The Trump administration on Tuesday pushed three federal judges to allow CMS to move forward with a 2014 rule requiring Medicare Advantage plans to repay HHS for overpayments.
Insurers sued the federal government over the rule, claiming that CMS didn't have the power to issue it because the agency didn't ensure payments to Medicare Advantage plans were "actuarially equivalent" to traditional Medicare, which federal law requires. The plans argued it was unfair for CMS to go after them for overpayments because the rule required their records to be 100% accurate, even though the government's records for traditional Medicare payments aren't audited. U.S. District Court Judge Rosemary Collyer in Washington, DC, agreed with insurers, blocking the rule in September 2018.
Department of Justice attorney Weili Shaw told the U.S. Court of Appeals for the District of Columbia Circuit the lower court made a mistake when it sided with insurers, claiming it would give plans a "free pass" to selectively mine for coding errors to increase their CMS payments.
"Suppose CMS finds out that a beneficiary that an insurer reported as having cancer doesn't actually have cancer," he said. "Under UnitedHealth's theory, CMS can't recover the money it paid for covering a cancer patient unless it … audits both traditional Medicare and the Medicare Advantage plan to determine to determine their overall error rates."
The federal government argued that would put CMS and taxpayers at a disadvantage.
"In terms of medical record reviews, the sky is the limit. When the insurer finds an additional code, it can report (and get reimbursed for it), but if CMS discovers an invalid code, it has to go through a huge process in order to collect payment," Shaw said.
He argued that Congress didn't intend for CMS only to collect overpayments if it audited the government records used to set rates, saying that insurers should have challenged the payment rates directly or the risk-adjustment model.
Judge Cornelia Pillard seemed to agree, saying that insurers' "tail wagging dog theory" didn't add up because it would prevent CMS from collecting documented improper payments until it rewrote its risk adjusters.
Shaw said that if the three-judge panel didn't side with the government, it should allow CMS to explain why it didn't include a fee-for-service adjuster in its improper payment rule.
Insurers' defended the district court ruling, arguing CMS could fix the rule by removing unsupported codes from its rate calculation—a move that would likely increase payments to plans. The agency could also require plans to document the code and bring false claims cases against insurers if they don't, said Daniel Meron, an attorney for Latham & Watkins representing UnitedHealthcare and other insurers.
The judges didn't signal how they would rule but admitted the issue was "complicated."
