Federal Judge Overturns 2023 Risk Adjustment Audit Overhaul, Favoring Medicare Advantage Plans

What's Happening?

A federal judge has struck down a regulation from the Biden administration that aimed to overhaul risk adjustment audits for Medicare Advantage plans. The rule, finalized in February 2023, sought to enhance audits for risk adjustment data validation (RADV) to determine if plans were overpaid. The judge ruled that the Department of Health and Human Services violated the Administrative Procedure Act by not properly notifying the industry and public about the changes. The regulation removed the 'fee-for-service adjuster,' which insurers argued was crucial for ensuring parity between Medicare Advantage and traditional Medicare. Humana challenged the overhaul, claiming the removal of the adjuster would lead to underpayment for Medicare Advantage plans.

Why It's Important?

The ruling is a significant victory for Medicare Advantage insurers, as it prevents the implementation of audit changes that could have led to substantial financial implications. The decision highlights the importance of regulatory transparency and adherence to procedural requirements. Insurers had expressed concerns that the changes would result in unforeseen costs due to reliance on previous methodologies. This ruling may impact future regulatory efforts to modify audit processes and could influence ongoing discussions about Medicare payment structures. The decision also underscores the need for clear communication and industry engagement in regulatory changes.

What's Next?

The ruling may prompt further legal and regulatory actions as stakeholders assess the implications of the decision. The Centers for Medicare & Medicaid Services (CMS) may need to revisit its approach to auditing Medicare Advantage plans, potentially leading to new proposals or adjustments. Insurers and policymakers will likely continue to debate the balance between ensuring accurate payments and maintaining industry stability. The decision could also affect the Trump administration's efforts to increase audit volumes and address overpayments in Medicare Advantage plans.