What is the story about?
What's Happening?
A federal judge has invalidated a regulation from the Biden administration that aimed to enhance risk adjustment audits for Medicare Advantage plans. Judge Reed O'Connor ruled that the Department of Health and Human Services violated the Administrative Procedure Act by not adequately notifying the industry and public about changes in the rule. The regulation, finalized in February 2023, sought to overhaul audits for risk adjustment data validation (RADV) to determine overpayments. Insurers, including Humana, challenged the removal of the 'fee-for-service adjuster,' arguing it was crucial for ensuring parity between Medicare Advantage and traditional Medicare. The judge's decision highlights the lack of meaningful notice and dialogue regarding the changes, which could lead to significant unforeseen costs for insurers.
Why It's Important?
The ruling represents a significant setback for the Biden administration's efforts to reform Medicare Advantage audits. It underscores the ongoing tension between the federal government and insurers over payment methodologies. The decision could have substantial financial implications for insurers who relied on the previous audit methodology. Additionally, it complicates the Centers for Medicare & Medicaid Services' (CMS) plans to increase audit volumes and address a backlog dating back to 2018. The outcome may influence future regulatory approaches and the balance of power between traditional Medicare and Medicare Advantage plans.
What's Next?
The ruling may prompt CMS to revisit its audit strategies and potentially engage in further rulemaking to address the court's concerns. Insurers might seek additional legal remedies or adjustments to their business practices to mitigate potential financial impacts. The decision could also influence ongoing discussions about Medicare payment reforms and the role of private insurers in the program.
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