelligence to make their processes more efficient. The issue is, their business is providing healthcare to living, breathing human beings. and in some cases, when AI gets something wrong, the result could mean life or death or extreme pain for the patients they are intended to help. On top of that, this issue appears to be plaguing older Americans enrolled in Medicare Advantage Plans, the privatized version of Medicare operated by private insurance companies rather than Medicare.

For today's interview, myself and The Lover's Andrew Perez were joined by journalist Bob Herman from Stat News. Bob recently co authored a report, along with his colleague Casey Ross, about UnitedHealth, America's largest health insurer, which has been using AI to deny rehabilitation services to its members.

All right, we are now joined on Lever Time by Bob Herman. Bob is a journalist and healthcare business reporter for Stat [00:03:00] News. Bob, thank you so much for being here.

Bob Herman: Thanks for having me. Appreciate it.

Frank Cappello: And we're also with Andrew Perez, -- reporter and senior editor for The Lever. Andrew, thank you as well.

Andrew Perez: course.

Frank Cappello: So, Bob, you recently co authored a report for Stat News about how UnitedHealth, the country's largest health insurance company, has been using artificial intelligence to deny rehabilitation services to some of its older and disabled customers. So, how did you first learn about this, and what did you end up uncovering?

Bob Herman: Casey Ross and I first learned about this pretty much a year ago. We heard from somebody that this was going on that, um, you know, nursing homes and their patients were just getting inundated with payment denials. and they were all based on an algorithm. The nursing homes were never given a justification or any insights into what went into the algorithm.

They just knew that, hey, their patients were getting kicked out more or less. So Casey and I started digging into it and we found that it for sure is happening and it was just like this [00:04:00] progression. It was, yes, it's happening. Uh, it's happening at a broad scale. and it's even worse than you might think, because, um, it's, what we ultimately learned is this was at least for United Health, the largest Medicare Advantage insurer in the country.

This was like an explicit strategy, to save money. Um, this algorithm would spit out some numbers of how long they think, um, a patient should be in the nursing home. And once that day was met. It's either, you know, pay out of pocket or, you're going home and employees were incentivized to basically follow the algorithm.

Um, so it just, it just snowballed into this. Hey, this is a thing that's happening to. Oh, my God. This is like, widespread across Medicare advantage writ large.

Andrew Perez: private Medicare Advantage plans are supposed to cover services that traditional Medicare would cover. So how, how is, you know, the company, like you're saying the biggest Medicare Advantage insurer, the biggest I think health insurer in the [00:05:00] country, how are they skirting Medicare coverage rules this way?

Bob Herman: So you're right. Medicare advantage insurers by law have to provide the same benefits that. Some traditional Medicare beneficiary would get otherwise. and under traditional Medicare, people are entitled to 100 days of nursing home care. Obviously, not everybody needs 100 days nursing home care, but if you need it, it's there and it's covered, um, with certain cost sharing obligations for the beneficiary.

if, an insurance company is kicking someone out at day 16, for example, and that person, by all measures, from their point of view, their doctor's point of view, need more time, and they're getting... denied, that seems like it would run afoul of Medicare coverage rules. So, um, and as a Medicare Advantage company, you agree to those terms when you, uh, accept money from the federal government.

So that's, that's the big concern is, you know, are they providing full coverage for all services for [00:06:00] beneficiaries?

Andrew Perez: I guess the question is like, what kind of recourse do people have in this situation? Like what, what happens Um, when they're denied, like, is it, does it mean they're like automatically paying out of pocket? Do they not get services? What, what happens next?

Bob Herman: in short, it's a, it's a total mess. Um, so when, uh, a patient receives a payment denial, they can appeal and so, but the appeals process is just a total nightmare. And if you're a sick and injured, uh, frail individual, that's mostly just concerned about being able to walk again. That's not something you can really do.

So maybe you're relying on family to go through the appeals process. and it's just, it's very convoluted. Maybe you can buy a couple more days, um, from the insurance company, and then they're just going to issue another payment denial. This is, it's written into their. employee handbook, more or less.

And so those are the options. You can, you can appeal and appeal and appeal over again. Eventually you can make it to an administrative law judge who would look at the case. And maybe you get more of your stay covered. A lot of people don't make it that far. for the exact reasons that I'm, I'm outlining, it's, [00:07:00] it's long, it's complicated.

They just don't have the energy or, or stamina to do that. So then they're faced with, okay, I can, I still need this care. I'm going to stay in the nursing home. And pay out of pocket, which a lot of people can't afford, or they just get discharged home in a condition where it might not be safe for them. So there are options, but none of them are really good for the sick or injured person.

Frank Cappello: So a few weeks ago, uh, a class action lawsuit was actually filed against United Health and its subsidiary Navi Health, alleging that they are illegally using the algorithm to deny rehab care to seriously ill patients.

The complaint alleges that the Navi health algorithm has a 90% error rate, which seems incredibly high.

Bob Herman: Yeah, so the class action came out the same day we published and we had heard that something was going to be happening there. I mean, we've been covering this all year. There's been a groundswell of, Kind of outrage, and we just, we've received a lot. We knew something was could be in the works. And the lawsuit does allege that Navi health algorithm has this [00:08:00] wildly high.

error rates and I think we've, we've found that part of that is true. Like, for example, if you know, someone is only given 16 days. Um, but they need more care. that's just, it's built back into the algorithm. The algorithm says, okay, this person was sent out at 16 days, but if they needed more, that's not reflected in the algorithm.

So it's just like self perpetuating thing that just drives lengths of stay lower. And it hurts by far the most vulnerable people, the people who need the longest amounts of care and recovery. And so if this algorithm is just. You know, basing its decisions and, uh, you know, it's, it's progress over this really skewed perspective of patients.

Recoveries it's by default, not going to be accurate, an accurate, predictor of how long someone might need.

Andrew Perez: could you tell us a little bit about how this algorithm is set? And then secondly, like the nine, the 90 percent error rate, [00:09:00] is basically like if you appeal. You win 90 percent of the time, right? Like even in the, in the internal insurer process, right?

Like, but the thing, I guess the catch here is they also know people don't appeal, right? Like it's a really, it's a very small percentage of people who are having their, their claims denied are then actually appealing. But if you appeal, you win. and this is like sort of a longstanding issue, right?

With like, I know there's been past, um, reports from the health and human services department about how. Basically, 75 percent of, of Medicare Advantage, um, denials get overturned on appeal. and, and then again, they were, you know, the government was flagging, people don't appeal. so it actually kind of seems like the number of, the, the, the percentage of people who are, you know, winning on appeal is going up.

It's got, it's, it's, it's just like ever increasing. But, um, nothing's really kind of changing, right? Like the process continues.

Bob Herman: That's exactly right. You're right. It's, it's single digit percentage like numbers of people who are appealing, [00:10:00] but if you do make it there, you do win. Uh, you at least buy yourself a couple more days. If you make it to the administrative law judge, which is in this complex appeals process, it's like the end of the line almost.

you know, oftentimes patients will win there too and get at least most, if not all of their stay, the rehab stay covered. So, it's absolutely a problem where if people appeal, they will win. But, you know, I think insurance companies know that this is a very complex process. They don't make it easy. They make it difficult for this exact reason.

They know that people aren't going to go through the arduous process. and yeah, the HHS OIG has found for a long time that, you know, denials have been high, appeals are low, the, the win rate for patients and those who appeal are, are very good. They're successful. this, it's absolutely a design, issue, uh, insurance companies know that if people had to go through this appeals process over and over again, they're eventually going to fall out and that's to their [00:11:00] benefit because then they just get to deny the caring and keep the money that would have otherwise gone out the door.

Frank Cappello: know, one of the most compelling parts about your report for me was you spoke to a number of, uh, health insurance case managers about how and why AI is now doing their job for them. So what did you learn by speaking directly to these human case managers?

Bob Herman: Yeah, it's, And my colleague Casey Ross, uh, you know, he did such a good job with this too. you know, it, it really felt like the, I mean, we talked with dozens of people throughout the year and the case managers in particular. you know, we've said it almost was like, there was a confessional for them.

Because they, it was written into their performance goals. Like, listen, you have to follow the algorithm within 1%, which is basically there's no variance. Right? And so, when these people have to go into nursing homes and tell the nursing homes and the patients, like, Sorry, the cares up knowing that like a person can't even go to the bathroom [00:12:00] or, you know, you know, they're an amputee and they're like, still like, learning how to work with their prosthetic limb.

this is not something that they felt good about. and it's not like this is stop. Like, this is, it's an ongoing thing as far as we know. and for a lot of them, and, you know, it just, it weighed on them. They knew that care should be personalized a little bit more. and it just, it wasn't. And so I think, they felt like they were in between a rock and a hard place by choosing whether they should.

Stick to what they're being judged by, uh, and their jobs and also weighing that against their conscious of having to kick people out when they, when they knew that people needed more care.

Andrew Perez: Can we talk about like What is the system here? I'm like, and who, who are actually like, you know, handling these cases, right? Like, so this is being managed by, um, by Optum at United Health, which is both its pharmacy benefit manager and what it's like claims management service. [00:13:00] amazing constellation of, uh, of, of interests all built into one there, obviously, You know, it's my understanding, often, like, case managers, the people who are denying these claims, and I don't mean in specific, like, the people you talk to, but, case managers are often, like, doctors and nurses, right?

people who would be helping, in a different world, would actually be providing people some medical service, right?

Bob Herman: that's exactly right. So the case managers, this is not like. someone with, like, a business degree or an engine, like, this is like, it's occupational therapist. It's nurses. It's physical therapists. It's like people who have direct experience with rehab. and they know how long someone might need.

They know if, you know, they were ambulating before an injury, how long it should take until they're back to normal. now, United has told us, you know, hey, there's. Physician medical reviewers as a backstop. we've also heard that that's, I mean, they just kind of rubber stamp these payment denials.

Anyway, like, they're just, [00:14:00] there's too much for them to look at, or it's just not in their interest to have to fight, um, to extend someone's stay as well. but you're exactly right. These case managers, these are direct, like, these are people with vast experience in health care. They know what they're looking at.

This is not They're not novices in this, and to your point, like, this is like in the broader context, this is just a, it's United Health in particular is this complex system of subsidiaries and everything else. So you have United Health, you have Optum, you have NaviHealth. These are all, it's this large vertically, vertically integrated company.

That basically controls you from you owning health insurance to when you need the rehab care and that's that's a completely separate issue But it goes to how big of a problem and how big United Health is itself now.

Frank Cappello: included in your story is a short profile of the CEO of UnitedHealth's OptumDivision, which oversees NaviHealth, and [00:15:00] his business philosophy known as, So can you tell us a little bit about Patrick Conway and his corporate governance strategy?

Bob Herman: This was a fascinating wrinkle Patrick Conway Has been involved in the value based care movement for years. He was a key person in the Obama administration just this evangelist for, uh, Medicare, accountable care organizations, right care at the right place at the right time. he left Medicare to go into private industry.

He was at Blue Cross Blue Shield, North Carolina, then eventually made his way to Optum, UnitedHealth, and he's been there for a few years now. And he's had this philosophy, it's called lean management, and it's pervasive across healthcare. Where it's this idea that... Let's make things as efficient as possible.

Let's root out the waste. Um, and Lean has its roots in Toyota, the car manufacturer. So in a way, it's like this assembly line mentality being brought to healthcare. And I think we can all [00:16:00] agree that. You know, someone in a nursing home is not exactly the same as like a sedan on an assembly line. but Patrick Conway, like he has this philosophy, like lean manager, grew out the waist.

And he even found podcasts where he said like, how soon can we get someone out of the nursing home? I don't think it was him saying like, let's shut down the nursing home industry, but it was a clear intent to get people out sooner. And there's. Obviously, financial interest here for United Health. If they get people out of rehab quicker, that's more money that they don't have to pay out.

but Patrick Conway has just espoused this theory or this, this, um, you know, the ideology for a long time and he's brought it to Optum and all the United Health executives at the top have bought in as well. This is, this is not just like some kind of like, oh, isolated, isolated. Let's, you know, do this thing.

This is like bought in from the top down and Patrick Conway is a big part of that.

Frank Cappello: I want to turn now from UnitedHealth specifically to the, the [00:17:00] larger issue of artificial intelligence and the use of computer algorithms in healthcare. Because this is something that you report about a lot. So, earlier this year, ProPublica reported that Cigna has been using algorithms to deny hundreds of thousands of claims on the basis that the services are not medically necessary.

So, would you say that this is an industry wide issue? Insurers are now using AI to deny claims in bulk.

Bob Herman: Yeah, I, you know, I, I saw ProPublica's report too, and, and that's interesting because I think the focus is a lot on the commercial side, the employer market, right? And what we focused on was Medicare Advantage, which is arguably the biggest, most profitable, profitable piece of health insurance writ large right now.

So. This is across the board. Um, I think some undercovered areas are probably Medicaid, which, um, let's be honest, uh, insurance insiders have agreed. That's like a of claims business is Medicaid. So this is absolutely across the board. It's not isolated to [00:18:00] one health insurance product or another.

It's not isolated to one insurance company. I mean, some insurance companies even brag about their use of AI. So this is, it's, it's across the board. Every insurance product, probably most insurers.

Frank Cappello: And I'm curious, other than the obvious issue of patients receiving poorer care for the sake of higher profit margins for these healthcare companies, is there anything else that you find concerning about how AI technology is being used in health care?

Bob Herman: you know, and my colleague Casey Ross, he covers AI and healthcare, especially closely. Um, and one thing that, like, we just kept, you know, AI is being promised, like, oh, it's going to help deliver this individualized care. Um, it'll cater everything to someone's specific needs. It's really doing the exact opposite, right?

Like, if you're just kind of taking this machine learning and this technology to almost make cookie cutter decisions about the care that someone needs, or like, what gets [00:19:00] approved and what gets denied, It's a, it is a kind of like an assembly line. It's, it's not, it's not individualized whatsoever.

Um, despite that being the, the tagline of it.

Andrew Perez: so Physicians for National Health Program, which is a single payer advocacy group, they issued a report, um, last month in November, or sorry, in October, estimating that Medicare Advantage is overcharging taxpayers by up to 140 billion per year. there's long been reporting of systemic overbilling by insurers.

It's sort of baked into, into how they're paid. and you've written a lot about this, um, about this fight, in the Biden administration and, and going back way beyond that, um, to claw back some of the excess payments that are going to Medicare Advantage plans. Um, can, can you tell us a little bit about that?

You know, that fight, that conversation and how it's shaking out now in the Biden administration.

Bob Herman: there's been a ton of good reporting on this over the years. And this goes back pretty much since [00:20:00] the, you know, the second coming of Medicare advantage, which was during the Obama administration. yeah, I mean, there's this issue of, you know, I'm not, I won't get into all the details, but the, the short of it is yes to, you know, to your point, Andrew, like, Medicare Advantage insurers, they are paid based on how sick their enrollees are, and there's, it makes some amount of sense, but I think reporting has shown that it has been abused over the years.

Like, insurance companies are being paid a lot more per member than, you know, what they should be because they're kind of inflating how sick their members are. Um, it's all done through coding. There's a whole coding apparatus, the cottage industry of doing it. It's a thing it's happening. There's no question.

Medicare advantage though, like it has flourished really since the Obama administration. There was some kind of tough talk about it. Like, oh, let's crack down on this a little bit. As some of this started to come to light, it really hasn't been the case. I mean, Medicare advantage enrollment is more than is roughly half of all.

Medicare enrollment. Now, if you're a Medicare [00:21:00] beneficiary, one and two are in a Medicare advantage plan. So there's been calls to really reign this in because, you know, the fear is if you are overpaying these Medicare advantage plans. They're going to be focused on profit more than actually, um, covering the care that Medicare beneficiaries expect.

you know, the Biden administration, you know, this past year is starting to crack down some, um, they are going to be doing, uh, more targeted audits, um, to see if, uh, plans are inflating how sick their members are. it was neutered quite a bit, because there's, it can only look back so far. So, I mean, it's still not limited.

And so I think that's important to keep in mind. And then for new payment regulations, there's, you know, they're kind of moving to this new system that will. Um, try to crack down on some of the coding abuses, um, but again, kind of limited. Um, I think a lot of people think it didn't go far enough to rein in some of the, the overpayments.

so overall it, the current environment is, you [00:22:00] know, it's, there, there, there's more regulation of Medicare Advantage plans than there was certainly a decade ago. but you have to understand these, this is like their cash cow right now. If you're an insurance company, Medicare Advantage is your cash cow.

They are finding ways around it. Um, this it's not like it's been a death now, um, by any means.

Andrew Perez: okay. So, you know, it's understood that Medicare Advantage plans are like systemically, systematically overbilling the government by, by saying their patients are actually really sick by like upcoding there. But then on the other end, they're actually, like, denying services as much as they can, right?

Like, they have a, they have a distinct profit incentive to do that because they're given a certain bucket per patient of cash, right? mean, it, it seems to me like this really absurd situation where, we know that these plans are overbilling the government, saying that their patients are very sick, but then their patients are getting, you know, Getting denied, um, right?

Like through, through the use of AI and bulk where they're, as what [00:23:00] you're saying is, you know, per, per your reporting, they're, they're having claims denied as if like, you know, as if they're not that sick, they're ready to, because the average patient can get out of the hospital, you know, 16 days. Right.

So like, it's, it seems like, um, a pretty messed up situation. All, all, all things considered.

Bob Herman: I think You're right. So first and foremost Medicare Advantage insurers are getting more money than they otherwise should. I think that's pretty clear and then to your point They're paying out less than I think some should because of these algorithms these different technology tools that kind of help them You know, retain some of the money there are some, guardrails around that.

For example, there a federal law says, um, for every dollar that we give you, you have to pay out 85 cents in medical benefits. So there's some, you know, I think there was some anticipation that there were, you know, insurance companies would try to stint on care. And that's kind of the [00:24:00] measure against that. However, um, insurance companies are, are kind of getting around that right now because they're becoming vertically integrated, like United. So, it's, for example, if you're United and you enroll a Medicare Advantage insurer, um, United also owning physicians, clinics, all these other things. So, let's route those patients to the clinics and therefore pay ourselves.

So, that's a way around it. Let's deny care if we can, if it's going to somebody else. But, hey, if we direct them to our own clinics, our own physicians, our own... Home health agencies now, that's looking like a much better business model.

Frank Cappello: Bob, final question. So, there's, there's obviously no lack of issues with these Medicare Advantage plans. Um, so, it begs the question, other than, you know, the White House exerting its own pressure, whose authority is it within the federal government to enforce these rules with these private insurers and why aren't they...

Doing it as robustly right now.

Bob Herman: yeah, [00:25:00] it's, it's, I mean, that's a great question. Um, you know, ultimately, this falls in the lap of the centers for Medicare and Medicaid services. It's the federal agency that oversees. Medicare advantage plans and all things Medicare in general. you know, when we just published our story, uh, this month, uh, about United health, we're actually kind of surprised.

CMS said that they were going to be investigating some of the allegations that were published in our story, which is kind of a rare step for CMS. You know, their enforcement of, uh, any plans, I think not been great. They don't have a great track record. So the fact that they're even looking into it is.

quite a big step. hav in this past year to crac abuses that we talked abo different coding payment is only so much that Congress ultimately of them to some degree if wholesale Um, an Medicare Advantage is bought in across the political spectrum. It's a [00:26:00] bipartisan, like, you know, every year there's these letters that come out saying, Oh, the Republicans and Democrats, they love Medicare Advantage.

And it's, you know, it's hard to reform a system that I think, especially in this environment, that both parties claim that they love. now, you know, some senators have started to notice and are calling for more investigations, some hearings. So I think the, you know, there are some cracks in the foundation for sure.

but if you really like, CMS can only do so much, um, and to be fair, the enforcement has been really bad. but Congress ultimately is, is the avenue if, if there's to be wholesale changes to this program.

Andrew Perez: We're sort of talking about a system here that, um, is designed to just like throw off money, right? it does make it, like, that, that, that system actually makes it, like, really difficult to rein in, right? Like, they have, you know, the insurance industry has, like, endless money to, to fight for this program and to, and to fight to, to maintain the status quo.

Bob Herman: Yeah, I mean, the, it's like we [00:27:00] talked about the fact that they, um, are getting overpaid, uh, to some degree by the federal government. That's just, it's extra money that they could, that could then be used to make sure that. Medicare advantage a doesn't go anywhere and be that it strengthens to its preferences.

and I mean, if you look over the past, like, ever since the affordable care act went to into effect. That's exactly what happened. The Affordable Care Act strengthened Medicare Advantage to some degree. I know it pared back some payments. But it created this bonus payment system that I think everyone agrees is flawed.

Uh, and, and is not a true barometer of, of quality within a health plan. Medicare Advantage is by far the most profitable line of business. so there's going to be a push to, to keep it that way.

Frank Cappello: well bob, we really appreciate your time today and really really appreciate your reporting everyone should go check out Uh bob story we will link to it in the show notes Uh, bob herman is a journalist and healthcare business reporter for stat news bob. Thank you again for joining us today

Bob Herman: Thanks so [00:28:00] much. Really appreciate it.

That's it for today's episode. As a reminder, our paid subscribers who get Lever Time Premium get access to this past week's bonus episode, my interview with journalist Cole Stangler about his new book. Paris is not dead, surviving hyper gentrification in the City of Light.

Frank Cappello: Again, to listen to Lever Time Premium, head over to LeverNews. com to become a supporting subscriber. When you do, you also get access to all of the Lever's premium content, and that is just for 8 a month or 70 for the year. One last favor, make sure to like, subscribe, and write a review for Lever Time on your favorite podcast app.

Make sure to subscribe to our other podcasts, The Audit and Movies vs. Capitalism. and of course, make sure to check out all of the incredible reporting our team has been doing over at LeverNews. com. Until next time, I'm Frank Capello. Rock the boat.

The Lever Time Podcast is a production of the Lever and the Lever Podcast Network. It's hosted by David Sirota. Our producer is me, Frank Capello, with help from Lever producer Jared Jacangmayor.

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