CMS issues final rule on Medicare Advantage risk adjustment

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The Centers for Medicare and Medicaid Services has finalized risk adjustment policies in a final rule to prevent overpayments to Medicare Advantage Organizations.

Studies and audits done separately by CMS and the Health and Human Services Office of Inspector General have shown that Medicare Advantage enrollees' medical records do not always support the diagnoses reported by MAOs, which leads to billions of dollars in overpayments to plans and increased costs to the Medicare program, as well as taxpayers, CMS said. 

Despite this, no risk adjustment overpayments have been collected from MAOs since payment year 2007, CMS said. 

The Risk Adjustment Data Validation final rule, released on Monday, holds insurers accountable, CMS said.

Rather than applying extrapolation beginning for payment year 2011 audits, as CMS initially proposed, the agency has finalized a policy not to extrapolate RADV audit findings for payment years 2011-2017 and to begin extrapolation with the 2018 RADV audit. 

As a result, CMS will only collect the non-extrapolated overpayments identified in the CMS RADV audits and OIG audits between payment years 2011 and 2017. The rule finalizes a proposed policy that CMS will not apply an adjustment factor, known as a Fee-for-Service Adjuster, in RADV audits. 

As consistent with a 2021 D.C. Circuit Court decision in UnitedHealthcare Insurance Co. v. Becerra, the requirement for actuarial equivalence in MA payments applies to how CMS risk-adjusts the payments it makes to MAOs, and not to the obligation to return overpayments for unsupported diagnosis codes, including overpayments identified during a RADV audit, CMS said. 

WHY THIS MATTERS

The finalized policies will allow CMS to continue to focus its audits on those MAOs identified as being at the highest risk for improper payments, the agency said. 

CMS said the RADV final rule reflects its consideration of extensive public comments and robust stakeholder engagement after the release of the 2018 Notice of Proposed Rulemaking. 

In September 2022, insurers told CMS that the proposed RADV policies unfairly target prior audits as far back as 10 years. AHIP told CMS that the proposed changes to the Risk Adjustment Data Validation audits "undermine confidence in CMS' willingness to be a fair partner with the private sector."

AHIP on Monday said its final rule remains "unlawful" and "fatally flawed."

President and CEO Matt Eyles said, "Our view remains unchanged: This rule is unlawful and fatally flawed, and it should have been withdrawn instead of finalized. The rule will hurt seniors, reduce health equity, and discriminate against those who need care the most. Further, the rule would raise prices for seniors and taxpayers, reduce benefits for those who choose MA, and yield fewer plan options in the future. We encourage CMS to work with us, continuing our shared public-private partnership for the health and financial stability of the American people."

THE LARGER TREND

The Medicare Advantage Risk Adjustment Data Validation program is CMS's primary audit and oversight tool of MA program payments. 

As required by law, CMS' payments to MAOs are adjusted based on the health status of enrollees, as determined through medical diagnoses reported by MAOs.

ON THE RECORD

"CMS has a responsibility to recover overpayments across all of its programs, and improper payments made to Medicare Advantage plans are no exception," said HHS Secretary Xavier Becerra. "For years, federal watchdogs and outside experts have identified the Medicare Advantage program as one of the top management and performance challenges facing HHS, and today we are taking long overdue steps to conduct audits and recoup funds."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org