Trump administration appeals decision overturning Medicare Advantage audit rule

Diving brief:

• The Trump administration will continue to fight in court over a Biden-era regulation that would audit Medicare Advantage plans and recoup billions of dollars in overpayments.
• In a filing Friday, the federal government said it will appeal a judge’s September ruling that struck down the Medicare Risk Adjustment Data Validation Rule, or RADV, for violating the Administrative Procedure Act.
• The decision to take the case to the Fifth Circuit Court of Appeals comes as regulators have said they will crack down on MA overpayments, including through a plan this spring to increase audits.

Dive overview:

The RADV rule, finalized in early 2023, would have allowed CMS to take a sample of MAID recipients to find diagnoses suggesting that an insurer was inflating their illnesses to receive increased reimbursement. The agency could then extrapolate based on this sample to an entire MA contract and recover overpayments accordingly.

The federal government initially estimated that this rule would have recovered $4.7 billion from insurers over 10 years.

But Humana, one of the nation’s largest MA payers, sued HHS in September 2023. The insurer pointed to regulators’ decision to remove a “fee-for-service adjuster,” which was intended to ensure that CMS paid MA beneficiaries the same amount per enrollee that they would have paid for traditional Medicare.

Humana argued that removing the expert would have allowed CMS to underpay MA plans, and that CMS failed to provide the industry with sufficient notice when it decided to remove the expert from the final rule.

Earlier this year, Judge Reed O’Connor of the Northern District of Texas agreed with Humana, striking down the rule in a significant victory for MA payers.

Today, CMS is appealing that decision to the Fifth Circuit Court of Appeals. The filing filed Friday does not detail the reasons why the regulator would oppose the decision. An agency spokesperson said CMS does not comment on litigation.

Overpayments in MA continued to be a concern for regulators. Medicare will spend $84 billion more on MA enrollees this year than if those beneficiaries participated in the traditional fee-for-service program, primarily due to favorable selection of healthier beneficiaries and the intensity of coding, according to a report from the MedPAC Congressional Advisory Council released in March.

CMS Administrator Dr. Mehmet Oz has repeatedly pledged to take a closer look at overpayments in the master’s program. This spring, the agency announced it would significantly increase its capacity to audit plans and close the backlog of reviews from previous years.