In an important decision for False Claims Act enforcement, the D.C. Circuit on Friday vaporized UnitedHealth Group's successful challenge to a Medicare Advantage overpayment rule, finding that the clawback policy doesn't improperly hold private insurers to higher standards.
Friday's unanimous opinion reversed a 2018 decision that vacated the rule, which requires Medicare Advantage insurers to return excess payments within 60 days. The opinion will likely buttress the government's FCA enforcement because it rejected the idea that recouping overpayments would violate a requirement that Medicare Advantage insurers receive apples-to-apples reimbursement with traditional Medicare.
At issue was whether the Centers for Medicare & Medicaid Services must ensure "actuarial equivalence" between payments in Medicare Advantage and traditional government-run Medicare. The appeals court on Friday found that "actuarial equivalence does not apply to the overpayment rule or the statutory overpayment-refund obligation under which it was promulgated."
"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," the D.C. Circuit wrote Friday in an opinion authored by U.S. Circuit Judge Cornelia T.L. Pillard.
The opinion contained substantial discussion of the FCA backdrop, observing the U.S. Department of Justice and whistleblowers have "pursued several False Claims Act cases against Medicare Advantage insurers in the last several years, charging failures to report and return overpayments that the insurers knew were based on unsupported diagnoses."
Medicare Advantage covers more than one-third of all Medicare beneficiaries, and Uncle Sam spent roughly $275 billion on the privately run insurance plans in 2019. Insurers are paid extra for covering sicker enrollees, and they have been accused of fraudulently exaggerating illnesses to pocket more money.
Friday's decision noted that "Medicare Advantage insurers, including UnitedHealth, have raised actuarial equivalence as a defense to False Claims Act liability," but that "at least one court has rejected that defense," citing a case involving California hospital network Sutter Health. Within hours of the D.C. Circuit's decision, the network filed a joint stipulation in California federal court with the DOJ and a plaintiffs firm reaffirming that they "have negotiated the terms of a written settlement agreement" and are working toward executing it.
In its opinion, the D.C. Circuit delved through statutory arcana to explain that "overpayments" and "actuarial equivalence" are not connected in the way that UnitedHealth has contended.
"Nothing in either provision renders actuarial equivalence a defense against the obligation to refund any individual, known overpayment," the court held.
It further observed that the Affordable Care Act "made specific provision for False Claims Act liability" when insurers don't return overpayments within 60 days of discovering them. And when Congress passed the ACA, it "made no reference to the Medicare statute's long-standing actuarial-equivalence requirement, let alone any suggestion that it could be interposed as a defense," the D.C. Circuit added.
Friday's opinion also rejected an assertion that the overpayment rule breaches CMS' duty to use the "same methodology" for traditional Medicare and Medicare Advantage. That duty "does not bear on the overpayment-refund obligation," the opinion stated.
And in a final section, the court shot down the argument that the overpayment rule is arbitrary and capricious under the Administrative Procedure Act. It found that CMS acted permissibly when it applied an "adjuster" to cushion the blow of certain Medicare Advantage audits but didn't do so in the context of the overpayment rule.
"CMS's one-time intention to apply the adjustment in one context but not the other was reasonable," the court held Friday, while also observing that CMS later backtracked on the adjustment.
Daniel Meron of Latham & Watkins LLP, counsel for UnitedHealth, declined to comment on Friday. A CMS spokesperson said that the agency doesn't comment on litigation, and representatives of UnitedHealth had no immediate comment.
Judges Cornelia T.L. Pillard, Judith W. Rogers and Justin R. Walker sat on the panel for the D.C. Circuit.
CMS is represented by Weili J. Shaw of the U.S. Department of Justice's Civil Division.
UnitedHealth is represented by Daniel Meron of Latham & Watkins LLP.
The case is UnitedHealthcare Insurance Co. et al. v. Becerra et al., case number 18-5326, in the U.S. Court of Appeals for the District of Columbia Circuit.
Read more at: https://www.law360.com/health/articles/1412674/dc-circ-erases-unitedhealth-s-overpayment-rule-triumph-?nl_pk=c4307fad-eaff-4e75-8891-46ac7733830c&utm_source=newsletter&utm_medium=email&utm_campaign=health?copied=1