- Humana is suing the HHS over federal regulators’ plan to audit Medicare Advantage payments in the first legal challenge to the rule, which is expected to recoup billions from health insurers.
- The payer filed the lawsuit on Friday in a Texas federal court, arguing the recently finalized rule is “arbitrary and capricious” and should be vacated.
- Humana is the second largest provider of MA plans in the U.S. after UnitedHealth. Medicare premiums make up the lion’s share of Humana’s revenue, and the company refocused its business entirely on government plans earlier this year. As such, the payer would be heavily affected by the audits.
The HHS first proposed the rule to conduct audits of MA payers in 2018 and finalized it in January.
The government expects to claw back roughly $4.7 billion over the next decade by recouping payments from cases where payers inflated patients’ sickness to garner higher reimbursement from the government.
Overpayment is a huge issue in the MA program, where private insurers receive lump sums from the government to cover the care of Medicare seniors. Plans receive more money for sicker patients, creating an incentive for plans to plans to inflate risk scores.
One report from government watchdogs estimated Medicare made $50 billion in overpayments from 2013 through 2017 from “plan-submitted diagnoses that were not supported by beneficiaries’ medical records.”
Regulators initially proposed recouping payments starting as early as 2011, but the final rule only allowed for audits beginning in 2018 in a win for the health insurance industry.
In its overhaul of the audits, the rule eliminated a measure to adjust for errors in Medicare data. Regulators argued that “fee-for-service adjuster,” which helps ensure the CMS pays MA plans the same amount for each enrollee it would expect to pay them in traditional Medicare, has no legal or actuarial basis.
Humana does not agree. In its new lawsuit, the Kentucky-based insurer contends that the elimination of the fee-for-service adjuster eliminates payment parity between privately-run MA plans and the original Medicare program, and will result in underpayments to MA plans.
Regulators’ “newly invented and self-serving reading of the Medicare statute” unfairly penalizes MA plans for errors in documentation, the lawsuit argues.
Humana also noted it has relied on the existence of the fee-for-service adjuster in past bids, and its removal exposes the payer to “unanticipated and unaccounted-for liabilities at odds with CMS’ past promises.”
The suit seeks to bar the government from recovering funds from Humana using the audit procedures outlined in the rule.
The CMS did not respond to a request for comment by time of publication.
Worries over MA overpayments are building as the program grows in popularity, accounting for a greater swath of Medicare spending. Currently, more than half of all Medicare seniors — about 31 million people — are enrolled in the plans, which can provide more flexible benefits than in fee-for-service Medicare.
Watchdogs have been raising concerns about profiteering in MA for years. Overpayments to MA plans could reach more than $75 billion this year, due to favorable beneficiary selection, aggressive coding and quality bonus engineering, according to the USC Schaeffer Center for Health Policy and Economics.
MA payers are currently navigating significant regulatory and legislative uncertainty. Along with the audits, the CMS recently changed how it calculates risk adjustment payments and overhauled a MA quality bonus program.