The government is letting the health plans that stole Medicare keep the money

Medicare Advantage plans for seniors dodged a major financial bullet Monday as government officials gave them a deadline to return hundreds of millions of dollars or more in government overpayments — some dating back a decade or more.

The health insurance industry has long feared that the Centers for Medicare and Medicaid Services will demand to reimburse the billions of dollars in overcharges that popular health plans have received since 2011.

But in a surprise action, CMS announced that it would demand almost nothing from insurers for any overpayments they received from 2011 through 2017. CMS won’t impose significant penalties until it has audits for the 2018 and beyond payment years, which haven’t started yet.

While the decision could cost Medicare plans billions of dollars in the future, it will be years before any penalty is due. Health plans will be allowed to charge hundreds of millions of dollars in overcharges and possibly much more for audits before 2018. The exact amount is unclear because audits dating back to 2011 have not yet been completed.

In late 2018, CMS officials said the agency would collect an estimated $650 million in overpayments from 90 Medicare Advantage audits conducted from 2011 to 2013, the most recent available. Some analysts have calculated overpayments for the plans to be at least double that amount for the three-year period. CMS is now conducting audits for the years 2014 and 2015.

The estimate of the audits for the period 2011-2013 was based on an extrapolation of overpayments found in a sample of patients in each health plan. In these reviews, auditors examine medical records to ascertain whether patients suffer from diseases for which the government reimbursed health plans.

Over the years, these reviews — and other audits by government oversight agencies — have found that health plans often can’t document that they are due extra payments for patients who said they were sicker than average.

The decision to take past audit findings off the table means CMS has spent tens of millions of dollars conducting audits since 2011 — far more than the government can recoup.

In 2018, CMS said it pays $54 million annually to perform 30 audits. Without extrapolating to the years 2011-17, a CMS won’t even come close to making up for that much.

CMS Deputy Director Dara Corrigan described the final rule as a “logical approach to oversight.” Corrigan said she does not know how much money will be collected from the years prior to 2018.

Health and Human Services Secretary Xavier Becerra said the base was taking “long overdue steps to move in the direction of accountability.”

“Going forward, this is good news. We should all be happy that they are doing it [extrapolation],” said Ted Doolittle, the former CMS official. But he added, “I wish they were pushing back more [and extrapolating earlier years]. “Looks like this would be fair game,” he said.

David Lipschutz, an attorney with the Medicare Support Center, said he was still assessing the rule, but noted: “We hope CMS will use everything at its discretion to offset overpayments made to Medicare Advantage plans.” He said it was “unclear whether they are using all of their power”.

Extrapolating errors in medical coding has always been part of government scrutiny, said Mark Miller, executive vice president of healthcare policy at Arnold Ventures and previously served on the Medicare Payments Advisory Committee, an advisory board to Congress. He said, “It’s ridiculous to run a sample and find an error rate and then just add up the sample error rate as opposed to giving it to the whole population or set of claims.” (KHN receives funding support from Arnold Ventures.)

Last week, KHN released details of 90 audits from 2011-2013, which were obtained through a Freedom of Information Act lawsuit. The reviews found there was about $12 million in net overpayment for the care of 18,090 patients sampled for three years.

In all, 71 of the 90 audits revealed net overpayments, which averaged over $1,000 per patient in 23 audits. Records showed that CMS paid the remaining plans very little on average, from $8 to $773 per patient.

Since 2010, the federal Centers for Medicare and Medicaid Services has threatened to crack down on billing violations on popular health plans, which now cover more than 30 million Americans. Medicare Advantage, a rapidly growing alternative to original Medicare, is primarily operated by major insurers including Humana, UnitedHealthcare, Centene, and CVS/Aetna.

But the industry has successfully opposed overpayment extrapolation, even though the audit tool has been widely used to recover overcharges in other parts of Medicare.

It happened despite dozens of whistleblower audits, investigations, and lawsuits alleging Medicare Advantage overcharges cost taxpayers billions of dollars annually.

Corrigan said Monday that CMS expects to collect $479 million in overpayments in 2018, the first year of the extrapolation. It said that over the next decade, it could recover $4.7 billion.

Medicare Advantage plans also face hundreds of millions of dollars in refunds from a host of unrelated audits by the Inspector General of Health and Human Services.

The audits include an April 2021 audit alleging Florida’s Humana Medicare Advantage plan overcharged the government by nearly $200 million in 2015.

The agency has conducted 17 such audits that found widespread payment errors — an average of 69% for some medical diagnoses, said Caroline Kapustige, senior counsel for the Office of the Inspector General for Managed Care. In these cases, “the HMO did not have the necessary support [for these conditions] in medical records, causing overpayment.”

“Although MAs don’t usually agree with us, they always had a little bit of disagreement with our finding that their diagnosis was not supported,” she said.

Although CMS has taken years to conduct Medicare Advantage audits, it has also faced criticism for allowing lengthy appeals that can drag on for years. The delays drew sharp criticism from the Government Accountability Office, the oversight arm of Congress.

Until CMS speeds up the process, GAO’s acting health team director, Leslie Gordon, said, “it will fail to recover hundreds of millions of dollars in improper payments annually.”

KHN reporter Phil Galewitz contributed to this report.

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