CMS will implement stricter audits of Medicare Advantage plans, a move that could leave payers on the hook for billions of dollars in repayments to the federal government.
In a final rule issued Jan. 30, the agency said it will strike the fee-for-service adjuster from risk adjustment data validation audits, a tool that would have calculated a permissible level of payment errors and limited audit recoveries to payment errors above that level.
The rule is less harsh than the initial proposed draft, which was first introduced in 2018. That version would have extrapolated the stricter auditing standards to contracts dating back to 2011, which payers heavily pushed back on. The final rule will only apply to contracts dated from payment year 2018 and up.
CMS representatives told the Wall Street Journal the agency estimates it will recover $479 million in overpayments from 2018, and projects it will recover around $4.7 billion over the next decade.
Nearly every major insurance company has been accused of or settled allegations of Medicare Advantage fraud, which the industry disputes. Payers have been accused of exploiting the program through elaborate "upcoding" schemes that make patients appear sicker on medical records than they actually are — thereby leading to higher payments from CMS.
MA experts had expected increased scrutiny around the public-private program, which recently hit a milestone of 30 million enrollees.
In a news release, HHS Secretary Xavier Becerra said the final rule is "commonsense" and a "critical accountability measure."
"For years, federal watchdogs and outside experts have identified the Medicare Advantage program as one of the top management and performance challenges facing HHS, and today we are taking long overdue steps to conduct audits and recoup funds," Mr. Becerra said. "These steps will make Medicare and the Medicare Advantage program stronger."
Payers had indicated they would likely pursue legal action if the final rule did not include a fee-for-service adjuster.
Matt Eyles, president and CEO of health insurance trade group AHIP, told Becker's ahead of the ruling the association believes the rule is "unlawful in terms of its construction."
"It relies on bad data, some which is almost 20 years old at this point. We think it's going to harm seniors and reduce health equity," he said. "We know how critically important the focus on health equity is, especially when you look at the higher levels of enrollment by minority populations and low income Americans in Medicare Advantage plans."
In a news release, Alliance of Community Health Plans CEO Ceci Connolly said the rule does not target the "most egregious diagnosis coding violations."
"We are disappointed by the final regulation and hope CMS reconsiders more targeted approaches to meaningfully address compliance in the MA program and protect the taxpayer dollar," she said.
"While we all can agree that improvements can be made, the failure to adjust for the legitimate differences between Medicare Advantage and original Medicare will have a detrimental effect on the seniors and people with disabilities who rely on the Medicare Advantage program," the BCBS Association said. "CMS should have implemented a narrower solution aimed at a few bad actors, but instead this overreaching regulation will raise costs, reduce choice and make it more difficult for seniors and those with disabilities to effectively manage their health."
Becker's has reached out to representatives for UnitedHealthcare, Elevance Health and Humana for comment and will update this article if more information becomes available. Aetna deferred to AHIP.