Just last week, the federal government finalized additional cuts to Medicare Advantage reimbursement rates in 2025—rates that industry giants like United Health and Humana had argued were insufficient to counter inflation and rising medical loss ratios. As a result, payors and their PBMs will attempt to cover their profits through Part D recoupments. Look out.
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Medicare Advantage Has Been Lucrative
Medicare Advantage, a program offering comprehensive healthcare benefits to seniors through private insurers, has been a lucrative business for many companies. Indeed, MA insurers reported much higher gross margins per enrollee than insurers in other markets. These margins grew even fatter during the pandemic, when many patients delayed elective surgeries.
Medicare Advantage Margins are Now Shrinking
MA margins are now under pressure as patients return for procedures, increasing medical loss ratios. Likewise, the federal government is cutting reimbursement in coming years. As a result, the payors that have invested heavily in Medicare Advantage will rely even more heavily on their PBMs and SIUs to pad shrinking margins.
Payors Will Adapt to Government Cuts
The stock market loves industry giants like United Health because these companies have many different levers to boost performance and maintain profitability. With a diverse range of revenue streams, these industry giants possess the agility to adapt to changing market conditions.
For example, Special Investigative Units, or SIUs, routinely run budget surpluses from proceeds generated by Fraud, Waste and Abuse (FWA) activities. In other words, claims audit and monitoring activities are "self-funded" by recoupments, and represent a revenue opportunity.
PBM and Pharmacy Audits Will Fuel Recoupments
A notable aspect of insurers' recoupment strategies is the emphasis on pharmacy claims over medical claims. Pharmacy claims offer a more lucrative avenue for recoupment due to lower audit hurdles and the ability to recoup entire claims, irrespective of medication costs. PBMs wield significant power in this domain, making substantial profits through audits.
For example, routine office visits, or E&M coded claims, are low-dollar and are essentially bullet-proof from audit recoupment unless documentation is extremely poor. Similarly, higher-dollar medical procedure claims typically cannot be recouped unless medically unnecessary. In short, insurers and PBMs have much higher audit hurdles on medical billing and coding audits.
In contrast, PBMs recoup on pharmacy claims for immaterial reasons, including unsupported patient denials, failure to provide adequate "proof" of co-pay collection, such as credit card receipts or deposit slips, delivery issues, and other insignificant "violations" of one-sided PBM manuals. Importantly, PBMs recoup on the entire claim, irrespective that the pharmacy paid for the medication dispensed. That is all the more outrageous considering the rebates and spread pricing that PBMs receive on that medication in the first place!
Payors and PBMs Must Be Held Legally Accountable
PBM audit recoupments often violate the terms of the provider manual and network enrollment forms. It is critical that pharmacies know their audit rights and applicable law. Legal recourse may be necessary to challenge unjust practices and protect your rights.
HLA Convinces Optum to Reverse PBM Audit Termination
Health Law Alliance is pleased to announce that Optum recently agreed to reverse its network termination of a Texas pharmacy client despite significant claim discrepancies based on inventory shortages, patient denials, and other alleged violations of the terms and conditions of the Provider Manual and network enrollment agreements.
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Health Law Alliance's lawsuit against Optum has resulted in the immediate release of hundreds of thousands of dollars in reimbursement that Optum unlawfully refused to release to our client prior to being sued.
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Health Law Alliance's Anthony Mahajan is pleased to announce the complete dismissal of a lawsuit brought on behalf of the federal government against a cancer care provider for the submission of false Medicare claims for oncology drugs.
Read More >>HLA Files Emergency Texas Lawsuit Against Optum PBM Audit Termination
Health Law Alliance announces the filing of an emergency lawsuit in federal court for the Northern District of Texas, Dallas Division, to stop Optum's termination of an independent pharmacy that dispensed medications on telemedicine prescriptions and force Optum to comply with federal and state "prompt payment" laws that prohibit withholding of reimbursement.
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