UnitedHealth loses Medicare Advantage overpayment argument on appeal

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UnitedHealthcare has lost its argument over Medicare Advantage overpayments.

On Aug. 13, the United States Court of Appeals for the District of Columbia ruled against UnitedHealthcare and remanded the case back to the lower court with the instructions that it rule in favor of the Department of Health and Human Services.

Judge Cornelia Pillard said there was no legal or factual basis for UnitedHealthcare's claim. 

UHC and other Medicare Advantage insurers under the umbrella of UnitedHealth Group challenged a rule by the Centers for Medicare and Medicaid Services called the Overpayment Rule.

The Overpayment Rule requires that if an insurer learns a diagnosis submitted to CMS for payment lacks support in the beneficiary's medical record, the insurer must refund the payment within 60 days.

UHC claimed the overpayment rule is subject to actuarial equivalence and that the rule fails to comply. 

Actuarial equivalence requires CMS to model a demographically and medically analogous beneficiary population in traditional Medicare to determine the lump sum payments to MA insurers. 

But the judge disagreed. Actuarial equivalence does not apply to the overpayment rule or the refund obligation, she said. Rather, actuarial equivalence appears in another statutory subchapter.

"As UnitedHealth would have it, Congress clearly intended enforcement of the statutory overpayment-refund obligation, which the Overpayment Rule essentially parrots, to depend on a prior determination of actuarial equivalence," Pillard said in issuing the opinion on Aug. 13. "That principle, UnitedHealth says, prevents CMS from recovering overpayments under the Rule unless CMS first shows that the rate of payment errors to healthcare providers in traditional, fee-for-service Medicare is lower than the rate of payment errors to the Medicare Advantage insurer, or that CMS comprehensively audited the data from traditional Medicare before using it in the complex regression model – the CMS Hierarchical Condition Category (CMS-HCC) risk-adjustment model – that predicts the cost to insure Medicare Advantage beneficiaries."

However, she said, the overpayment rule does not violate the Medicare statute's "actuarial equivalence" and "same methodology" requirements.

"We accordingly reverse the judgment of the district court and remand this case with orders to enter judgment in favor of Appellants," Pillard said.

WHY THIS MATTERS

The overpayment rule is part of the government's ongoing effort to trim unnecessary costs from the Medicare Advantage program, according to the judge's opinion. 

About 40% of people on Medicare have a private Medicare Advantage plan. CMS pays these plans a lump sum per capita amount each month.

Overpayment to Medicare Advantage insurers is a serious drain on the Medicare program's finances, Pillard said. In 2016 alone, audits of the data submitted by Medicare Advantage insurers to CMS showed that CMS paid out an estimated $16.2 billion for unsupported diagnoses, equal to "nearly ten cents of every dollar paid to Medicare Advantage organizations."

THE LARGER TREND

Payments to the Medicare Advantage program depend on participating insurers accurately reporting to CMS their beneficiaries' salient demographic information and medically documented diagnosis codes. To better control erroneous payments, including those garnered from reported – but unsupported – diagnoses, Congress in 2010 amended the Medicare program's data-integrity provisions. 

The amendment specified a 60-day deadline for reporting and returning identified overpayments and confirmed that such payments not promptly returned may trigger liability under the False Claims Act. CMS promulgated the Overpayment Rule to implement those controls on Medicare Advantage.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com