Better Payment Management Needed by CMS for Medicare Advantage Organizations

Published: May 11, 2016

HHSWaste, Fraud, and Abuse

CMS estimates that it makes over $14 billion in improper payments annually to Medicare Advantage (MA) organizations, according to a recent GAO report.

CMS contracts with MA organizations to offer beneficiaries a private alternative to the original Medicare plan.  CMS pays the MA organization a set monthly amount for each enrollee based on their health status and projected use of Medicare-covered services. MA organizations are able to submit beneficiary diagnoses for payment adjustment purposes in order to receive additional funds.

CMS performs Risk Adjustment Data Validation (RADV) audits of 30 MA contracts on a regular basis.  These audits facilitate the recovery of improper payments made to MA organizations that file for additional payments from CMS based on beneficiary diagnoses that are not backed up by appropriate medical records.

In 2014, CMS paid $160 billion to MA organizations.  It estimates that annually 9.5% of MA payments are improper.

  • GAO was asked to evaluate CMS’ efforts in regards to improper payments in the MA program.  GAO evaluated the following:  
  • Does CMS’ contract selection methodology for RADV audits facilitate the recovery of improper payments?  
  • Does CMS complete RADV audits and appeals in a timely manner?

Has CMS made progress toward incorporating Recovery Audit Contracts (RACs) into the MA program to identify and assist with improper payment recovery?   

GAO found that the methodology CMS uses to select contracts for audit does not facilitate recovery of improper payments. CMS is not selecting contracts at highest risk for improper payments for the RADV audits.

Additionally, recent audits have taken multiple years to complete and experienced substantial delays. Also, the system for transferring medical records from MA organizations for RADV audits has often been inoperable.

CMS would like to include RACs in the RADV audit process as prescribed by the Affordable Care Act, but to date has been unable to do so.  It issued an RFI in December 2015 seeking industry comment on how an MA RAC could be incorporated into the RADV audit framework.

GAO made the following recommendations to CMS: 

  •  To improve the accuracy of CMS’ calculation of coding intensity, it should modify the calculation  
  • CMS should modify its selection of contracts for contract-level RADV audits to focus on those contracts most likely to have high rates of improper payments 
  • CMS should enhance the timeliness of its contract-level RADV process 
  • CMS should improve the timeliness of its contract-level RADV appeal process by requiring that reconsideration decisions be rendered within a specified number of days  
  • CMS should ensure that it develops specific plans and a timetable for incorporating a RAC in the MA program as mandated by the Affordable Care Act

CMS concurred with the recommendations.