Providers urged to enhance compliance as CMS expands Medicare Advantage audits
The Centers for Medicare & Medicaid Services, (CMS) recently announced expansion of its auditing efforts for Medicare Advantage plans, aiming to recover up to $43 billion annually in overpayments. This initiative will involve auditing all eligible Medicare Advantage (MA) contracts for each payment year in all newly initiated audits and investing in additional resources to expedite the completion of audits for payment years 2018 through 2024. Historically, CMS audited approximately 11% of all MA plans.
The rapid growth in MA plan enrollment has raised alarms among policymakers about potential overpayments. In 2024, 54% of eligible Medicare beneficiaries were enrolled in MA plans, with the Congressional Budget Office (CBO) projecting this figure to rise to 64% over the next decade. Regulatory watch dogs have flagged certain billing practices that affect payments to MA plans based on specific coding measures.
The Medicare Payment Advisory Council (MedPAC), an independent advisory body to Congress, estimates that in 2025, MA plans will spend 20% more on enrollees than if those beneficiaries were in fee-for-service (FFS) Medicare, translating to a projected $84 billion. The MA quality-bonus program adds about $15 billion annually to MA payments, while beneficiaries in both MA and FFS plans generally rate their care highly. The findings underscore ongoing regulatory concerns about payment accuracy in the expanding MA program.
A significant portion of these overpayments stems from what MedPAC identifies as ‘’inaccurate coding intensity practices’’ where MA plans may record more diagnoses than are clinically necessary, inflating risk scores and securing higher payments from CMS.
Regulators are also scrutinizing ‘’favorable selection techniques,’’ suggesting that MA plans may disproportionately enroll healthier beneficiaries, resulting in lower actual health care costs than projected by their risk-adjusted payments. This allows plans to retain a larger share of federal funds.
Quality bonus payments to five-star MA plans, intended to reward high-performing plans, have also come under criticism. Critics argue these bonuses contribute to excess spending without consistently demonstrating commensurate improvements in patient care.
In response to these issues, CMS is significantly increasing its resources to address overpayments. The agency plans to expand its team of medical coders to 2,000 by Sept. 1, a substantial increase from the previous count of 40 before the announcement. Additionally, CMS will implement advanced systems to streamline the review of medical records and “flag” unsupported diagnoses.
The takeaway
CMS’s expanded auditing efforts aim to ensure accurate billing, potentially saving taxpayers billions annually and promoting more equitable health care spending within the growing MA sector. This move signals a strong commitment to combating fraud, waste and abuse, while enhancing accountability and transparency in the Medicare system.
Providers must develop robust compliance programs, improve documentation and audit readiness, and foster a culture of transparency and stay agile in response to these regulatory changes. Proactive compliance is crucial to avoid penalties and maintain access to MA funding in an increasingly stringent oversight landscape.
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