Feds Abandon Medicare Advantage Overbilling Reforms Amid Industry Pushback

A decade ago, the Centers for Medicare & Medicaid Services (CMS) attempted to implement a regulation aimed at curbing the overcharging by Medicare Advantage insurers, but the agency withdrew the proposal amid significant pushback from the industry, as revealed in recent court filings.

In January 2014, CMS issued a draft regulation that would have mandated Medicare Advantage plans to identify and refund any overpayments identified during patient record reviews. However, just four months later, CMS abandoned this initiative without public explanation, citing industry pressure as a primary concern.

This decision is now central to a ongoing multibillion-dollar fraud case by the Justice Department against UnitedHealth Group, the largest Medicare Advantage insurer. The case alleges that the company defrauded Medicare of over $2 billion by falsely reporting additional diagnoses found in patient records while neglecting to address overcharges.

According to the Justice Department, Medicare payments are higher for sicker patients, requiring plans to bill accurately based on documented conditions. In its defense, UnitedHealth asserts that it should not be penalized for not adhering to a regulation that was never finalized.

The revelations from thousands of pages of testimonies, recently unsealed, expose the agency’s ongoing struggle to regulate the expansive Medicare Advantage sector, which now includes around 33 million members. This growth has seen the industry face numerous whistleblower lawsuits and investigations alleging that health plans often overstate patient health statuses to maximize Medicare payouts.

Former CMS officials acknowledged that some plans actively sought consultants to bolster the diagnoses documented in patient files, yet there was hesitation regarding the agency’s authority to enforce stricter compliance measures. As a result, the proposed January 2014 rule would have ensured that any chart reviews conducted could not solely be for the purpose of identifying profitable diagnoses.

Additions to the controversy arose from testimony indicating that the regulatory proposal was shelved due to “stakeholder concern” and an “uproar” from the industry, according to Cheri Rice, a former CMS director. It remains unclear who ultimately made the decision to withdraw the proposal.

Health experts criticize the CMS for its perceived caution in overseeing the powerful Medicare Advantage industry. Erin Fuse Brown, from Brown University, emphasized that the agency’s reluctance to act starkly reflects a troubling dynamic between taxpayer protection and industry influence.

The ongoing legal battle pits the recollections of former CMS staff against those of UnitedHealth executives, highlighting differing memories of industry interactions regarding the ill-fated chart review proposal.

As the case unfolds, allegations continue that UnitedHealth knowingly submitted unsupported claims to Medicare, resulting in substantial excess payments. From 2009 to 2016, the government claims that UnitedHealth received over $7.2 billion based on these questionable billing practices.

Calls for improved transparency and accountability in Medicare Advantage plans are growing. Legal precedents have established that health plans must ensure accuracy in billing, yet the persistence of unconfirmed diagnoses remains a troubling issue within the industry.

The controversy surrounding Medicare Advantage and the alleged fraud illustrates the challenges facing regulators in a rapidly expanding healthcare market. With billions at stake, the outcome of this case could have lasting implications for Medicare’s future oversight and the integrity of the health insurance sector.