The Centers for Medicare & Medicaid Services (CMS) has proposed new measures that could impact Medicare Advantage health plans. These include holding reimbursement rates nearly flat for 2027 and restricting the use of "chart reviews."
These proposals aim to address concerns about potential overcharges and ensure more accurate payments within the program.
Proposed Changes
On January 26, CMS officials announced a planned rate increase of less than a tenth of a percent for 2027, which was significantly below industry expectations. This announcement led to declines in stock prices for major publicly traded insurers, such as UnitedHealth Group and Humana.
Additionally, CMS proposed restricting plans from conducting "chart reviews." These reviews can lead to the addition of new medical diagnoses for patients, which subsequently increases government payments to Medicare Advantage plans.
Government auditors have criticized this practice for over a decade, citing billions of dollars in alleged overpayments.
Concerns and Past Actions
Earlier this month, the Justice Department announced a $556 million settlement with Kaiser Permanente over allegations that the company added approximately 500,000 diagnoses to its Advantage patients' charts between 2009 and 2018. This resulted in about $1 billion in alleged improper payments. Kaiser Permanente did not admit wrongdoing as part of the settlement.
Experts like Spencer Perlman, a healthcare policy analyst, and Richard Kronick, a professor at the University of California-San Diego, indicate that the administration appears committed to addressing overpayments, despite the Trump administration's general support for Medicare Advantage.
CMS Administrator Mehmet Oz stated that curbing this practice would ensure accurate payments and protect taxpayers from unnecessary spending.
Industry Reaction and Future Steps
The health insurance industry has voiced strong opposition, particularly regarding the flat payment rates. Chris Bond, a spokesperson for AHIP (America's Health Insurance Plans), suggested the proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities.
However, David Meyers, an associate professor at the Brown University School of Public Health, noted that such claims are common from health plans, which often remain profitable even with less favorable payment adjustments.
CMS is currently accepting public comments on the proposal and plans to issue a final decision by early April.
Historical Context of Overpayments
The federal government pays Medicare Advantage plans higher rates for sicker patients. Whistleblower lawsuits, government audits, and investigations have frequently alleged that health plans exaggerate patient sickness, a practice known as "upcoding," to secure higher payments.
A December 2019 report by the Department of Health and Human Services inspector general found that chart reviews "almost always" added diagnoses, with over 99% of reviews adding rather than deleting them.
Diagnoses reported solely through chart reviews, without corresponding service records, were estimated to account for $6.7 billion in payments in 2017.
CMS previously attempted to restrict chart reviews in January 2014 but withdrew the plan months later due to industry opposition. The outcome of the current proposal will indicate the administration's seriousness in addressing these long-standing payment practices.