Humana has filed suit against the feds, saying the Biden administration's bid to claw back overpayments in Medicare Advantage (MA) is built on "shifting justifications and erroneous legal reasoning."
Earlier this year, the Centers for Medicare & Medicaid Services (CMS) finalized a hotly anticipated rule that would overhaul risk adjustment data validation (RADV) audits, which determine whether MA plans were overpaid. In a win for insurers, the agency elected not to backdate these audits beyond 2018.
However, CMS did nix the so-called fee-for-service adjuster, which payers argued was critical to ensuring parity between traditional Medicare and MA. The adjuster accounted for errors in Medicare data that the industry argued could lead MA plans to be underpaid.
CMS determined in the initial pitch for a RADV overhaul, proposed in 2018, that the adjuster was not necessary. It maintained that stance in the final rule, arguing that it was backed up by a 2021 court decision that said the adjuster had no mathematical basis.
In the lawsuit, Humana argues that eliminating the adjuster and applying new methodology retroactively to prior audits "undermines the basis on which Humana’s Medicare Advantage bids were certified to the agency."
"CMS abused its discretion by concluding that retroactive application of the final rule is necessary to comply with statutory requirements," Humana said in the suit.
Insurers, including Humana, intimated that a legal fight was likely if the RADV changes did not go their way. At the J.P. Morgan Healthcare Conference earlier this year, Humana Chief Financial Officer Susan Diamond said the fee-for-service adjuster was central to how the company would respond.
“What we will be looking for is hopefully the acknowledgment that a FFS adjuster is necessary to recognize the inherent error rate in all claims data sets within Medicare,” she said during the company's session.
AHIP, the leading insurance industry lobbying group, also called the rule "unlawful and fatally flawed" at the time of its release in January.