Federal Oversight of Managed Care a Priority

Takeaway Points

• Continual growth in managed care Medicare and Medicaid is driving more federal oversight.
• Health and Human Services (HHS) Office of Inspector General (OIG) issued a report in August on managed care oversight priorities.
• The report lays out 3 oversight goals and a tool called the Managed Care Life Cycle to help achieve those goals.
• The OIG sees a dual role with industry as both overseer and partner in achieving compliance.
• Oversight by the OIG dovetails with legislative activities in Congress.
• Managed care is encouraged to take proactive steps to meet compliance in their internal processes and procedures.
• The ability of managed care to show strong compliance processes makes them more attractive in the marketplace.

In 2022, 50% of Medicare enrollees received care through Medicare Advantage plans (up from 19% in 2007), incurring a $403 billion cost to the federal government. Among current Medicaid enrollees, 81% receive at least one component of their care through managed care for $254 billion (federal match to state funding).

These are some of the statistics driving the increased attention by the Biden Administration and Congress on the growth of managed care in Medicare and Medicaid and the need for good oversight. In August 2023, the Health and Human Services (HHS) Office of Inspector General (OIG) issued a report¹ on a strategic plan detailing what it views as the main goals of oversight and a way to achieve these goals via a tool they call the Managed Care Life Cycle that breaks down the components of managed care that require oversight.

“We are increasing our oversight of managed care and we see this is as a priority,” said Carolyn Kapustij, Senior Advisor for Managed Care in the OIG. “The goals and the managed care lifestyle tool work together to create a framework to help us focus our resources appropriately.”

Kapustij underscored that the OIG sees itself in its traditional role as providing robust oversight of managed care through audits, evaluations, and investigations and engaging managed care plans to help them know where to direct their resources to mitigate risk. “We’re looking for plans to take the information from OIG’s materials and use it for their internal processes, as well as to reach out and work with us when they identify fraud,” she said.

“The OIG is here to encourage compliance and prevent fraud before it occurs,” she added.

Called the Strategic Plan for Oversight of Managed Care for Medicare and Medicaid, the report identifies 3 main goals the OIG sees as areas it can have an impact on the good governance of managed care plans:

1. promoting access to care
2. providing comprehensive financial oversight
3. promoting data accuracy and encouraging data-driven decisions.

Managed Care Oversight: Through the Eyes of OIG

Kapustij gave examples of OIG’s work in each area. To promote access to care, she cited the ongoing work to ensure that people enrolled in Medicare Advantage and Medicaid programs can access services and will not be denied care. As part of this effort, OIG examined prior authorization in a report entitled Some Medicare Advantage Organization Denials for Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care.² The report found, for example, that 13% of prior authorization requests denied in Medicare Advantage plans met Medicare coverage rules and that states had limited oversight of prior authorization denials in Medicaid managed care plans despite the finding that 1 out of every 8 requests for prior authorization of services in certain Medicaid managed care plans was denied.

For providing financial oversight, Kapustij underscored the need to ensure payments to plans are accurate (eg, risk adjustment data validation) but also emerging areas of fraud that the OIG investigations are uncovering. For example, the OIG was recently involved in a civil settlement case for Medi-Cal in California. Three network providers and a Medicaid managed care organization (MCO) allegedly submitted $70 million in false claims to game the medical loss ratio (MLR) system.

In promoting data-driven decisions, the OIG will continue to review managed care payments to assess whether data are accurate and to encourage the timely collection of complete data. One audit determined that 47 states made capitation payments for individuals who were concurrently enrolled in 2 states. Audits by the OIG of Medicaid enrollment data found that states made approximately $1 billion per year in questionable payments for concurrent enrollment in two different States or concurrent enrollment in two different managed care plans.

To pursue these goals, the OIG developed the Managed Care Life Cycle to address four stages of risk and vulnerabilities in managed care plans: plan establishment/contracting, enrollment, payment, and services to people (beneficiaries have adequate access to high-quality services). The tool helps the OIG focus its audits, evaluations, and investigations. Still, it is also meant to guide managed care plans to evaluate their internal processes in managing each stage.

Drilling Deeper into OIG Areas of Oversight

Xavier Baker, JD, principal at Groom Law Group Chartered, who advises MCOs and other stakeholders on federal and state laws and policy considerations, thinks that among the 4 stages of the managed care life cycle laid out in the OIG report, the bigger focus for the OIG will be on payment and services to people given that a lot of the state procurement process is complete in terms of contracting and enrollment. The main focus in these 2 areas will be ensuring that MCOs have good documentation on the bid process, negotiations, and operations in compliance with state contracting requirements.

On the payment stage, Baker said he thinks the focus will be on ensuring that all inputs for calculating the MLR, which is tied to risk adjustment evaluations (eg, whether its provider incentive arrangements and bonuses or delegated agreements with subcapitation), are robust and traceable for how plans are allocating expenses to justify what the MLR is and whether there is a rebate. “I think that is an easy area for OIG oversight,” he said.

He said this focus dovetails with a proposed rule published by HHS in May 20233 that would change how MLR reporting works in MCOs, specifically in quality improvement activities, given that these activities qualify for favorable treatment for MLR purposes. Baker said the proposed rule highlights the concern by HHS that MCOs administering the Medicaid program appeared at times to enter into agreements with providers and hospital systems halfway through the year and potentially backdated performance metrics to show that a provider had achieved certain targets, and therefore were entitled to incentive payment resulting in an inflated MLR for the MCO. “So there is a bit of a concern of a shell game, that these were illusory incentives,” he said.

Although the proposed rule is not yet final, Baker thinks this is an area on the payment side that will likely focus on the OIG even without the rule being finalized (which he said he thinks will happen).

On the services to people stage of the lifecycle framework, Baker thinks an active area of OIG oversight will be ensuring plans provide enrollees access to services. He cited a proposed rule by HHS in August 20224 that he thinks will be finalized in 2023; if enacted into law, requires broad nondiscrimination protections. The rule, he said, will particularly impact MCOs given that the populations traditionally served in these programs include vulnerable persons and people with limited English proficiency. He underscored that this is another area of potential vulnerability for MCOs, particularly during this period of Medicaid redetermination.

Devin A. Cohen, JD, partner, Ropes & Gray, LLP, who counsels health care organizations on regulatory matters, also cited the payment stage of the life cycle as a main focus of the OIG oversight. “I think the focus on payments is a bit of a codeword for financial relationships with providers in how they are reimbursed, and ultimately what matters most to the services of people and how those services are delivered,” he said.

Cohen sees the report highlighting that the OIG intends to engage more in their direct interactions with Medicare Advantage organizations (MAOs), particularly larger plans, through audit. “It has been very clear that the OIG is involved in risk adjustment validation audits,” he said. “I think this report is a way by which the OIG states ‘we are here’ and view Medicare Advantage enforcement environment as requiring focus from several stakeholders (vendors, data suppliers, provider networks, and enrollees) across the timeline.”

Cohen underscored that he sees the report as a way for the OIG to lay out its compliance priorities to help with their oversight and, importantly, to show MAOs what is expected to help them meet their internal compliance needs. An MAO, said Cohen, could use the report to check how well it complies, for example, on enrollment requirements. “From a compliance perspective, a plan could go back and look through their last 3 years of bidding to see what areas of improvements could be made,” he said, adding that this may be an area of more risk for larger MAOs.

Citing the growth in Medicare Advantage, he said plans should be incentivized to meet compliance to satisfy OIG requirements and make themselves marketable. Also important is for a plan “to show that it can identify and proactively remediate concerns and identify noncompliances in law and effectively mitigate risk in the process of a sale or transaction,” he said, saying this is a way to make plans more attractive to a bidder, venture capitalist firm, or another type of investor. “It’s another reason to ensure that your shop is in order,” he added.

OIG Report–Tip of the Spear

Baker sees the OIG report as the tip of the spear regarding regulatory oversight for ensuring that federal funds are administered appropriately and that all the rules are followed in the procurement process. “These rules do not operate in a vacuum,” he said. “There are political headwinds on the horizon for Medicaid managed care as Congress begins to look at where the large expenditures are, particularly heading into appropriations season,” he said.

He cited, for example, a recent announcement by the members of the Senate Finance Committee on their intention to investigate Medicaid managed care overpayments that may be in the billions of dollars.

Although he said the report is not a complete roadmap for compliance for managed care organizations, Baker underscored that it does highlight priorities the OIG is already focusing on and will be focusing on in the future and is a ‘signal’ for the industry on these priorities.

“It is always helpful when government wants you to know in advance what their concerns are and what they might be looking at,” he said. “This gives industry an opportunity to think about proactive steps it can take to be well positioned for an audit or investigation by the OIG.”

Cohen underscored that regulations governing Medicaid and Medicare managed care plans are changing quickly and consistently. “We can continue to expect the speed in which they are coming,” he said.

The OIG will continue to update its compliance guidance as well. Kapustij said that the OIG is currently working on updating its Compliance Program Guidance and that the managed care Medicare Advantage will be one of the first updates.

Interested in More?

Baker, XA. Agencies, Congress ratchet-up oversight of Medicare Advantage and Medicaid Managed Care. Groom Publication. Published October 5, 2023. Accessed January 16, 2024. https://www.groom.com/resources/agencies-congress-ratchet-up-oversight-of-medicare-advantage-and-medicaid-managed-care/

Cohenm D, O’Connor A, Clark O. OIG strategic plan for oversight of managed care. Ropes & Gray. Published September 27, 2023. Accessed January 16, 2024. https://www.ropesgray.com/en/insights/alerts/2023/09/oig-strategic-plan-for-oversight-of-managed-care

References

1. Grimm, CA. Oversight of managed care for Medicare and Medicaid. US Dept of Health and Human Services; August 2023. Accessed January 16, 2024. https://oig.hhs.gov/reports-and-publications/featured-topics/managed-care/Strategic_Plan_Managed_Care.pdf
2. Some Medicare Advantage organization denials of prior authorization requests raise concerns about beneficiary access to medically necessary care. US Dept of Health and Human Services; April 2022. Accessed January 16, 2024. https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf
3. Medicaid Program; Medicaid and Children’s Health Insurance Program (CHIP) Managed Care Access, Finance, and Quality. Vol 88. US Dept of Health and Human Services, Centers for Medicare & Medicaid Services. May 3, 2023. Accessed January 16, 2024. https://www.govinfo.gov/content/pkg/FR-2023-05-03/pdf/2023-08961.pdf
4. Nondiscrimination in health programs and activities. US Dept of Health and Human Services, Centers for Medicare & Medicaid Services, Office of the Secretary. August 4, 2022. Accessed January 16, 2024. https://www.federalregister.gov/documents/2022/08/04/2022-16217/nondiscrimination-in-health-programs-and-activities