Insurers, doctors slam CMS for overhaul to Medicare Advantage payment audits

Insurers and physicians are angry with the Centers for Medicare & Medicaid Services' proposal to change how it audits Medicare Advantage plans. (1001Love/iStock)

Providers and insurers are livid that the Trump administration wants to change how Medicare Advantage (MA) plans are audited, saying the changes are unfair and illegal.

The Centers for Medicare & Medicaid Services (CMS) is seeking public comments on a proposed rule that would overhaul audits of MA plans to ensure payment accuracy. But insurers and providers say in comments to the proposed rule, which were due Wednesday, that the changes violate federal law and could undermine confidence in the MA market, which has become a major profit driver for insurers.

"Rather than engage with its private-sector partners, (the CMS' Center for Program Integrity) released a proposal that is neither fair nor appropriate," said America's Health Insurance Plans (AHIP), the leading insurance lobbying group, in comments on the rule. 

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More than one-third of beneficiaries (32%) are on MA, a figure expected to grow up to 42% in the next decade, one study finds. Insurers have invested more into MA especially as baby boomers reach retirement age. 

Currently, MA payments are adjusted via a risk score based on factors such as population health, age and diagnosis. MA plans submit diagnostic data to CMS, and the agency uses the information to calculate the risk score.

Every year, the agency takes a random sample of MA plans and examines the medical records of beneficiaries to determine whether the diagnoses submitted by the plan match the actual disease the beneficiary has. If a plan exaggerates a diagnosis, for example, then it could be required by CMS to pay back some of its MA money.

Only plans that are audited will face penalties if the diagnosis data are off. But one of the changes CMS is proposing is to extrapolate the results from the audits to apply to an overall error rate for all plans. This means that a plan’s payment rate could be affected even if that MA plan wasn’t audited by CMS.

However, while federal law gives Medicare the authority to extrapolate, it can only do so for Medicare contractors auditing providers in Parts A and B and only in limited circumstances, AHIP said in its comments.

“The proposed rule provides no legal justification for extrapolation,” the group added.

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Physician groups also blasted the use of extrapolation. Graybill Medical Group, which represents more than 200 doctors in California, cited a 2018 study from consulting firm Wakely that found extrapolation could result in a high degree of randomness.

“High enrollment contracts with low risk scores will experience the most variation,” the group said.

AHIP and physicians were also livid with CMS’ decision to get rid of a tool called the Fee-for-Service Adjuster.

To calculate risk scores, CMS requires MA plans to submit diagnostic data that is different than the coding data required under traditional Medicare fee-for-service. Plans were worried about a discrepancy in payments between traditional Medicare and MA.

In 2012, CMS created the Fee-for-Service Adjuster to address any differences with MA’s system and the traditional Medicare system. But CMS hasn’t closed out audits for 2011 through 2013 because it hasn’t finalized the Fee-for-Service Adjuster.

Last December, CMS proposed to get rid of the Fee-for-Service Adjuster when calculating payment adjustments. The agency cited an internal study that found (PDF) significant diagnosis errors in fee-for-service claims, but the flaws didn’t lead to “systematic payment error in the MA program.”

AHIP countered that the adjuster is needed to ensure payments to MA plans are equivalent to payments under fee-for-service, which is required by Congress.

A March study (PDF) from consulting firm Avalere found that errors in fee-for-service claims do have an impact on the accuracy of MA risk scores and that the CMS study didn’t fully examine the relationship between the two.

AHIP also charged that CMS cannot retroactively apply new changes outlined in its December proposal to the audits for 2011 through 2013.

“This long passage of time could make it extremely difficult for plans to obtain medical records with respect to providers who, for example, are deceased, closed their practices, changed to new recordkeeping systems, etc.,” AHIP said.