While the industry clashed with the Inspector General's Office, it found a sympathetic ear at CMS. Rather than hammer the health plans for chronic billing blunders, the agency has mostly shrugged them off or settled for recouping minimal sums.
In February 2012, CMS officials decided to forgive overpayments to Medicare health plans made from 2008 to 2010. The surprise decision brought cheers to corporate boardrooms, according to John Gorman, a former federal health official who now advises Medicare Advantage plans.
Gorman said CMS decided that "the sins of the past are absolved."
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"They didn't have to do that, and we, hundreds of CFOs and bankers up and down Wall Street and Madison Avenue, are thankful they did," Gorman added.
The CMS decision certainly spelled relief for Coventry Health Care in Bethesda, Maryland, which operates in more than a dozen states and is owned by insurance giant Aetna. Within a week of the decision, the company freed up $133 million it had held in reserves to cover any potential liability from flawed risk scoring, according to its financial statements.
Humana Inc., which disclosed to securities regulators that it was the subject of six CMS payment audits for 2007, declined to say how much the audits cost the company, but noted the results were not significant financially.
CMS ignored the HHS inspector general's finding that the six health plans it audited had been overpaid by an estimated $650 million for 2007. CMS settled five of the six audits for a total repayment of just over $1.3 million, the Center for Public Integrity confirmed.
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Further, CMS decided not to chase after overcharges from 2008 through 2010 even though the agency estimated through sampling that it made more than $32 billion in "improper" payments to Medicare Advantage plans over those three years. CMS did not explain its reasoning.
CMS took that stance just a month after congressional auditors criticized the agency for failing to crack down on Medicare Advantage plans that overbilled.
CMS officials also decided in 2012 to conduct only 30 of its own confidential RADV overpayment audits each year. That's less than a third of the number the agency said it would do in 2009. At that time, the Obama administration had promised to ramp up efforts to recoup overpayments to help fund the Affordable Care Act.
At that rate, it would take CMS more than 15 years to review the hundreds of Medicare Advantage contracts now in force.
CMS also helped out the industry in other ways likely to limit recoveries. The agency agreed to write off a portion of overpayments to account for doctors' coding differences and mistakes, a concession insiders said was a big break for the health plans.
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CMS officials also declared an amnesty period for voluntarily disclosing improper risk scores for which plans had been overpaid, much like a library suspending fines for a short period for the return of overdue books.
Trusiak, the former federal prosecutor, said CMS officials yielded too much ground to the industry and that these concessions will "restrict the amount of money recouped" by taxpayers.
Still, it's not clear that the health plans will continue to slip the hook.
After years of delays and deliberation, CMS now intends to "extrapolate" its RADV audit findings for the first time later this year. Auditors will presume that the percentage of billing errors they find in a sampling of 200 patients exists throughout a plan's full membership. That could potentially cost a large health plan millions of dollars or more.
Former CMS official Thomas E. Hutchinson, who helped design the RADV audit process and now advises health plans, said that small penalties weren't taken seriously by the industry. In some cases, he said, it cost health plans more to retrieve medical records to buttress their billing than accepting the small CMS penalty for failing to do so.
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Now, he said, health plans could face a "nuclear option" if they can't justify their billings. "We either have too little a stick or too big a stick," Hutchinson said.
CMS officials have said they expect to recover $370 million in overpayments as a result of their 30 audits that start this year. Though that's significantly below earlier predictions, it still caught the industry's attention.
Both Humana and UnitedHealth Group, the nation's two biggest Medicare Advantage plans, have told investors they could be ordered to cough up significant refunds, according to Securities and Exchange Commission filings. Humana reported to the SEC in November that "certain" of its contracts would be audited. It offered no details. Other plans also warned investors of a "material effect" on their finances, the SEC filings show.
In January, CMS threw another curve by proposing regulations that would require health plans to return overpayments they had received dating back six years. CMS did not explain how that proposal was consistent with its earlier decision to forgive overpayments from some past years.
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The regulations also clear the way for other divisions of HHS -- presumably the Inspector General's Office -- to conduct more Medicare Advantage audits.
Whether the office will actually take up the challenge is anyone's guess. It has already gone on record saying it lacks the funding to undertake comprehensive risk score audits, which it has set as a priority every year since 2008. In a video presentation outlining their investigative priorities for 2014, OIG officials made no mention of Medicare Advantage.
The inspector general's audits are far more threatening to the industry than those done by CMS. The inspector general's audits are widely distributed and can draw media attention as well as demands for reform in Congress.
Absent the inspector general's review, it's doubtful the public will ever get a full accounting of how accurately individual Medicare Advantage plans spend billions of tax dollars.
Burns, of the taxpayer rights group, said federal officials need to get serious about protecting tax dollars and keep from being "outgamed" by the health care industry.
"You need an electric fence for these cows," he said. "As soon as you touch it you get nailed."
The Center for Public Integrity is a nonprofit, nonpartisan investigative news organization in Washington, D.C.