Humana sues to stop Medicare Advantage audits rule, clawbacks

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Humana is suing to block the implementation of a plan to recoup billions of dollars the federal government says it overpaid to Medicare Advantage carriers.

The health insurance company filed suit in the U.S. District Court for the Northern District of Texas on Friday against a regulation the Centers for Medicare and Medicaid Services announced in January, more than four years after first proposing it. CMS intends to collect payments dating back to 2018, toughen risk-adjustment data validation audits and scrap an adjustment factor designed to align Medicare Advantage with fee-for-service Medicare costs. The agency projects the rule will enable it to reclaim $4.7 billion in overpayments from 2023 to 2032.

Humana alleges that CMS violated the Administrative Procedure Act of 1946 and is asking the court for an injunction to block the regulation. CMS declined to comment.

“The final rule will alter the Medicare Advantage program’s actuarial foundations, with unpredictable consequences for Medicare Advantage organizations and the millions of seniors who rely on the Medicare Advantage program for their healthcare,” according to Humana’s complaint.

Humana is the second-largest Medicare Advantage carrier with 5.8 million enrollees. Humana and market leader UnitedHealth Group collectively cover 47% of Medicare Advantage enrollees, according to CMS data compiled by KFF.

The CMS regulation aims to discourage health insurance companies from manipulating Medicare Advantage risk adjustments to maximize revenue. Medicare Advantage plans receive flat monthly payments for each enrollee, which are based on their risk scores. The agency then reviews a selection of claims and risk codes to determine if they are consistent with patients’ medical records or if there is evidence that insurers engaged in upcoding, and extrapolates those findings across carriers’ entire Medicare Advantage memberships.

Health insurers collected an estimated $17 billion in Medicare Advantage overpayments last year, according to the Medicare Payment Advisory Commission, which makes policy recommendations to Congress. The Justice Department is suing Humana and other Medicare Advantage carriers over allegations they exaggerated expenses to generate excess payments.

In its new lawsuit, Humana alleges that CMS does not have the statutory authority to claw back payments from past years and that it neither adequately justified its plan to eliminate the fee-for-service adjuster from risk-adjustment data validation, or RADV, audits nor provided sufficient time for public comments on the proposed rule.

Health insurance companies maintain that fee-for-service adjuster is critical to ensuring payments to private Medicare carriers are actuarially equivalent to the traditional program.

“Humana’s annual bid certification explicitly relied on CMS’ public commitment to account for the different documentation standards used to calculate Medicare Advantage payment rates and conduct RADV audits before recouping any payments associated with diagnosis codes that were not documented in enrollees’ medical records,” Humana wrote in its lawsuit.

Medicare Advantage insurers are set to receive a 1.12% cut to their base payments next year under a final rule published in March that also makes significant changes to the star ratings quality bonus program.

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