CMS’ new Medicare Advantage audit rule, expected to recoup $4.7B in overpayments

Reports that the Biden administration is proposing cuts to Medicare Advantage are wrong, administration officials said last week.

“In fact, the administration is proposing to increase Medicare Advantage payments this year by 1%, on top of an 8.5% increase in Medicare Advantage payments last year,” according to a news release from the U.S. Department of Health and Human Services. “The administration also announced efforts to strengthen Medicare and hold the industry accountable.”

However, the administration will begin using audits to recover improper payments made to insurance companies in Medicare Advantage, with a new ruling effective April 3, 2023. “Recovering these improper payments and returning this money to the Medicare Trust Fund will protect the fiscal sustainability of Medicare and allow the program to better serve seniors and people with disabilities, today and in the future,” the release said.

However, a leading insurance industry association takes issue with the department’s figures.

“We respectfully disagree with [HHS Secretary Xavier Becerra’s] recent statements about the impact of the administration’s proposed 2024 Advance Rate Notice for Medicare Advantage,” said Matt Eyles, president and CEO of America’s Health Insurance Plans. “It will have real-world consequences in 2024 for more than 30 million seniors and people with disabilities who chose Medicare Advantage — they will face increased costs and reduced benefits.”

Related: Senator urges CMS to approve its proposed Medicare Advantage policy changes

These three changes would cut average Medicare Advantage rates in 2024 by 2.27%, according to AHIP:

• A12% reduction because of the risk model that accounts for the health status and demographic characteristics of enrollees;
• Quality bonus payments that are 1.24% lower under the Medicare Star Ratings program; and
• Benchmarks used to set maximum payment rates increased an average of 2.09%, less than half the growth rate in 2023 and well below the estimated growth in per-enrollee Medicare costs.

Each year, the law requires the Centers for Medicare & Medicaid Services to update how payments are calculated for insurance companies that offer Medicare Advantage, CMS bases updates on current costs and trends. Through this process, CMS ensures that payments to insurance companies accurately reflect what it costs to provide services and benefits to enrollees.

“We see a net positive, a little over 1%,” CMS Administrator Chiquita Brooks-LaSure said earlier this month. “Over the last two years, Medicare Advantage plans have seen positive updates, more so than other parts of the Medicare program.”

CMS is cracking down on Medicare Advantage plans because of audits showing they have received improper payments by inflating medical diagnoses. CMS and the HHS Office of Inspector General said the audits have shown that private insurance companies have charged billions of dollars in overpayments to Medicare Advantage plans and increased costs to the Medicare program, as well as taxpayers. Eight of the 10 largest Medicare Advantage insurers — representing more than two-thirds of the market — have submitted information to inflate payments, according to HHS.

“Recovering overpayments in Medicare Advantage and holding industry accountable will not result in higher premiums for seniors,” the HHS release said. “In fact, the Biden-Harris administration has worked to lower health-care costs for seniors, including making recommended vaccines free and capping each covered insulin at $35 per month’s supply for people on Medicare; requiring drug companies to pay Medicare a rebate if they raise prices faster than inflation; and finally allowing Medicare to negotiate prescription drug prices, lowering the cost of prescription drugs for millions of seniors and people with disabilities in the future.”

Despite the payment disagreement, the administration and the insurance industry share the objective of meeting the needs of Medicare Advantage participants, Eyles said.

“Medicare Advantage delivers lower costs, more choices and better coverage and care than original Medicare, and it should be protected for the millions of Americans who depend on Medicare Advantage for their health and financial well-being,” he said. “The administration has stressed that protecting Medicare is a key priority.

“We agree, and so do the 30 million seniors who count on Medicare Advantage. That’s why we look forward to having meaningful conversations with the administration about the impact of the Advance Rate notice on seniors and people with disabilities to ensure they continue to receive the high-quality, affordable coverage and care they expect through their Medicare Advantage plans.”