Pre-Submission Risk Adjustment Audits: Preventing Medicare Advantage Plans from Draining Medicare Funds Dry

• Author: Casie C. Rodenberger
• Position: J.D. Candidate, The University of Iowa College of Law, 2018; M.S.W., Washington University in St. Louis, 2012; B.A., The University of Portland, 2011
• Pages: 841-870

841

Pre-Submission Risk Adjustment Audits:

Preventing Medicare Advantage Plans

from Draining Medicare Funds Dry

Casie C. Rodenberger*

ABSTRACT: The Centers for Medicare and Medicaid Services (“CMS”) pays

private organizations on a capitated payment rate to provide medical services

to Medicare beneficiaries in the Medicare Advantage Program. To decrease

the risk of the capitated payment model, CMS uses risk adjustment to increase

payment for beneficiaries with a higher risk score. The risk adjustment data

submission process is at great risk for mistake given the complex nature of risk

adjustment and fraud because Medicare Advantage plans stand to increase

profit margins with higher risk adjustment data scores. CMS has overpaid

Medicare Advantage plans by millions of dollars in the risk adjustment

process. The current CMS process to validate and recover overpaid funds is

not sufficient given the volume of payment errors and the inefficient system.

CMS should require Medicare Advantage plans to comprehensively audit

diagnosis data before being submitted for risk adjustment to reduce the

number of payment errors that lead to overpayment. CMS should also improve

the data validation procedures to make recovery a more efficient process.

I. INTRODUCTION ............................................................................. 842

II.MEDICARE ADVANTAGE AND SYSTEMS OF PAYMENT ...................... 845

A.TRADITIONAL MEDICARE ......................................................... 845

B.MEDICARE ADVANTAGE ........................................................... 847

C.CAPITATED PAYMENT AND RISK ADJUSTMENT ........................... 849

D.RISK ADJUSTMENT DATA VALIDATION ...................................... 852

E.FALSE CLAIMS ACT .................................................................. 856

III. THE BURDEN OF RISK ADJUSTMENT .............................................. 858

A.RISK ADJUSTMENT DATA SUBMISSION PROCESS ......................... 859

*

J.D. Candidate, The University of Iowa College of Law, 2018; M.S.W., Washington

University in St. Louis, 2012; B.A., The University of Portland, 2011. Thank you to the Volume

103 editors of the Iowa Law Review for their help and guidance. I would also like to thank my

parents for their never-ending encouragement.

842 IOWA LAW REVIEW [Vol. 103:841

B.THE STRUGGLES ASSOCIATED WITH RADV ............................... 862

C.THE UNINTENDED COST OF RISK ADJUSTMENT ......................... 863

IV.RISK ADJUSTMENT AUDITS AND RADV PROCESS

IMPROVEMENTS ............................................................................. 866

A.MEDICARE ADVANTAGE PLAN INTERNAL AUDITS ...................... 867

B.IMPROVING THE RADV PROCESS .............................................. 869

V.CONCLUSION ................................................................................ 870

I. INTRODUCTION

In the current political climate, conversations about the government’s

role in subsidizing for its citizen’s services are common. Often, the

conversations focus on the greatest cost offender. In 2015, national health

expenditures accounted for nearly 17.8% of the U.S. Gross Domestic Product

(“GDP”).1 Historically, private payers represented the majority of the payment

source for national health expenditures, but this trend has been slowly

shifting.2 The federal government currently accounts for 28.7% of national

healthcare expenditures.3 It is anticipated by the Centers for Medicare

& Medicaid Services (“CMS”) that the federal government’s share of

healthcare spending will only continue to rise given the aging population that

will be eligible for Medicare, the expansion of subsidies programs under the

Affordable Care Act (“ACA”), and the cost of the possible replacement of the

ACA entirely.4

1. National Health Expenditure Fact Sheet, CTRS. FOR MEDICARE & MEDICAID SERVS., https://www.

cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/

nhe-fact-sheet.html (last updated June 14, 2017, 3:11 PM) (explaining the expenditure amount

reached three trillion, which is about $9,990 per person).

2. See EARL DIRK HOFFMAN, JR. ET AL., U.S. DEP’T OF HEALTH & HUMAN SERVS., CTRS. FOR

MEDICARE & MEDICAID SERVS., BRIEF SUMMARIES OF MEDICARE & MEDICAID: TITLE XVIII AND

TITLE XIX OF THE SOCIAL SECURITY ACT 3 (2007), https://www.cms.gov/Research-Statistics-Data-

and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/downloads/Medicare

MedicaidSummaries2007.pdf (describing that there has been a shift from a majority of private

funding toward public funding due to cost sharing methods and out of pocket costs).

3. See National Health Expenditure Fact Sheet, supra note 1 (noting that private households

also have a majority share of 27.7%, while private businesses and state and local government have

a minority share at 19.9% and 17.1% respectively).

4. HOFFMAN ET AL., supra note 2, at 4–5; see Exec. Order No. 13,765, 82 Fed. Reg. 8351

(Jan. 20, 2017) (indicating that the Trump Administration intended to repeal the ACA, but the

plan to take its place had yet to be decided on). In an attempt to replace the ACA, the House

passed the American Health Care Act. Mara Lee, Fate of Obamacare Now is in the Senate, MOD.

HEALTHCARE (May 4, 2017), http://www.modernhealthcare.com/article/20170504/NEWS/

170509944. However, the replacement of the ACA remains in limbo as the vote for the Senate

replacement proposal, a Better Care Reconciliation Act, was delayed and the measure to partially

repeal the ACA, the Healthcare Freedom Act, was rejected. See Juliet Eilperin et al., Senate Rejects