DOJ loses bid to toss Humana Medicare Advantage case

A federal judge Friday denied a motion by the federal government to dismiss a legal challenge seeking to block updated Medicare Advantage auditing standards.

Humana, the second-largest Medicare Advantage insurer by membership, sued the Health and Human Services Department in September 2023 over a regulation announced by the Centers for Medicare and Medicaid Services earlier that year. The Justice Department filed a motion on behalf of HHS to dismiss or transfer the case in December. Judge Reed O’Connor, of the U.S. District Court for the Northern District of Texas in Fort Worth, denied the motion this week.

Related: CMS finalizes RADV rule, leaves MA plans on the hook for millions

At issue in the case is an update CMS made to the Medicare Advantage audit program that removes a statistical tool previously used to align private Medicare plans with traditional coverage, a metric known as the fee-for-service adjuster. In the January 2023 final rule, CMS wrote that it would apply the updated methodology to insurer audits from the 2018 plan year and onward. Officials projected the new Risk-Adjustment Data Validation — or RADV — standards would enable CMS to reclaim $4.7 billion in overpayments over the next decade.

Humana in its September complaint alleged that CMS violated the Administrative Procedure Act of 1946 when finalizing the rule because regulators allegedly did not adequately explain why it was updating its audit procedures and lacked authority to retroactively apply the methodology.

The government in December court filings argued the case should be dropped because Humana allegedly had not been affected by the new auditing requirements and therefore lacked legal standing. 

Humana had to update its Medicare Advantage contracting process to reflect the latest auditing standards, O’Connor wrote in the Friday ruling.

“The final rule affects plaintiffs’ day-to-day affairs: Plaintiffs must alter their bidding structures to prepare and certify actuarially compliant bids that account for the final rule even if CMS never uses the RADV audits to require repayments,” O’Connor wrote. 

O’Connor has a history of siding with parties challenging federal healthcare laws.

DOJ had also argued in its motion that the case should be moved to Dallas because that is where Humana’s local subsidiary is headquartered. The government did not provide sufficient evidence about why it would cost more or pose a greater administrative burden to have the case be heard in Dallas rather than Fort Worth, O’Connor wrote. 

O'Connor ordered Humana and the government to submit filings for next steps in the case by June 20.

Humana and HHS declined to comment. DOJ did not immediately respond to an interview request.