Q. I remember reading in one of your articles this past fall that some of the largest Medicare Advantage insurers are submitting inflated bills and that it’s one of the reasons everything is so much more expensive for plan enrollees. I also heard that the way Medicare Advantage plans are currently audited is a big part of the problem, and that changes to this were supposed to take effect this past November. What are some of these changes, have they occurred, and how will they affect plan members? Thanks so much for your help!
A. The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on November 1, 2018, to change the way it audits Medicare Advantage plans. The new policy may result in insurers paying back millions of dollars to the federal government and being subject to penalties for coding errors.
CMS had three years to implement the changes from 2018, which were supposed to have taken effect on November 1, 2022. However, CMS couldn’t meet the timeline to finalize the proposed rule three months ago, so they extended the deadline until February 1, 2023.
Industry experts believe that finalizing this rule will affect government spending, plan and provider participation, plan benefits, and beneficiaries’ out-of-pocket costs.
What Will Happen on February 1, 2023?
Currently, each year, CMS selects 30 Medicare Advantage plans for a Risk Adjustment Data Validation (RADV) audit to confirm that the documented diagnoses in the patient’s medical record match the category codes that Medicare Advantage insurers submit for payment. CMS reviews medical documentation to confirm coding accuracy and to determine whether the diagnosis data submitted by plans conforms with national standards.
If the audit reveals that in some cases the Medicare Advantage insurer exaggerated the patient’s condition and received higher payments than allowed, the plan must pay back CMS and pay a penalty. The problem was that the plans were only penalized for overpayments for the cases identified in an audit. Many were overlooked and never identified, so the MA plans were not accountable in those instances.
In the new proposed rule, CMS said it would:
- Audit up to 201 enrollees in any given plan and then extrapolate the audit results across the plan’s entire Medicare Advantage population. This extrapolation has not been done in the past.
- The agency also announced its plans to not adopt a fee-for-service (FFS) adjuster. The adjuster has been in place since 2012 and is used to account for coding errors that could impact MA payments. Click here to learn more about the FFS Adjuster and the history behind it.
- CMS could also apply the rule retroactively, conducting audits in arrears back to 2011.
CMS estimates that this would save $381 million each year in subsequent years because it would not make improper payments to insurers. The agency says that by implementing the changes to the audit process it can save as much as $4.5 billion over the next 10 years!
Industry insiders have warned that if CMS goes ahead with eliminating the fee-for-service adjuster, they will likely resort to litigation. The industry’s hope is that in the final rule, CMS includes the FFS adjuster to directly compare MA and traditional Medicare plans in its audits and that the agency does not conduct these audits in arrears back to 2011 as proposed.
Why CMS Wants to Change the Rules
Nearly every major insurance company has faced allegations of Medicare Advantage fraud. MA plans have been accused of making patients appear sicker on medical records than they actually are — thereby leading to higher payments from CMS, as described in the article you mentioned in your question. Insurers have disputed these claims.
This alleged fraud is costing the government billions! A 2017 Government Accountability Office (GAO) report found that the federal government made more than $16 billion in improper payments to private Medicare Advantage health plans in 2016. Another report in Kaiser Health News found in a review of 90 government audits that MA plan issuers repeatedly tried to sidestep government requirements for medical documents needed for audits. In addition, some progressive lawmakers have called on CMS to crack down on Medicare Advantage plans.
Another reason CMS wants to change the rules is that it no longer believes that a RADV-specific payment adjustment is appropriate. This is because errors in specific Medicare Advantage contract audits can produce both overpayment and underpayment. If anything, CMS says, there is a slight error in favor of the Medicare Advantage plans.
CMS feels that it’s not appropriate to correct any systematic payment error in the Medicare Advantage program through a payment adjustment that was only applied to audited contracts. “Doing so would introduce inequities between audited and unaudited plans, by only correcting the payments made to audited plans,” CMS said in the proposed rule.
Potential Impact of the Rule if Finalized as Proposed
Finalizing the rule as proposed has the potential to create disruption for plans and providers, which may affect premiums and benefits for beneficiaries, according to Fierce Healthcare.
Industry analysts believe that CMS is likely to “water down” its proposed rule, though MA plans are still at risk because CMS “ultimately believes it is overpaying.”
MA plans may either project decreased revenue or increase their bids (adding a “risk premium”). Experts believe that the potential changes could reduce funding available to lower enrollee out-of-pocket costs or premiums or to provide supplemental benefits (e.g., dental, transportation), or it could increase government costs. As a result, if the rule is finalized as proposed, some plan enrollees could face higher costs, fewer MA plan choices, and/or reduced supplemental benefits under the MA program.
Industry analysts also believe that the government’s costs could rise if plans exit the market or reduce their areas of service or increase their bids to account for the increased risk of variable payment recoupment.
While CMS and the industry agree on the need for a program to ensure payment integrity, the policy issues are complex, and implementation of proposed changes would likely present challenges for the entire Medicare Advantage program. The finalized rule will offer insight into how CMS will address the concerns that stakeholders have raised.
Review Your Medicare Health Plan Every Year, and if You Have Medicare Advantage, Consider Switching Back to Original Medicare
With all of the changes on the horizon and a possible increase in rates due to enhanced auditing, you may want to consider switching back to Original Medicare if you currently have a Medicare Advantage plan. During certain periods (including January 1 through March 31), you can switch from a Medicare Advantage plan back to Original Medicare. The reason we say switch “back to Original Medicare” is because when you first enroll in Medicare, you are always enrolled initially into Original Medicare, and you are then given the option to switch to a Medicare Advantage plan.
If you do switch back to Original Medicare from a Medicare Advantage plan, your coverage under Original Medicare will begin January 1 of the following year. As mentioned, you can make this change during the Medicare Advantage Open Enrollment period, which runs from January 1 through March 31. If you make this change, be sure to sign up for a Medicare Part D stand-alone prescription drug plan (PDP), unless you have creditable drug coverage from another source. If you do not, and you decide to sign up for Part D PDP coverage later on, you may face a penalty for late enrollment.
Also, if you switch back to Original Medicare, you should always try to purchase a Medicare Supplement insurance policy, also known as Medigap. Medicare Supplement policies help to pay your cost-sharing requirements under Original Medicare. However, once you have been enrolled in a Medicare Advantage plan, Medicare Supplement insurers are not required to sell you a policy if you don’t meet the medical underwriting requirements. Therefore, you should contact a few Medicare Supplement insurers directly to see if you will be able to purchase a Medicare Supplement policy when you switch back to Original Medicare. Or, to make your life much easier, work with an experienced Medicare health insurance agent who can help you shop for a Medicare Supplement policy, and help you get the best possible policy at the least possible cost.
At the Farr Law Firm, we work with Retirement & Medicare Together to serve the Medicare needs of our clients. Now is a perfect time to review your plan and start thinking about making any necessary changes. Click here to schedule your no-cost Medicare review today!
Medicare Planning Fairfax: 703-691-1888
Medicare Planning Fredericksburg: 540-479-1435
Medicare Planning Rockville: 301-519-8041
Medicare Planning DC: 202-587-2797
About Evan H Farr, CELA, CAP
