Humana should return nearly $200 million to CMS after overcharging the federal agency for care that its Medicare Advantage enrollees did not need, according to a recent government report.
The Louisville, Ky.-based insurer overcharged CMS by $197.7 million in 2015, representing the largest gap between what a Medicare Advantage payer said its members' care cost and the actual price of the care received, an HHS' Office of Inspector General analysis of diagnosis claims revealed. As enrollment in Medicare Advantage plans continues to grow, Christopher Bresette, an assistant regional inspector general of audits, said it is more critical than ever to maintain the integrity of the multibillion-dollar program.
Humana, for its part, disagrees with the OIG's findings and questions the statistical and actuarial accuracy of the report. In 2015, CMS paid Humana about $5.6 billion to treat 485,000 members, most of whom lived in south Florida. Today it is the second-largest Medicare Advantage insurer in the nation—with UnitedHealthcare coming in first—and counts 4.6 million enrollees.
"I think any Medicare beneficiary wants to know the right decisions are being made for their care," Bresette said. "We're looking at the diagnosis codes that are used to fund the program, and the beneficiaries need to know that the right diagnoses are being made so that the right payments can be made so, in turn, the right care can be delivered."
The OIG said this report represents just one in a series reviewing Medicare Advantage insurers' efficacy. But payers say the OIG's method for reviewing risk subjects them to unfair standards.
Under the MA program, CMS pays insurers set advance payments each month to cover the expected cost of enrollees' care. CMS figures out how much to pay each insurer, in part, by each individual's risk score, a measure that essentially attempts to quantify how sick a patient will be. The agency and insurers lean on providers to identify this risk through diagnosis codes submitted through face-to-face encounters from the year before. Insurers are supposed to audit providers to make sure they are not upcoding, or misrepresenting the sickness of the patients they treat to gain higher reimbursement.
In this instance, Bresette said Humana failed to effectively audit its provider partners.
From 2017 to 2020, an independent contractor working for the OIG reviewed the diagnosis codes of a random sample of 200 Humana Medicare Advantage enrollees. Humana said providers submitted 1,525 diagnosis codes across these individuals. But the OIG was unable to find evidence that about 200 of the conditions listed existed, leading officials to believe that Humana overcharged CMS for 68 individuals' care.
The OIG then extrapolated these findings across Humana's entire Medicare Advantage membership for that year and found CMS paid the insurer about $263 million more than was needed. Humana dug through its patients' medical history and was able to cut the recommended return down by $65 million. But the OIG is still requesting that Humana return the $197.7 million overcharged and "tighten up those policies and procedures, so that they get the right amount from the federal government and that the beneficiaries receive the right diagnosis," Bresette said.
"Using a statistical sample is a better use of resources for, not only the government, but for the auditees as well. Ninety percent of the time, the amount that we recommend is less than if we would have reviewed every claim," Bresette said, adding that the sheer volume of claims Humana submitted for its members in 2015 made it impossible to review each one.
"We have decades of experience with other parts of the Medicare program, and using statistical techniques, and those techniques are tried and tested," Bresette said. "On that basis, we're extremely confident that the extrapolation, or the methodology that we used, for this audit is good."
But a Humana spokesperson said the OIG's report is inconsistent with statistical and actuarial principles and fails to maintain actuarial equivalence with the traditional Medicare fee-for-service program. A rule to change these audit methods has been pending since 2019.
While Humana said it will work cooperatively with CMS and OIG to resolve the matter, the spokesperson noted the payer "will have the right to appeal if CMS does determine an overpayment exists." CMS was unable to immediately respond to an interview request.
But the fact that the OIG was able to account for 89% of the diagnosis codes Humana submitted makes this more likely a case of data documentation error rather than upcoding, said Glenn Melnick, a professor at the University of Southern California.
He said he expected more audits like this in the future, as nearly 40% of Medicare-eligible individuals enroll in Advantage plans, although he questioned how useful findings from six years ago would be today. Ultimately, he said the OIG report underscores the importance of having integrated data systems between payers and providers, development of which will eventually increase healthcare costs for patients.
"It's a call for more oversight, monitoring and compliance under Medicare Advantage because it is such a big program now and the risk score is so important in the payment methodology," Melnick said. "The more efficient and effective our payment system is (will) make the (care) delivery system more efficient and effective. It definitely contributes to a higher value. But on its face, it seems a little unfair to go back to 2015."
