UnitedHealthcare Ins. Co. v. Becerra
| Decision Date | 13 August 2021 |
| Docket Number | No. 18-5326,18-5326 |
| Citation | 9 F.4th 868 |
| Parties | UNITEDHEALTHCARE INSURANCE COMPANY, et al., Appellees v. Xavier BECERRA, in His Official Capacity as Secretary of Health and Human Services, et al., Appellants |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Weili J. Shaw, Attorney, U.S. Department of Justice, argued the cause for appellants. With him on the briefs were Ethan P. Davis, Acting Assistant Attorney General, and Mark B. Stern, Attorney. Michael S. Raab, Attorney, entered an appearance.
Daniel Meron, Washington, DC, argued the cause for appellees. With him on the brief was Matthew M. Shors.
David W. Ogden, Washington, DC, Brian M. Boynton, and Kevin M. Lamb were on the brief for amicus curiae America's Health Insurance Plans in support of appellees.
Before: Rogers, Pillard and Walker, Circuit Judges.
UnitedHealthcare Insurance Company and other Medicare Advantage insurers under the umbrella of UnitedHealth Group Incorporated (collectively, UnitedHealth) challenge a rule the Centers for Medicare and Medicaid Services (CMS) promulgated under the Medicare statute, 42 U.S.C. §§ 1301 - 1320d-8, 1395 - 1395hhh. The Overpayment Rule is part of the government's ongoing effort to trim unnecessary costs from the Medicare Advantage program. Neither Congress nor CMS has ever treated an unsupported diagnosis for a beneficiary as valid grounds for payment to a Medicare Advantage insurer. Consistent with that approach, the Overpayment Rule requires that, if an insurer learns a diagnosis it submitted to CMS for payment lacks support in the beneficiary's medical record, the insurer must refund that payment within sixty days. The Rule couldn't be simpler. But understanding UnitedHealth's challenge requires a bit of context.
As explained in more detail below, people who are eligible for Medicare may elect to receive their health insurance through a private insurer under Medicare Advantage rather than directly through the government under traditional Medicare, and approximately forty percent of beneficiaries have chosen Medicare Advantage. CMS pays private Medicare Advantage insurers, in a prospective lump sum each month, the amount it expects a month's care would otherwise cost CMS in direct payments to healthcare providers treating the same beneficiaries under traditional Medicare. For each Medicare Advantage beneficiary, CMS pays the insurer a per-capita amount that varies according to demographic characteristics and diagnoses that CMS has determined, based on its past experience in traditional Medicare, to be predictive of healthcare costs.
Payments to the Medicare Advantage program depend on participating insurers accurately reporting to CMS their beneficiaries’ salient demographic information and medically documented diagnosis codes. To better control erroneous payments, including those garnered from reported—but unsupported—diagnoses, Congress in 2010 amended the Medicare program's data-integrity provisions. The amendment specified a sixty-day deadline for reporting and returning identified overpayments and confirmed that such payments not promptly returned may trigger liability under the False Claims Act. See id. § 1320a-7k(d). CMS promulgated the Overpayment Rule to implement those controls on Medicare Advantage. See 42 C.F.R. § 422.326. As relevant here, the Overpayment Rule establishes that, if a Medicare Advantage insurer has received a payment increment for a beneficiary's diagnosis and discovers that there is no basis for that payment in the underlying medical records, that is an overpayment that the insurer must correct by reporting it to CMS within sixty days for refund. See Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 79 Fed. Reg. 29,844, 29,921 (May 23, 2014) (hereinafter Overpayment Rule), J.A. 64.
UnitedHealth claims that it is unambiguous in the text of the Medicare statute that the Overpayment Rule is subject to a principle of "actuarial equivalence," and that the Rule fails to comply. See 42 U.S.C. § 1395w-23(a)(1)(C)(i). But actuarial equivalence does not apply to the Overpayment Rule or the statutory overpayment-refund obligation under which it was promulgated. Reference to actuarial equivalence appears in a different statutory subchapter from the requirement to refund overpayments, and neither provision cross-references the other. Further, the actuarial-equivalence requirement and the overpayment-refund obligation serve different ends. The role of the actuarial-equivalence provision is to require CMS to model a demographically and medically analogous beneficiary population in traditional Medicare to determine the prospective lump-sum payments to Medicare Advantage insurers. The Overpayment Rule, in contrast, applies after the fact to require Medicare Advantage insurers to refund any payment increment they obtained based on a diagnosis they know lacks support in their beneficiaries’ medical records.
UnitedHealth contends that the actuarial-equivalence principle reaches beyond its statutory home to impose an implied—and functionally prohibitive—legal precondition on the requirement to return known overpayments. As UnitedHealth would have it, Congress clearly intended enforcement of the statutory overpayment-refund obligation, which the Overpayment Rule essentially parrots, to depend on a prior determination of actuarial equivalence. That principle, UnitedHealth says, prevents CMS from recovering overpayments under the Rule unless CMS first shows that the rate of payment errors to healthcare providers in traditional, fee-for-service Medicare is lower than the rate of payment errors to the Medicare Advantage insurer, or that CMS comprehensively audited the data from traditional Medicare before using it in the complex regression model—the CMS Hierarchical Condition Category (CMS-HCC) risk-adjustment model—that predicts the cost to insure Medicare Advantage beneficiaries.
There is no legal or factual basis for UnitedHealth's claim. Actuarial equivalence is a directive to CMS. It describes the goal of the risk-adjustment model Congress directed CMS to develop. It does not separately apply to the requirement that Medicare Advantage insurers avoid known error in their payment requests. It assuredly does not unambiguously demand that, before CMS can collect known overpayments from Medicare Advantage insurers, it must engage in unprecedented self-auditing to eliminate an imagined bias in the body of traditional Medicare data CMS used in its regressions. The implausibility that Congress would have so intended is underscored by the lack of parallelism between the context and effects of, on one hand, unsupported diagnoses in the traditional Medicare data CMS uses to model generally applicable risk factors and, on the other, the specific errors the Overpayment Rule targets.
Even if actuarial equivalence applied as UnitedHealth suggests, it would be UnitedHealth's burden to show the systematically skewed inaccuracies on which its theory depends, which it has not done. Also fatal to UnitedHealth's claim is that it never challenged the values CMS assigned to the risk factors it identified or the level of the capitation payments resulting from CMS's risk-adjustment model. It cannot belatedly do so in the guise of a challenge to the Overpayment Rule.
UnitedHealth's next claim relies on the Medicare statute's requirement that CMS annually compute and publish certain traditional Medicare data "using the same methodology as is expected to be applied in making payments" to Medicare Advantage insurers. Id. § 1395w-23(b)(4)(D). That "same methodology" requirement does not bear on the overpayment-refund obligation. Meant to facilitate Medicare Advantage insurers’ bidding for contracts with CMS, that requirement merely clarifies that, in computing the data it publishes, CMS must use the same risk-adjustment model that it already uses to set monthly payments to Medicare Advantage insurers; like the actuarial-equivalence requirement, it says nothing about what constitutes an "overpayment."
UnitedHealth's final claim is that the Overpayment Rule is arbitrary and capricious in violation of the Administrative Procedure Act (APA). That claim hinges on what UnitedHealth sees as an unexplained inconsistency between the Overpayment Rule and another error-correction mechanism to which Medicare Advantage insurers are subject: Risk Adjustment Data Validation (RADV) audits. With those audits, CMS proposed a systemic adjustment involving the traditional Medicare data used to model risk factors to account for any errors in that data set before requiring any contract-level repayments from insurers. UnitedHealth sees inconsistency in obligating repayments under the Overpayment Rule without any such adjustment. But the system-level adjustment that CMS said it would apply in the context of contract-level RADV audits came in direct response to concerns about actuarial equivalence. Because we hold that the actuarial-equivalence requirement does not pertain to the statutory overpayment-refund obligation or the Overpayment Rule challenged here, and the two error-correction mechanisms are plainly distinguishable in other ways, CMS's one-time intention to apply the adjustment in one context but not the other was reasonable.
In sum, nothing in the Medicare statute's text, structure, or logic applies actuarial equivalence to its separate overpayment-refund obligation, and thus the Overpayment Rule does not violate actuarial equivalence. For much the same reasons, we reject UnitedHealth's claim that the Rule violates the statute's "same methodology" requirement, and we also deny its claim that the Rule is arbitrary and capricious as an unexplained departure from prior policy. We therefore reverse the district court's grant of summary judgment to UnitedHealth and its resulting vacatur of the Overpayment...
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