Dr. Mehmet Oz vowed to reduce the bureaucratic footprint of the Centers for Medicare & Medicaid Services (CMS) if confirmed to lead the federal agency. He also acknowledged problems with Medicare Advantage plans and criticized the preauthorization process and overbilling by insurers.

During his appearance before the Senate Committee on Finance Friday, Oz seemed to step back from his earlier, more enthusiastic endorsement of MA plans.

In addition to agreeing with Senators on clamping down on upcoding – a practice associated with submission of codes for more acute and costly diagnoses than necessary – and fixing problems with the preauthorization process for services, he also suggested a more streamlined and efficient preauthorization system in response. Oz also fielded questions from lawmakers on proposed Medicaid cuts

“We spent about 12% of the CMS budget on bureaucratic processes, the administration of the program, and most of that money is taken by middlemen in ways that I don’t think need to be true in the long term,” he said. “I believe we have the power right now, with technology that didn’t exist from three or four years ago, to automate a lot of these processes, and preauthorization is a good example.”

He also said that Medicaid must ensure proper payments for doctors and access for patients, and that the solution to streamlining a ballooning Medicaid budget lay in cutting the cost of care through operational efficiencies.

In an exchange with Senator Ron Wyden (D-Ore.), Oz said that he “cherished Medicaid,” and later in the hearing, when presented with scenarios from Democratic lawmakers, he seemed sympathetic to the Medicaid patients being denied care.

As CMS chief, Oz would oversee health insurance programs covering over 150 million Americans, including Medicare, Medicaid, and the Affordable Care Act. In fiscal year 2024, CMS spent about $1.516 trillion, which is 22% of all federal spending.

The tone of the hearing seemed quite different than that of January’s hearing for Robert F. Kennedy’s nomination to lead the Department of Health and Human Services (HHS), with the room erupting in laughter at many points of the hearing. Oz has been meeting with lawmakers over the last month and is widely expected to be confirmed.

Oz also discussed abuses in the Medicare Advantage sector, highlighting issues with sales of these plans, noting brokers who engage in “policy churning” to earn commissions. He suggested considering multi-year plans for seniors to reduce broker costs. Oz also shared the need to explore whether some of the funds used by MA plans to attract enrollees should be reimbursed to ensure Medicare Advantage doesn’t cost more than traditional Medicare.

Medicare Advantage

More than 66 million Americans are currently on Medicare, and nearly half have traditional Medicare, where the federal government provides health care coverage directly. Meanwhile, the other half are on Medicare Advantage, where the federal government pays a private for-profit insurer to administer the health benefits instead.

“And surprise, surprise, the privatized Medicare costs a whole lot more. So let’s talk about the top trick that is used to gouge taxpayers,” said Sen. Elizabeth Warren as she began her questioning of Oz.

In criticizing Medicare Advantage, she said the problem arises from Medicare Advantage insurers receiving a set amount per patient, and the more diagnoses and codes they list, the higher the payment. While this is meant to cover sicker patients, insurers profit by adding diagnoses without delivering the actual care because reimbursement is based on existing diagnoses.

Warren gave an example of this abuse, as reported by the Wall Street Journal, where 66,000 Medicare Advantage patients were incorrectly diagnosed with diabetic cataracts, even though they had already undergone cataract surgery – a surgery that is only performed once and hence “anatomically impossible,” she said. Regardless, this fraudulent diagnosis led to insurers pocketing an extra $178 million in taxpayer funds.

All this has led to Medicare Advantage overpayments totaling $83 billion, Warren said. By contrast, she pointed out that Republicans in the House passed a budget framework proposing $88 billion in annual cuts to health care, Medicaid, and services for seniors and people with disabilities,

“I have a simple question: if you have to cut waste, fraud and abuse by a fortune 50 health insurance company in Medicare Advantage, or cut funding for Medicaid, which covers half of all seniors in nursing homes and one in three of America’s children,” Warren asked, which program would it be.

“My goal is to improve the health care of the American people, and as you create the argument, the former [scrutinizing Medicare Advantage] sounds a rational way to do,” Oz responded.

Staffing mandate

The nursing home staffing came up in the line of questioning by lawmakers, with Senator Ron Wyden (D-Ore.) asking Oz whether nursing homes should always have a registered nurse available 24/7 per the requirements of a federal staffing mandate for nurses that was finalized last year.

Oz responded that while it was a complex issue, he said a shortage of nurses at nursing homes was the real problem, and suggested that the solution lies in technology. He did not state his views on the federal staffing mandate.

“I actually think we need a nurse who will work in a nursing home, and in many nursing homes, that is a problem,” Oz said. “So, I believe we can provide quality care equivalent to having a nurse in the nursing home using tools and technology including telemedicine.”

Earlier, Oz did say he would give priority to addressing the issue.

“I hope you will not take the nurses out of nursing homes because there will be an effort in the senate to do that, and I will be opposed,” Wyden said in response.

Nursing Home advocates said Oz responded thoughtfully – at least on the issue of staffing in nursing homes.

Rachel Reeves, spokesperson for the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) said, “We thank the Senate Finance Committee for their thorough consideration of the next CMS Administrator and appreciate Dr. Mehmet Oz’s thoughtful comments.”

LeadingAge officials also lauded his responses on several key issues impacting nursing homes such as his openness to greater transparency within CMS, oversight and compliance within the MA program, reducing the administrative burden of MA for providers, especially around prior authorizations.

“We appreciate Dr. Oz’s recognition that the nursing home staffing rule requires further consideration, particularly given the anticipated challenges and unintended consequences it may have on rural providers,” Linda Couch, senior vice president of policy at LeadingAge, said in an emailed statement.

However, LeadingAge officials also wanted to get more definitive answers on whether or not Medicare Advantage would be rolled out in a bigger way.

“[We] are no closer to learning if Dr. Oz plans to pursue one of his positions from the time he ran for the U.S. Senate referred to as Medicare Advantage for all. We were disappointed that no Senator asked him about his intentions on this issue,” said Couch

Behind the scenes, Couch said that the advocacy group was actively engaged with Senate Finance Committee members prior to Oz’s hearing, providing suggested questions to gain clarity on his policy positions regarding nursing home staffing, Medicare Advantage, Medicaid funding and other issues. 

“If confirmed, we look forward to sharing our agenda with Dr. Oz and the Centers for Medicare and Medicaid Services team,” Couch said.