Judge orders Anthem to face lawsuit over alleged Medicare overpayments

Photo: Pichsakul Promrungsee EyeEm/Getty Images

Anthem has been accused of not verifying the accuracy of diagnosis codes it submitted when seeking reimbursements over a four-year span, and a federal judge has now ordered the insurer to face a lawsuit from the U.S. government.

The suit alleges that the supposedly inaccurate diagnosis data allowed Anthem to collect tens of millions of dollars in annual overpayments.

In the decision, released Friday, September 30, U.S. District Judge Andrew Carter of Manhattan estimated the alleged overpayments far exceeded $100 million over a span from 2014 to 2018. The government alleges the insurer sought to increase revenue by not deleting invalid codes.

Anthem, which rebranded this year as Elevance, had sought to strike portions of the complaint under rule 12(f) of the Federal Rules of Civil Procedure, which says the court may strike any redundant, immaterial, impertinent, or scandalous matter," but this effort was denied. A motion to dismiss was similarly rejected.

WHAT'S THE IMPACT?

The DOJ initially filed suit in March 2020, an action that stemmed from Anthem's operation of dozens of Medicare Advantage plans. The DOJ, seeking civil fines and triple damages, sued the insurer under the False Claims Act, which bars false payment claims.

Medicare Advantage plan payments are expected to get an 8.5% revenue increase for 2023. This is an increase over the 7.98% proposed in the February advance notice. The 2023 growth rate is set at 4.88% in the rate announcement released in July by the Centers for Medicare and Medicaid Services.

THE LARGER TREND

As enrollment in the Medicare Advantage program grows, so do concerns and uncertainty over the profits providers are reaping and whether "overpayment" is an issue. 

A report from the Brookings Institution indicates the five major insurers, UnitedHealthcare, Humana, Aetna, Kaiser Permanente and Anthem (now Elevance), are allegedly padding their bottom lines by disguising profits as costs. 

The report points out that insurers are able to do this because profits accrued through related businesses are not regulated by medical loss ratio (MLR) requirements. In certain cases, spending on related businesses can reach more than 70%, the report noted.

The top five companies have related businesses, including pharmacy benefit managers (PBMs), post-acute providers, hospitals and physician practices.

"In each case, the prices charged to the MA plan can have a material effect on where profits and costs appear," the report said. "This creates potential to move earnings outside the reach of regulations."

With payments to MA plans totaling $350 billion in 2021, the MA payment structure allows for several ways for plans to earn profits.

"The implication is that for the health plans serving most MA beneficiaries, related businesses offer an opportunity for pricing practices within the parent firm umbrella that can shield profits from the terms of MLR regulations," the report said. "The extent to which parent companies engage in such practices is yet unknown."

The authors added that the potential to engage in such practices puts smaller plans without related businesses at a competitive disadvantage.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com