Medicare Advantage Insurers Face New Curbs on Overcharges in Trump Plan That Reins in Payments

Medicare Advantage health plans are expressing strong opposition to a recent government proposal that aims to maintain flat reimbursement rates for the upcoming year while implementing other payment adjustments. This announcement has sparked significant concern among industry stakeholders.

However, some health policy experts argue that this proposal could be a crucial step toward eliminating billions of dollars in overcharges that have plagued the program for over a decade.

On January 26, officials from the Centers for Medicare & Medicaid Services (CMS) revealed their intention to increase rates paid to health plans by less than a tenth of a percent for 2027. This figure falls far short of industry expectations, leading to a sharp decline in stock prices for major insurers like UnitedHealth Group and Humana. Industry representatives have warned that if the government does not allocate additional funds, seniors aged 65 and older may face cuts to their services.

In the Medicare Advantage program, the federal government compensates private insurance companies to manage healthcare for seniors and disabled individuals. Amid the uproar over reimbursement rates, CMS has also proposed limiting plans from conducting “chart reviews” of their patients. These reviews can lead to new medical diagnoses, sometimes for conditions that patients have not sought treatment for, resulting in increased government payments to Medicare Advantage plans.

This practice has faced criticism from government auditors for over a decade, who assert that it has led to billions in overpayments to health plans. Recently, the Justice Department announced a record $556 million settlement with Kaiser Permanente, a nonprofit health system, over allegations that the company added approximately half a million diagnoses to its Advantage patients’ charts from 2009 to 2018, resulting in around $1 billion in improper payments.

Kaiser Permanente did not admit to any wrongdoing as part of the settlement.

“I believe the administration is genuinely committed to addressing overpayments,” stated Spencer Perlman, a healthcare policy analyst based in Bethesda, Maryland. Perlman noted that while the Trump administration has historically supported Medicare Advantage, officials are “troubled” by plans that generate excessive profits through chart reviews, billing the government for medical conditions that have not been treated.

In a news release, CMS Administrator Mehmet Oz emphasized that curbing this practice would ensure more accurate payments to plans while “protecting taxpayers from unnecessary spending that does not address real health needs.”

Richard Kronick, a former federal health policy researcher and professor at the University of California-San Diego, described the proposal as “at least a mildly encouraging sign,” although he expressed skepticism that health plans would not find ways to circumvent it.

Kronick has argued that transitioning seniors to Medicare Advantage plans has cost taxpayers tens of billions more than keeping them in the government-run Medicare program due to rampant medical coding excesses. The number of enrollees in these plans has surged in recent years, now encompassing about 34 million members, which is over half of those eligible for Medicare.

David Meyers, an associate professor at Brown University’s School of Public Health, referred to the proposed restriction on chart reviews as “a step in the right direction.”

“The administration has been signaling strongly that they want to reduce inefficiencies,” he remarked.

The swift backlash from the industry, particularly regarding the proposal to maintain flat Medicare Advantage payment rates, has been notable. Chris Bond, a spokesperson for AHIP (formerly known as America’s Health Insurance Plans), stated, “If finalized, this proposal could lead to benefit cuts and increased costs for 35 million seniors and individuals with disabilities when they renew their Medicare Advantage coverage in October 2026.”

CMS is currently accepting public comments on the proposal and plans to issue a final decision on payment rates and other provisions by early April.

Meyers pointed out that health plans often claim they will be forced to reduce benefits when dissatisfied with CMS payments, but this rarely occurs. “The plans can still make money,” he noted. “They are generally very profitable, just not as profitable as shareholders anticipated.”

The government compensates Medicare Advantage plans at higher rates to cover sicker patients. However, numerous whistleblower lawsuits, government audits, and other investigations have alleged that health plans exaggerate the severity of their customers’ conditions to secure unwarranted payments, a tactic known as “upcoding.”

Many Medicare Advantage plans have engaged medical coding and analytics consultants to scrutinize patients’ medical charts for new diagnoses that they can then bill to the government. Medicare regulations require that health plans document and treat all medical conditions they bill for.

Yet, federal audits have consistently shown that many health plans’ billing practices do not withstand scrutiny. A December 2019 report from the Department of Health and Human Services inspector general revealed that health plans “almost always” used chart reviews to add diagnoses rather than remove them. “Over 99 percent of chart reviews in our review added diagnoses,” the investigators reported.

This week’s proposal is not the first attempt by CMS to restrict chart reviews. In January 2014, federal officials drafted a plan to limit the practice but abruptly retracted it a few months later due to significant industry backlash.

For years, the health insurance industry has relied on aggressive lobbying and public relations campaigns to resist efforts aimed at curbing overpayments or reducing taxpayer costs associated with Medicare Advantage.

The outcome of this latest proposal will reveal much about the administration’s commitment to addressing controversial and longstanding payment practices within the program.

Perlman noted that it is “quite common” for CMS to partially reverse decisions when faced with industry opposition, often phasing in changes over several years to mitigate the impact on health plans.

David Lipschutz, an attorney with the Center for Medicare Advocacy, a nonprofit public interest law firm, stated that finalizing the chart review proposal “would be a meaningful step towards reining in overpayments to Medicare Advantage plans.”

However, he cautioned that even minor adjustments to Advantage payments have historically prompted the industry to claim that “the sky will fall,” leading to the proposal being dropped. “It’s difficult to predict how this will unfold,” Lipschutz remarked.

Medicare Advantage health plans are expressing strong opposition to a recent government proposal that aims to maintain flat reimbursement rates for the upcoming year while implementing other payment adjustments. This announcement has sparked significant concern among industry stakeholders.

However, some health policy experts argue that this proposal could be a crucial step toward eliminating billions of dollars in overcharges that have plagued the program for over a decade.

On January 26, officials from the Centers for Medicare & Medicaid Services (CMS) revealed their intention to increase rates paid to health plans by less than a tenth of a percent for 2027. This figure falls far short of industry expectations, leading to a sharp decline in stock prices for major insurers like UnitedHealth Group and Humana. Industry representatives have warned that if the government does not allocate additional funds, seniors aged 65 and older may face cuts to their services.

In the Medicare Advantage program, the federal government compensates private insurance companies to manage healthcare for seniors and disabled individuals. Amid the uproar over reimbursement rates, CMS has also proposed limiting plans from conducting “chart reviews” of their patients. These reviews can lead to new medical diagnoses, sometimes for conditions that patients have not sought treatment for, resulting in increased government payments to Medicare Advantage plans.

This practice has faced criticism from government auditors for over a decade, who assert that it has led to billions in overpayments to health plans. Recently, the Justice Department announced a record $556 million settlement with Kaiser Permanente, a nonprofit health system, over allegations that the company added approximately half a million diagnoses to its Advantage patients’ charts from 2009 to 2018, resulting in around $1 billion in improper payments.

Kaiser Permanente did not admit to any wrongdoing as part of the settlement.

“I believe the administration is genuinely committed to addressing overpayments,” stated Spencer Perlman, a healthcare policy analyst based in Bethesda, Maryland. Perlman noted that while the Trump administration has historically supported Medicare Advantage, officials are “troubled” by plans that generate excessive profits through chart reviews, billing the government for medical conditions that have not been treated.

In a news release, CMS Administrator Mehmet Oz emphasized that curbing this practice would ensure more accurate payments to plans while “protecting taxpayers from unnecessary spending that does not address real health needs.”

Richard Kronick, a former federal health policy researcher and professor at the University of California-San Diego, described the proposal as “at least a mildly encouraging sign,” although he expressed skepticism that health plans would not find ways to circumvent it.

Kronick has argued that transitioning seniors to Medicare Advantage plans has cost taxpayers tens of billions more than keeping them in the government-run Medicare program due to rampant medical coding excesses. The number of enrollees in these plans has surged in recent years, now encompassing about 34 million members, which is over half of those eligible for Medicare.

David Meyers, an associate professor at Brown University’s School of Public Health, referred to the proposed restriction on chart reviews as “a step in the right direction.”

“The administration has been signaling strongly that they want to reduce inefficiencies,” he remarked.

The swift backlash from the industry, particularly regarding the proposal to maintain flat Medicare Advantage payment rates, has been notable. Chris Bond, a spokesperson for AHIP (formerly known as America’s Health Insurance Plans), stated, “If finalized, this proposal could lead to benefit cuts and increased costs for 35 million seniors and individuals with disabilities when they renew their Medicare Advantage coverage in October 2026.”

CMS is currently accepting public comments on the proposal and plans to issue a final decision on payment rates and other provisions by early April.

Meyers pointed out that health plans often claim they will be forced to reduce benefits when dissatisfied with CMS payments, but this rarely occurs. “The plans can still make money,” he noted. “They are generally very profitable, just not as profitable as shareholders anticipated.”

The government compensates Medicare Advantage plans at higher rates to cover sicker patients. However, numerous whistleblower lawsuits, government audits, and other investigations have alleged that health plans exaggerate the severity of their customers’ conditions to secure unwarranted payments, a tactic known as “upcoding.”

Many Medicare Advantage plans have engaged medical coding and analytics consultants to scrutinize patients’ medical charts for new diagnoses that they can then bill to the government. Medicare regulations require that health plans document and treat all medical conditions they bill for.

Yet, federal audits have consistently shown that many health plans’ billing practices do not withstand scrutiny. A December 2019 report from the Department of Health and Human Services inspector general revealed that health plans “almost always” used chart reviews to add diagnoses rather than remove them. “Over 99 percent of chart reviews in our review added diagnoses,” the investigators reported.

This week’s proposal is not the first attempt by CMS to restrict chart reviews. In January 2014, federal officials drafted a plan to limit the practice but abruptly retracted it a few months later due to significant industry backlash.

For years, the health insurance industry has relied on aggressive lobbying and public relations campaigns to resist efforts aimed at curbing overpayments or reducing taxpayer costs associated with Medicare Advantage.

The outcome of this latest proposal will reveal much about the administration’s commitment to addressing controversial and longstanding payment practices within the program.

Perlman noted that it is “quite common” for CMS to partially reverse decisions when faced with industry opposition, often phasing in changes over several years to mitigate the impact on health plans.

David Lipschutz, an attorney with the Center for Medicare Advocacy, a nonprofit public interest law firm, stated that finalizing the chart review proposal “would be a meaningful step towards reining in overpayments to Medicare Advantage plans.”

However, he cautioned that even minor adjustments to Advantage payments have historically prompted the industry to claim that “the sky will fall,” leading to the proposal being dropped. “It’s difficult to predict how this will unfold,” Lipschutz remarked.