SCOTUS Secures Medicare Advantage Overpayment Rule

In a move that surprised very few in healthcare—and fewer on Capitol Hill—SCOTUS refused to hear UnitedHealth’s case against the 2014 Medicare Advantage Overpayment Rule. In the case of UNITEDHEALTHCARE CO., ET AL. V. BECERRA, SEC. OF H&HS, ET AL. the lower court’s ruling stands.

 

 

Back in 2018, a Fierce Healthcare headline announced, “Federal court nixes CMS overpayment rule, handing a big win to Medicare Advantage insurers.” 

 

“U.S. District Judge Rosemary Collyer in D.C. sided with UnitedHealth, which argued the rule that requires MA plans to return overpayments based on an analysis of its members’ health status was ‘wholly inconsistent’ with Medicare fee-for-service requirements.” 

 

And earlier in that same year, Fierce reported that, “DOJ abandons much of its Medicare Advantage fraud suit against UnitedHealth.” 

 

For a brief moment, it looked like Medicare Advantage insurers might not be legally required to “return overpayments based on incorrect diagnoses to CMS within 60 days of identifying them.” Ethical questions aside, it looked like they just might get away with submitting invalid diagnoses, getting paid, and keeping the money.

 

Unfortunately for MA plans everywhere, that big win was predictably followed by an even bigger appeal. And this time, documentation, accuracy, specificity and accountability won big. 

 

From the UnitedHealthcare Ins. Co. v. Becerra, United States Court of Appeals, District of Columbia Circuit, Aug 13, 2021:

 

The Overpayment Rule is part of the government’s ongoing effort to trim unnecessary costs from the Medicare Advantage program. Neither Congress nor CMS has ever treated an unsupported diagnosis for a beneficiary as valid grounds for payment to a Medicare Advantage insurer. Consistent with that approach, the Overpayment Rule requires that, if an insurer learns a diagnosis it submitted to CMS for payment lacks support in the beneficiary’s medical record, the insurer must refund that payment within sixty days. The Rule couldn’t be simpler. But understanding UnitedHealth’s challenge requires a bit of context.

Unitedhealthcare Ins. Co. v. Becerra, 16 F.4th 867, (D.C. Cir. 2021)

 

The bottom line on The Medicare Advantage Overpayment Rule:

 

The Medicare Advantage Overpayment Rule has been weighed, measured and—for the time being—left standing, perhaps more firmly than before.

 

For greater context, the following is excerpted with attribution from a publication by Troutman Pepper. (Find the full text HERE)

 

The Affordable Care Act requires MA insurers to report and return any overpayments identified by the insurer to CMS within 60 days. Failure to do so can trigger liability under the False Claims Act. In 2014, CMS promulgated the Overpayment Rule to implement these statutory requirements and further specified that a “diagnosis that has been submitted [by a Medicare Advantage insurer] for payment but is found to be invalid because it does not have supporting medical record documentation would result in an overpayment.” Becerra, 2021 WL 3573766, at *10. For purposes of the rule, overpayments are “identified” when actually identified or when they should have been identified by the insurer “through the exercise of reasonable diligence.” “Reasonable diligence” is defined as “proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments.” 42 C.F.R. § 422.326 at 29,921.

 

Documentation of a reported medical diagnosis is relevant here because of the way CMS pays MA insurers. Unlike traditional fee-for-service (FFS) Medicare payments, MA insurers receive pre-established monthly lump sum payments for each beneficiary they insure. The monthly payment amounts are intended to reflect the relative risk and cost of insuring any particular member. To that end, the Medicare statute requires a monthly payment adjustment to reflect “such risk factors as age, disability status, gender, institutional status, and … health status … , so as to ensure actuarial equivalence” between traditional Medicare and Medicare Advantage. MA insurers are then paid larger amounts for covering higher risk, costlier individuals. 42 U.S.C. § 1395w-23(a)(1)(C)(i).

 

CMS uses the Hierarchical Condition Category risk adjustment model to convert diagnosis data into expected costs for MA beneficiaries. The model uses data from individuals covered under the traditional Medicare program to determine medical costs associated with certain diagnosis and demographic information. CMS then uses this data to predict the cost of care for MA beneficiaries based on their demographics and diagnoses.

 

Since errors may occur in reporting diagnosis codes, CMS has implemented mechanisms, including the Overpayment Rule, to validate reported diagnoses. Another validation mechanism is the Risk Adjustment Data Validation audit through which CMS audits a sample of medical records for any unsupported diagnoses that may have resulted in an overpayment. CMS then extrapolates this sample’s error rate across all beneficiaries. At one point, CMS considered adding, but ultimately did not, an FFS adjuster to achieve actuarial equivalence in the RADV program. The FFS adjuster would be applied to any overpayment amounts to ensure that MA insurers were only liable for repayments that exceeded any payment errors under the traditional Medicare program. The FFS adjuster was at issue in the challenge to the Overpayment Rule before the D.C. Circuit.

 

Implications

 

With this opinion, the D.C. Circuit disfavored arguments advanced by Medicare Advantage insurers and the District Court, largely reinstating the Overpayment Rule and shoring up CMS’ authority to implement fraud prevention and cost containment measures in a variety of forms. Importantly though, this opinion did not disturb the significant victory Medicare Advantage insurers enjoyed at the District Court concerning the reasonable diligence requirement, which the court ruled could not be applied to lower the standard for False Claims Act Liability. Even so, Medicare Advantage insurers must remain diligent in their compliance procedures. As the Circuit Court made clear, CMS has several tools in its arsenal — including certification obligations, RADV audits, and the Overpayment Rule — to identify and recoup overpayments and to potentially impose substantial liability for erroneous coding submissions. Read the full article here.

 

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