The CMS has provided a long-awaited update on how it plans to approach Medicare Advantage audits, five months after a federal judge threw a wrench in the agency’s plan to drastically expand the money it’s able to recoup from health insurers.
Last week, the CMS send a memo to MA plans saying it plans to forge ahead with accelerated audits, despite some operational tweaks it’s made to the process in response to insurers’ concerns.
The CMS started auditing the 2019 reimbursement of all eligible MA contracts last summer, and expects 2020 audits to begin as early as this month. Recoveries tied to earlier audits, from 2011 to 2013, are expected “soon,” the agency said.
The memo is the most the agency has disclosed on the subject since September, when the Northern District of Texas tossed out the CMS’ 2023 risk adjustment data validation, or RADV, final rule.
The decision undercut the CMS’ authority to extrapolate sample audit results to an insurer’s entire MA population, which was expected to increase the agency’s recoupments by billions of dollars.
It also complicated CMS Administrator Dr. Mehmet Oz’s plan to expedite audits for the 2018 through 2024 payment years, and hasten recoveries from earlier audits. That’s because regulators had to revert to an older RADV methodology to comply with the judge’s decision, throwing the validity of more recent audits into doubt.
Still, the CMS memo outlines how regulators have continued to work through their auditing backlog — while increasing the scope of audits to all eligible MA plans.
“Strengthening oversight of MA payments is a top priority of this Administration, and we are committed to executing a robust, comprehensive audit strategy that ensures payment accuracy,” a CMS spokesperson told Healthcare Dive.
CMS moving forward with RADV audits
RADV audits are retrospective payment reviews meant to ensure the accuracy of government reimbursement to insurers in MA. In the privatized Medicare program, payers’ payments are adjusted based on the health needs of their members, creating a significant financial incentive for plans to log diagnoses that make their members appear sicker.
In a RADV audit, the CMS asks an MA plan to submit medical records backing up diagnosis codes for a sample of its members.
The CMS hasn’t made any significant recovery of MA overpayments under RADV since the 2007 payment year, despite federal estimates suggesting MA plans could be raking up $17 billion in overpayments each year by submitting unsupported diagnosis codes.
In 2023, the Biden administration finalized a rule that would have allowed regulators to audit a small sample of MA plans’ enrollees and extrapolate their findings to calculate overpayments for the entire plans’ population. The government expected to claw back roughly $4.7 billion more in overpayments over a decade as a result.
Humana, the second-largest MA carrier, sued to block the rule later that year, arguing that regulators ignored a technical provision needed to ensure payment parity between MA and the original Medicare program.
In September, Texas Judge Reed O’Connor agreed, vacating the final rule and throwing future RADV audits into doubt.
The CMS appealed the Texas judge’s decision in November, but has been largely silent on the subject since. Some CMS officials have signaled continued interest in ramping up the audits, given evidence of extensive MA overpayments.
According to congressional advisory group MedPAC, overpayments could reach $76 billion this year — a significant amount of money, especially given Medicare’s dwindling reserves.
The CMS says it is fully complying with the court’s order vacating the RADV rule. But in the meantime, the agency plans to move ahead with expediting audits, pushing through a seven-year RADV backlog and starting to audit all eligible MA contracts instead of just a few, according to the memo sent Jan. 27.
Regulators started auditing 2019 payments last summer — the first set of audits reviewing all MA contracts eligible for RADV. The agency plans to initiate future RADV audits every three months, the memo said.
The CMS is currently developing that timeline, but anticipates beginning 2020 audits by the end of this month.
And moving forward, the CMS will publish a calendar so that MA carriers can plan around the audits, the memo says.
RADV artifical intelligence, hiring updates
The CMS has tweaked its approach to the audits in response to plan concerns about operational burden and transparency, according to the memo.
Regulators are giving plans five months instead of three to submit medical records documenting members’ health needs. They’ve also lowered the maximum number of medical records that can be submitted for documentation, to attempt to reduce the administrative load on both plans requesting records and the providers fulfilling those requests.
The CMS will also base audits on smaller samples adjusted to a plan’s size, the memo says.
The CMS spokesperson did not respond to questions about how much the CMS expects to recoup from the 2018 to 2024 year RADV audits, or when it expects the money to come through.
They also did not answer whether the CMS has hired additional staff to support the RADV audits, as Oz promised in May.
However, “the Agency is evaluating operational and resource needs, including potential avenues to augment medical coding capacity,” the spokesperson said over email. “Discussions regarding the scope and source of additional coder support are ongoing.”
Per the memo, the CMS still plans to secure new artificial intelligence-backed technology to use as a medical coder support tool. However, all decisions that could result in an overpayment determination will be made by a human, according to the agency.
“CMS will share more information about this new technology in the future,” the memo says.
The RADV update was sent to insurers one day after the Trump administration proposed a notable overhaul of MA risk adjustment.
The draft 2027 payment rule includes a provision that would exclude member diagnoses unlinked to actual medical care from a plans’ risk adjustment. The goal is to eliminate the financial motivation insurers have to mine their members’ medical charts for additional conditions they aren’t actually getting care for.
The Trump administration has proved more gung-ho on curbing overpayments than many experts predicted. During the first Trump administration, MA payers enjoyed relatively little oversight that contributed to lucrative margins in the privatized Medicare program.
But consumer sentiment on insurers has soured as plans become more expensive and healthcare becomes increasingly out of reach. Public pressure has risen on Washington to act to improve affordability, sparking a sea change for Republicans who increasingly cast big insurers as profiting at the expense of patients.
