Dr. Mehmet Oz leads the Centers for Medicare & Medicaid Services. A CMS plan to keep payments to Medicare Advantage flat in 2027 roiled health insurance stocks this week.
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Health insurers are expressing concerns about a recent proposal from the government to maintain current reimbursement rates for Medicare Advantage plans in the upcoming year. This move, which includes other changes to payment structures, has sparked significant debate.
Some health policy analysts argue that this plan could potentially address long-standing issues of overcharging within the program, which has been a problem for over a decade. On January 26, officials from the Centers for Medicare & Medicaid Services (CMS) revealed their intention to raise rates by less than 0.1% for the year 2027, a figure that fell short of industry expectations.
Major insurers like UnitedHealth Group and Humana experienced a drop in their stock prices following the announcement, as industry representatives warned that insufficient government funding could lead to reductions in services for individuals aged 65 and older.
Chart Reviews Under Scrutiny
Amidst the discussion on rates, CMS has also suggested limiting the use of “chart reviews” by health plans. These reviews sometimes result in new medical diagnoses, even if patients haven’t sought treatment, which in turn can lead to increased government payments to Medicare Advantage plans.
This practice has faced criticism for a decade from government auditors, who claim it has led to billions in overpayments. Recently, the Justice Department secured a $556 million settlement with Kaiser Permanente over allegations of submitting half a million diagnoses from 2009 to 2018, leading to approximately $1 billion in improper payments.
Despite the settlement, Kaiser Permanente did not admit to any wrongdoing. Spencer Perlman, a health care policy analyst, remarked, “I do think the administration is serious about cracking down on overpayments.”
According to Perlman, while the Trump administration supports Medicare Advantage, they are concerned about plans that exploit chart reviews for undue profits without providing treatments. The CMS Administrator, Mehmet Oz, stated in a news release that curtailing this practice ensures more accurate payments and protects taxpayers from unnecessary expenditures.
Richard Kronick, a former federal health policy researcher, commented on the proposal as “at least a mildly encouraging sign,” though he predicted that health plans might find ways around it. He has long argued that the transition to Medicare Advantage has led to excessive costs for taxpayers, largely due to unchecked medical coding.
David Meyers from Brown University described the proposed restriction on chart reviews as a “step in the right direction,” indicating an administrative push against inefficiencies.
Industry voices have reacted sharply to the proposal, arguing it could result in benefit cuts and increased costs for millions of seniors. Chris Bond, a spokesperson for AHIP, stated, “If finalized, this proposal could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026.”
Public feedback on the proposal is being solicited by CMS, with a final decision expected by April. Meyers noted that while health plans often claim they will reduce benefits if dissatisfied with CMS payments, such actions are uncommon.
He added, “The plans can still make money. They mostly are very profitable, just not as profitable as shareholders expected.”
For years, allegations have been made that health plans use tactics like “upcoding” to exaggerate patient conditions for financial gain. These practices involve medical coding consultants reviewing patient charts to identify new diagnoses, which are then billed to the government.
Federal audits have consistently revealed discrepancies in health plans’ billing practices. A 2019 report by the Department of Health and Human Services inspector general noted that chart reviews almost always resulted in added diagnoses, not deletions. Investigators found that such reviews led to an estimated $6.7 billion in payments in 2017.
This is not the first attempt by CMS to address chart reviews. A 2014 plan to restrict the practice was shelved due to industry pushback. The health insurance industry has long relied on lobbying and public relations to counter efforts to reduce taxpayer costs for Medicare Advantage.
The outcome of this proposal will reflect the Trump administration’s commitment to addressing controversial payment practices. Spencer Perlman noted that CMS often alters its stance in the face of industry opposition, sometimes phasing in changes over years to ease the impact.
David Lipschutz from the Center for Medicare Advocacy remarked that finalizing the chart review proposal would mark a significant advance in curbing overpayments.
However, he cautioned that even minor changes to Advantage payments often provoke strong industry reactions, leading to proposals being shelved. Lipschutz concluded, “It’s hard to tell at this stage how this will play out.”
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF.
This article was originally written by www.npr.org
