A federal district court judge on Friday sided with UnitedHealthcare-led payers in a case that challenged a CMS Overpayment Rule from 2014.
Judge Rosemary Collyer vacated the rule, which the payers charged created additional burdens for Medicare Advantage insurers that are not consistent with traditional Medicare regulations.
The judge wrote that CMS doesn't see more errors or fraud in MA beneficiary charges than those in traditional Medicare. However, the overpayment rule may result in payers getting lower reimbursements while providing the same level of healthcare coverage.
The ruling is a big win for payers as they increasingly enter or expand offerings in the lucrative MA market. UnitedHealth boosted its MA plan membership by 450,000 people in the second quarter of this year, a 10.4% year-over-year increase. After first quarter results, the payer said it expected a long-term MA growth rate of 8%.
The uptick in interest is likely to increase further with a new rule that will allow MA plans to offer population health benefits like food security assistance and transportation to medical appointments.
Meanwhile, multiple insurers have been challenged with claims of fraud in the program, often with allegations of inaccurate or misused diagnosis codes. Earlier this year, the Department of Justice dropped most of a False Claims Act lawsuit alleging UnitedHealth Group used false billing data to increase MA payments. A California federal judge also dismissed another case that charged UnitedHealth infringed the False Claims Act by knowingly submitting false claims.
One reason for the popularity of MA is its largely favorable payment model, which includes risk adjustment that takes into account patient demographics and diagnoses. However, regulators and legislators have increasingly looked at potential fraud in the program and Medicare as a whole. A recent HHS Office of Inspector General report found that Medicare overpaid hospitals as much as $21.5 million for intensity-modulated radiation therapy planning services.
Another HHS OIG report charged health insurers for not using proactive data analysis to detect fraud, waste and abuse as well as not notifying states of bad actors. DOJ has increased its focus on Medicare and Medicaid overpayments, including a recent crackdown on $2 billion in false claims.
The latest ruling is on a case UnitedHealth and 41 other payers brought against CMS in 2016 objecting to the rule that penalizes insurance companies for MA overpayments. It states that any diagnostic code not documented in the medical record is considered an overpayment.
MA payers must forfeit overpayments within 60 days of identifying them. If not, they could violate the False Claims Act and be subject to lawsuits and penalties. CMS implemented the rule as a way to combat fraud, but UnitedHealthcare argued that the same level of oversight doesn't happen with Medicare fee-for-service.
Collyer said the unequal treatment between MA and traditional Medicare was unfounded.
"This inequity is inevitable because CMS sets Medicare Advantage rates based on costs that are presumed, based on traditional Medicare diagnosis codes, to be associated with particular health status information that is not verified in underlying patient records," she wrote. "The same unverified diagnosis is, under the 2014 Overpayment Rule, treated as an overpayment that must be repaid, thus reducing the reimbursement to a Medicare Advantage insurer while requiring no such reduction in payment under traditional Medicare."