After years of criticism that they cost taxpayers too much, private Medicare Advantage health plans are facing landmark audits that for the first time could order them to repay the government tens of millions of dollars for past overcharges and other billing mistakes.
Medicare pays the health plans a set amount monthly for each person based on estimates — known as “risk scores” — of how sick they are. The industry has grown explosively over the past decade under this payment method and now cares for nearly 16 million people at a cost expected to top $150 billion this year.
The government audits are targeting chronic Medicare Advantage billing errors that federal officials blame for billions of dollars in “improper” payments every year — mainly due to inflated estimates of the health “risks” of the seniors the plans insure. The findings carry added importance because insurers selling policies on exchanges set up under the Affordable Care Act will be paid under a similar risk-based formula, which officials expect to reduce overall health care expenditures.
The secretive audit process is known as Risk Adjustment Data Validation, or “RADV,” in Washington parlance. In early November 2013, federal officials notified 30 health plans that they had been selected for review this year. Officials declined to name the companies or discuss the audit process. So it’s not clear if any of these audits have yet been completed, or what the results might be.
The Centers for Medicare and Medicaid Services (CMS), the agency that runs Medicare, has quietly conducted some of these RADV (pronounced RAD’-vee) audits since 2008. But the agency has never before imposed stiff financial penalties for overbilling the government, as it now intends to do. In the first round of audits, officials expect to recoup as much as $370 million from overpayments allegedly made to the 30 Medicare Advantage plans during 2011, according to CMS.
However, that figure is well below previous administration estimates, and health plans have been granted extensive appeal rights that could stall any repayment orders for years.
CMS is part of the Department of Health and Human Services (HHS). The HHS Office of Inspector General, which acts as a watchdog over CMS, has done some of its own audits of Medicare Advantage. It estimated much higher losses in six plan audits it conducted starting late in 2008. Those audits found that just the six plans reviewed had been overpaid by as much as $650 million for 2007 alone because of inflated risk scores, including payments for diseases that couldn’t be verified through a patient’s medical record.
The HHS inspector general audits are more worrisome to the industry than the CMS audits because the findings are made public and often draw media notice and attention from members of Congress. But the inspector general’s office has said it won’t be conducting any more of its reviews for the foreseeable future due to budget cuts, leaving oversight in the hands of CMS.
CMS officials have said that health plans would be selected for review this year based “primarily” on changes in risk scores, presumably increases.
Humana Inc., one of the nation’s largest Medicare Advantage plans with more than 2.7 million members, notified investors in February that one of its contracts had been chosen. The company did not elaborate.
Florida Blue Cross also has notified its doctors that the plan was among the 30 selected for review this year. Samaritan Health Plan, based in central Oregon with 6,500 members, also was picked, according to a company newsletter. Health Net, Inc. disclosed in a Securities and Exchange Commission filing that its plan in Arizona was selected. None of the health plans would comment.