During a time of growing interest in covering Medicare members, the CMS is looking to vastly expand audits of Medicare Advantage plans as a way to monitor insurers that may game the system to obtain higher payments.
Last week, the CMS released a request for information (PDF) that outlined the expansion of Medicare's Recovery Audit Program, a program that has drawn the scorn of hospitals and doctors. In that program, the government hires private companies called recovery audit contractors, or RACs, to comb through medical records at hospitals and doctor offices and find instances of where Medicare is paying too much money.
Providers have characterized RACs as administrative burdens and argued auditors have clear incentives to hunt for overpayments even when they may not exist. RACs are paid an amount that is contingent on how much money they recover for the government. Those same complaints are likely to extend to Medicare insurers, which, if found to have improperly billed, could have to forfeit millions of dollars back to Medicare if the program gets off the ground. But the CMS touts RACs as a way to ensure taxpayer money is being spent appropriately.
The Affordable Care Act required Medicare's RAC program to be expanded to Medicare Advantage and Part D plans, but that has not happened yet. The recently released CMS document explains how that would be done and the scope of the program, although there is no definitive timeline for when the program would go into effect.
Under the new Medicare Advantage auditing system, RACs would be tasked with conducting risk adjustment data validation (RADV) reviews. Each Medicare Advantage insurer is paid a monthly amount from the CMS for every member it covers, and those payments are based on risk-adjusted scores. If a member is sicker and has more medical needs, the risk score is higher, and the insurer is paid more money. RADV audits look at a sample of medical records to determine if an insurance company's diagnoses for risk scores are legitimate and worthy of the higher payments.
In addition to general RADV audits, RACs would conduct “condition-specific” RADV audits. Those reviews would focus on specific medical codes or health conditions, such as diabetes, that have high rates of payment errors. Currently, the CMS performs only 30 RADV audits a year, which covers 5% of all Medicare Advantage contracts.
“Our ultimate goal is to have all MA contracts subject to either a comprehensive or condition-specific RADV audit for each payment year,” the CMS said.
More insurers have expressed interest in covering Medicare members over the past decade because it has grown into a high-revenue, and potentially profitable, business. In 2014, there were 14 Medicare Advantage contracts that received at least $1,000 a member every month, including four contracts owned by Humana, according to CMS data. The median monthly per-member payment in Medicare Advantage that same year was about $750.
But many whistle-blower lawsuits have accused Medicare Advantage insurers of purposefully inflating risk scores to make patients appear sicker than they are with the goal of receiving higher payments. The government is investigating the risk-adjustment practices of Humana and other companies, but no official conclusions from those probes have been made.
RADV audits were created to help combat those issues, but the reviews have been sporadic and scaled back, according to an investigation from the Center for Public Integrity. The first set of RADV audits, based on payment data for 2007, resulted in $13.7 million in returned overpayments to the government. The CMS has named companies that will be subjected to RADV audits for 2011 and 2012 payments and “expects much more significant recoveries” from those audits because the agency will extrapolate results.
The CMS suggests now shifting the RADV auditing responsibility to RACs. The agency will pay a contingency fee to each RAC, “according to contractual terms.” Current Medicare RACs earn anywhere from 9% to 12.5% of recouped overpayments on average. Insurers will be able to appeal RAC decisions just as providers are able to do, but the program thus far has not elicited an overly warm response from the industry.
“We are in the process of reviewing these proposals, particularly given the concerns that have been raised about RAC audits in other areas of the Medicare program,” Clare Krusing, spokeswoman for lobbying group America's Health Insurance Plans, said in a statement. “Ultimately, CMS should avoid an audit approach that leads to significant, serious changes to beneficiaries' coverage without necessarily improving payment accuracy.”
All comments on the Medicare Advantage RAC program are due by Feb. 1.
