Nucor earnings beat by $0.08, revenue fell short of estimates
Investing.com -- Shares of major health insurers UnitedHealth (NYSE:UNH), Humana (NYSE:HUM), and CVS (NYSE:CVS) fell sharply today, with UnitedHealth down 4%, Humana declining 5%, and CVS dropping 4% in afterhours trading. The slide came in response to the Centers for Medicare & Medicaid Services (CMS) announcing a significant expansion of its auditing efforts for Medicare Advantage (MA) plans.
The CMS’s initiative, which begins immediately, aims to audit all eligible MA contracts for each payment year in all newly initiated audits, covering payment years 2018 through 2024. This move is part of a broader effort to address concerns about fraud, waste, and abuse in federal healthcare programs. According to CMS Administrator Dr. Mehmet Oz, the audits will ensure that Medicare Advantage plans are accurately billing the government for the coverage provided to Medicare patients.
Medicare Advantage plans, which offer an alternative to traditional Medicare, receive payments based on the health conditions of their enrollees. Higher payments are made for patients with more serious or chronic conditions. The CMS uses Risk Adjustment Data Validation (RADV) audits to confirm that the diagnoses submitted for payment are supported by medical records.
The CMS has been behind in completing these audits, with the last significant recovery of MA overpayments following the audit of payment year 2007. Federal estimates suggest that MA plans may overbill the government by around $17 billion annually, a figure that the Medicare Payment Advisory Commission (MedPAC) believes could be as high as $43 billion per year.
To tackle the backlog of audits, CMS plans to deploy enhanced technology and expand its workforce, increasing the number of medical coders from 40 to approximately 2,000 by September 1, 2025. These measures are expected to increase the volume of audits significantly, allowing CMS to review more medical records and ensure the accuracy of payments to Medicare Advantage plans.
The news has clearly unsettled investors in these health insurance companies, as the expanded audits could potentially lead to the recovery of significant overpayments from Medicare Advantage plans, impacting their financial performance. The market’s reaction reflects concerns over the potential financial implications for these insurers.