New Analysis Highlights Steps by the Biden-Harris Administration to Reduce Medicare Advantage Overpayment

Last week, the Kaiser Family Foundation (KFF) released an analysis of two announcements by the Biden-Harris Administration around Medicare Advantage (MA). The first announcement was the finalization of a rule that would allow the federal government to recoup more money if audits of MA plans showed overpayment. The second announcement was the annual proposed update to MA payment methodology.

The audit-related final rule, called the Risk Adjustment Data Validation or “RADV” rule, goes into effect in April of 2023. The rule allows the Centers for Medicare & Medicaid Services (CMS) to perform audits on samples of MA plan claims and to assume that the rate of incorrect information, whether deliberate or inadvertent, can be applied across all plan submissions. This is likely to increase the amount of money CMS recoups from MA plans to around $4.5 billion over the next decade. For comparison, the Medicare Payment Advisory Panel (MedPAC) estimates that MA plans have received around $124 billion in overpayments from 2007 to today, including an estimated $23 billion in overpayment in 2023 alone.

The second announcement was the Advance Notice, an annual recalculation of MA and Part D payment rates and methodological changes. This year, CMS proposes to modernize claims data and reduce the impact of certain diagnosis codes that are discretionary and not connected to claims or care that the MA plan paid for. CMS pays MA plans more if their enrollees are sicker. Including diagnosis codes for which no care is provided can make enrollees appear sicker than they are. CMS estimates that its payments to MA plans will increase by 1.03%, a much slower rate of growth than in previous years.

The RADV rule caused controversy, with MA plans claiming that it is unfair and other stakeholders arguing it does not go far enough. Similarly, the Advance Notice was met with claims from insurers and others that it was a Medicare “cut.”

Medicare Rights supported the use of extrapolated data to ensure accurate payment and will be submitting comments in support of the methodology changes, which take some initial steps to correct the decades-long problem of MA overpayments.

Read the KFF analysis.

Read more about the Advance Notice.

Read more about MA overpayment.