A federal judge concluded in 2018 that the overpayment rule violated a federal law that required payments to be actuarially equivalent to traditional fee-for-service providers. But the U.S. Court of Appeals for the District of Columbia Circuit threw out the decision after it found that actuarial equivalence did not apply to the overpayment rule.
"Neither Congress nor CMS has ever treated an unsupported diagnosis for a beneficiary as valid grounds for payment to a Medicare Advantage insurer," D.C. Circuit Judge Cornelia Pillard wrote in the decision.
A group of UnitedHealth insurers sued CMS in January 2016 over a May 2014 rule detailing the requirements and penalties insurers face when they receive Medicare Advantage overpayments. According to the rule, any diagnostic code submitted to CMS for payment that isn't documented in a patient's medical chart results in an overpayment.
The rule required Medicare Advantage insurers to return overpayments to the government within 60 days of identifying them, or they would be considered in violation of the False Claims Act and potentially subject to civil lawsuits, treble damages and additional penalties. CMS hoped the rule would help curb Medicare fraud and upcoding, which may cost the government billions of dollars per year.
"The rule couldn't be simpler," Pillard wrote.
UnitedHealth insurers argued that CMS violated the mandate of actuarial equivalence because it does not audit or verify the fee-for-service data, which they claim is riddled with errors and held them to a higher standard than traditional Medicare.
But actuarial equivalence merely describes the goal of the risk-adjustment model Congress directed CMS to develop, according to the decision.
"It assuredly does not unambiguously demand that, before CMS can collect known overpayments from Medicare Advantage insurers, it must engage in unprecedented self-auditing to eliminate an imagined bias in the body of traditional Medicare data CMS used in its regressions," Pillard wrote.
UnitedHealthcare did not respond to a request for comment by deadline.