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CMS wants to audit Medicare Advantage medical claims. Photo: Myung J. Chun/Los Angeles Times via Getty Images

The Centers for Medicare & Medicaid Services is ready to charge ahead with broad audits of Medicare Advantage plans, which could result in companies paying back billions of taxpayers dollars to the federal government.

The big picture: The threat of these federal audits has existed for several years, but the audits haven't led to large clawbacks yet. CMS now has an estimate of those improper payments to insurers: almost $14.4 billion in 2017, or 7% of Medicare Advantage spending from that year.

How it works: The federal government pays Medicare Advantage companies monthly amounts based on how sick their enrollees are. Insurers code the conditions people have, and the more health problems someone has, the more insurers get paid.

  • But regulators are conducting "risk adjustment data validation" (RADV) audits that compare patient medical codes submitted by health insurers with the actual codes that doctors put in patient medical records.
  • The goal is to see if Medicare Advantage insurers are exaggerating people's health conditions to get higher payments.
  • An investigation from the Center for Public Integrity detailed how the industry has manipulated these so-called "risk scores."

Driving the news: New proposed regulations lay out the federal government's legal authority for the audits.

  • CMS says it will audit the diagnoses of about 200 people in any given health plan and then extrapolate the results across the insurer's entire Medicare Advantage population — leading to potentially large clawbacks for insurers that improperly code conditions.
  • An accompanying federal analysis separately found that coding errors in the traditional Medicare program have no bearing on how Medicare Advantage insurers are paid, and thus RADV audits should not adjust for those discrepancies. The analysis, in essence, pokes a hole in a recent federal ruling that favored insurers.

The bottom line: CMS appears ready to step on the gas and recoup money it believes the industry has bilked from taxpayers. Health insurers have long been frightened of RADV audits — every major publicly traded insurer lists the audits as a top "risk factor" in their annual filings to investors.

  • "CMS has a strong requirement to ensure accuracy of payments because of the magnitude of dollars flying around," said Jessica Smith, a consultant at Gorman Health Group who studies risk adjustment.

Between the lines: Health insurers have successfully fought off or watered down these audits since they were first proposed. The industry almost certainly will work to weaken any final regulation.

  • America's Health Insurance Plans — the industry's leading lobbying group, which has made Medicare Advantage a priority as more insurers rely on the program for revenue — has already warned the audits must be "sound" and "legally appropriate."

Go deeper

WHO warns against travel bans on southern African countries

Matshidiso Moeti, World Health Organization regional director for Africa. Photo: Sylvain Gaboury/Patrick McMullan via Getty Images

The World Health Organization called on countries Sunday to not impose travel bans on southern African nations amid concerns over the new COVID-19 Omicron variant.

Why it matters: The U.S. and countries in Europe and the Asia-Pacific announced travel restrictions in response to Omicron, which was first detected in South Africa. It's since spread to several European countries, Canada, Israel, Australia and Hong Kong. The WHO noted in a statement that only two southern African nations have detected the new variant.

Updated 4 hours ago - Health

First North American Omicron cases identified in Canada

COVID-19 testing personnel at Toronto Pearson International Airport in September. Photo: Steve Russell/Toronto Star via Getty Images

The first two cases of the new Omicron variant have been detected in North America, the Canadian government announced Sunday evening.

Driving the news: The World Health Organization has named Omicron a "variant of concern," but cautioned earlier on Sunday that it is not yet clear whether it's more transmissible than other strains of COVID-19.

8 hours ago - Health

WHO: Not yet known whether Omicron leads to more severe disease

Photo illustration: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

The World Health Organization on Sunday said that it is not yet clear whether the newly discovered Omicron variant is more transmissible than other strains of the COVID-19 virus.

Why it matters: The agency's statement comes as the variant, discovered in South Africa, has already been detected in European and Asian countries.