Humana is suing the United States Department of Health and Human Services (HHS) over the plan to audit Medicare Advantage payments, arguing that the rule is “arbitrary and capricious.” The lawsuit, filed in the United States District Court for the Northern District of Texas, requests that the Court set aside the Final Rule as “arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law” and prohibit the government from enforcing any payment recoveries against Humana calculated using the new audit methodology announced in the Final Rule.
The Final Rule that Humana is suing over is the February 1, 2023, Final Rule by the Centers for Medicare and Medicaid Services (CMS), Under the Final Rule, Policy and Technical Changes to the Medicare Advantage, Medicare Prescription Drug Benefit, Program of All-Inclusive Care for the Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 2021, a new policy for calculating payment recoveries in Medicare Advantage audits was released. Under the Final Rule, the “fee-for-service adjuster” concept was eliminated, as the agency felt it had no legal or actuarial basis.
Humana disagrees, however, and according to the lawsuit, “the agency did not even try to offer an empirical or actuarial justification for its new audit methodology, relying instead on purely legal rationales – none of which withstand scrutiny.”
The Final Rule also allowed CMS to claw back payments made to Medicare Advantage organizations years after the payment, based on agency audits using a documentation standard inconsistent with the standard it used to develop the Medicare Advantage payment model to begin with. The lawsuit goes so far as to allege that “Internal documents produced by CMS show that, more than a decade ago, the agency recognized that the very double standard CMS now seeks to implement would be actuarially unsound” and in 2012, “CMS publicly promised to adjust any audit recoveries to account for this double standard.”
Humana notes in the lawsuit that the goals the Medicare Advantage program set out to reach have been achieved, with Medicare Advantage organizations offering plan benefits beyond the “fee-for-service Medicare,” including dental care, hearing aids, and over-the-counter medicine. Not only that, but Humana notes that the average monthly premium for Medicare Advantage plans has decreased, from $32.91 in 2015 to $19 in 2022 and with Medicare Advantage enrollees reporting 40% less out-of-pocket healthcare spending and are 29% less likely to be hospitalized for avoidable reasons (when compared to fee-for-service Medicare).
Humana argues that CMS violated the Administrative Procedure Act in its rationale for the Final Rule, the retroactivity application of the Final Rule, as well as the inadequate notice-and-comment period regarding the exclusion of fee-for-service adjusters. As noted above, Humana is asking the Court to declare that the Final Rule is “arbitrary, capricious, an abuse of discretion, and otherqise not in accordance with law…and in excess of Defendants’ statutory jurisdiction, authority, or limitations, or short of statutory right…because CMS’s decision not to apply an FFS Adjuster in RADV audits rests on incorrect legal arguments and is inadequately explained.” Humana is also asking the Court to set aside the Final Rule and enjoin CMS and HHS from enforcing any payment recoveries calculated under the new audit methodology in the Final Rule against Humana.