UnitedHealthcare Loses MA Overpayment Case

A federal appeals court recently ruled against UnitedHealthcare, reversing a 2018 decision involving Medicare Advantage overpayments and sending the case back to the lower court with instructions to rule in favor of the Centers for Medicare & Medicaid Services (CMS).

The lower court’s ruling in UnitedHealthcare Insurance Co. v. Azar, No. 16-157 (D.D.C.), vacated Medicare’s Overpayment Rule which requires insurers to refund payment to CMS within 60 days if a diagnosis is found to lack medical record support. At the time, it was seen as a win for Medicare Advantage plans because it was viewed as the court rejecting CMS’ view of what constituted an overpayment.

The appellate court decision means that CMS can, once again, rely on the Overpayment Rule to impose voluntary refund obligations for Medicare Advantage Organizations. It’s estimated that nearly 40 percent of those on Medicare have a private Medicare Advantage plan and the Congressional Budget Office projects that figure will rise to nearly 50 percent by 2029.

UnitedHealthcare had argued the Overpayment Rule was subject to a principle of “actuarial equivalence” and that the CMS rule did not comply.

The lower court judge in her 2018 opinion wrote that the Overpayment Rule “fails to recognize a crucial data mismatch” and “establishes a system where ‘actuarial equivalence’ cannot be achieved.” She ruled that CMS was “arbitrary and capricious” in adopting that rule without explaining its departure from prior policy, granted summary judgment to UnitedHealthcare and vacating the Overpayment Rule.

However, the appellate court found that “actuarial equivalence does not apply to the Overpayment Rule or the statutory overpayment refund obligation under which it was promulgated.” Furthermore, the appellate court said, “the actuarial-equivalence requirement and the overpayment-refund obligation serve different ends.”

This ruling is significant because CMS has been targeting Medicare overpayments. The agency along with Watchdog Groups previously voiced concern that Medicare Advantage Organizations are overcharging the government. According to published reports, in 2016 alone, audits showed that CMS paid out an estimated $1.62 billion for unsupported diagnoses. Such overpayments may trigger liability under the False Claims Act.

With this new ruling, CMS could start making recoupments from Medicare Advantage plans across the country.

The Health Law Offices of Anthony C. Vitale has been representing healthcare entities for more than 30 years. If you have any questions about this article or matters relating to healthcare law give us a call at 305-358-4500 or email info@vitalehealthlaw.com.

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