CMS Takes Action To Combat Medicare Advantage Overpayments And Improve Program Supervision

The Centers for Medicare & Medicaid Services (CMS) has launched an investigation into Medicare Advantage Organizations (MAOs) to recoup a staggering $4.7 billion in overpayments. MAOs have long been accused of misusing taxpayer dollars, leading to calls for greater oversight of the programs. Long-standing allegations of payment abuses in the MA program, particularly those connected to risk adjustments, have alarmed regulators. Millions of Americans are covered by the program, which pays MAOs capitated rates and risk-adjusted payments to increase payments to plans for sicker members. Federal officials claim that this structure provides health plans with a financial incentive to misrepresent risk evaluations and “game the system.”

For health insurers that run Medicare Advantage plans, which serve around 29 million Americans, the CMS announced the final rule on Monday. Officials will extend the error margin to the insurer’s Medicare Advantage operation based on a limited sample of audits. According to the CMS, these reasonable policies will improve program supervision and support Medicare’s financial viability. The new rule also emphasizes that diagnosis codes lacking documentation in a patient’s medical record are not a valid basis for CMS risk adjustment payments to an MAO, and insurers have a longstanding obligation to refund payments to CMS for unsupported diagnoses.

Together with the inquiry, the CMS also finalized a new rule that establishes the auditing procedures and guidelines for the Risk Adjustment Data Validation (RADV) program at the contract level. The program is used to correct overpayments made to MAOs when there is a lack of documentation in the medical record to support the reported diagnoses. The rule codifies both the choice to forgo using a fee-for-service adjuster in audits and the decision to employ extrapolation in RADV audits. The CMS will only collect non-extrapolated overpayments identified in RADV audits conducted between payment years 2011 and 2017, with extrapolation beginning in payment year 2018.

With the help of this new rule, the CMS should be able to concentrate more effectively on performing future audits and ensuring that the RADV appeals procedure satisfactorily resolves each appeal. MAOs will be obliged to repay incorrect payments detected during RADV audits as mandated by CMS. By forgoing the use of an extrapolation methodology prior to the payment year 2018, the CMS hopes to better manage the volume of active appeals submitted in the initial years following the finalization of the rule. The new policy recognizes CMS’s fiduciary duty to protect taxpayer dollars and preserves the ability to collect potentially significant amounts of overpayments made to plans.

With the CMS under increasing public pressure to scrutinize these plans, the investigation will be closely watched to see whether it leads to meaningful changes in the way MAOs operate. The new policies and investigation into overpayments are expected to improve transparency and reduce the potential for abuse of taxpayer dollars. The CMS wants to improve program oversight and guarantee Medicare’s long-term financial viability.