Judges will evict Medicare Advantage Audit Rules with Industry Winning

Diving briefs:

The federal judge has abandoned Biden-era rules that would have taken billions of dollars back with overpayments from Medicare Advantage insurance companies with a major industry victory. On Thursday, Judge Reed O'Connor of the Northern District of Texas tested Medicare risk adjustment data or eliminated RADV and found that CMS failed to properly inform the industry of changes to violations of the Management Procedure Act. The ruling complicates plans to strengthen CMS' audits of MA payers and pushes down more broadly overpayments of privatized Medicare programs.

Dive Insights:

CMS established a new methodology for calculating payment recovery rates from MA audits in January 2023.

The rules allowed regulators to sample a small number of MA members and find unsupported diagnoses that suggest payers were inflated risk scores to get a higher rebate from the government. The regulator then planned to estimate these results throughout the contract and recover repayments based on that estimate.

However, Humana, the MA's leading insurance company, appealed to block the rules later that year. Humana's case was on the regulator's decision to eliminate “service fee adjustments” to ensure that the MA paid by the CMS would plan the same amount. Register it From audit methodology, it is expected that payments will be made in traditional Medicare (a principle called actuarial equivalence).

Humana said the regulator has changed legitimacy to reverse service fee adjusters between the proposed and final versions of the rules. Without the adjuster, the MA's plans were unfairly punished because traditional Medicare physicians might not be encouraged to record all of their patients' health.

On Thursday, O'Connor agreed.

“There was no meaningful notice of the defendant's ultimate recognition that actuarial equivalence would not apply to an actuarial audit, so there was no meaningful dialogue regarding the costs and benefits of surprising changes,” O'Connor wrote in his ruling, arguing that the harm to the insurer was exacerbated by a retroactive application for the rules that returned in 2018.

“As a result, plaintiffs and others could potentially bear enormous, unexpected costs,” he wrote.

O'Connor's decision is a victory for Humana, the second-largest payer in the MA program, for other insurers who opposed a more stringent retroactive audit. The government was hoping to win around $4.7 billion over a decade through the new RADV audit methodology.

“We are pleased with the court's order and are considering a decision to understand its full meaning,” a Humana spokesperson said in an email.

The CMS can still challenge the judge's decision or reissue the rules following appropriate notice and comment procedures, but the agency may reissue the rules, although it did not respond to requests for comment regarding the next step.

In Massachusetts, private insurance companies receive lump sums from the government to cover care for senior Medicare. The plan creates incentives for planning that will receive more money to patients with illness and inflate their risk scores.

The influential council advisory group MEDPAC estimates that CMS will pay MA insurance companies $84 billion more this year than the government would have if these members were in traditional Medicare. Upcode was responsible for almost half of these overpayments.

According to a recent analysis of CMS data, the two largest MA insurers, UnitedHealthCare and Humana, occupy billions of dollars of Medicare spending each year due to aggressive patient coding.

Amid growing evidence for Upcode, top health regulators in the Trump administration have pledged to scrutinize practices. This spring, CMS announced that it will step up its overpayment audits of MA. This is a plan that could be derailed by the decision of O'Connor, given that it is supported by the RADV methodology established by the 2023 regulations.

Congressional members have also been zero on reforms to risk adjustments against overpayment control, but such policies have been excluded from the GOP's massive tax and policies passed in July.