Following the Trump administration’s vow to aggressively expand audits to find erroneous claims, investors in UnitedHealth Group Inc. and other Medicare Advantage plan providers had to swallow yet another unpleasant pill.
The hire of over 2,000 staff members is part of the “significant expansion” of auditing activities that the Centers for Medicare and Medicaid Services announced late Wednesday, effective immediately. Audits of all qualifying MA contracts for the 2018–2024 payment years will start right now.
CMS Administrator Mehmet Oz declared, “We are dedicated to eliminating fraud, waste, and abuse across all federal healthcare programs.” “While the Administration values the work that Medicare Advantage plans do, it is time CMS faithfully executes its duty to audit these plans and ensure they are billing the government accurately for the coverage they provide to Medicare patients.”
Following allegations of a government criminal investigation, a revised full-year financial outlook due to a worsening of its MA business, and a bipartisan movement to decrease prescription pricing, that is just another gut punch for UnitedHealth investors.
The business responded to the increasing audits by taking the high road:
“We welcome CMS’s announcement to audit every Medicare Advantage plan each year, a policy UnitedHealth Group has long publicly advocated for to strengthen program oversight,” the business said.
Nevertheless, after dropping 5.8% the day before, the stock (UNH) fell 1.7% in afternoon trading. The stock was down 49.1% since it released first-quarter earnings prior to the April 17 start, despite an 8.6% recovery since closing at a five-year low of $274.35 a week ago.
Read: Following the DOJ probe, UnitedHealth’s stock plummets once more as its problems mount.
Also read: HSBC warns that although UnitedHealth’s stock may appear inexpensive, it could potentially drop far lower.
Shares of Humana Inc. (HUM), CVS Health Corp. (CVS), and Elevance Health Inc. (ELV) fell 6.5%, 2.5%, and 3.4%, respectively, among other MA plan providers.
In a letter to clients, Oppenheimer analyst Michael Wiederhorn stated, “Although it was anticipated that the new administration would be easier on MA, that has not proven to be the case in the early going.”
Government payments to MA plan providers are determined on the diagnoses that are filed on behalf of their members. Because the payments are “risk-adjusted,” the more severe or long-lasting a member’s illness, the larger the payout.
Although it admitted that it was a few years behind schedule, CMS has been examining plans to validate the diagnosis. Although the government estimates that it is overbilled by MA plan providers by approximately $17 billion year, it might be as much as $43 billion annually. It stated that the last time it saw a major recovery of MA overpayments was 2007.
CMS announced that it was increasing the number of medical coders by 50 times, from 40 employees to 2,000 employees by September 1, as part of its “aggressive” attempt to speed up the audits.
Together with the implementation of new, cutting-edge technology, CMS anticipates being able to audit all 550 qualifying MA plans annually, up from the present rate of roughly 60 plans.
In essence, the Trump administration seems eager to expand areas that could help the government save money, while Elon Musk’s Department of Government Efficiency, or DOGE, has been trying to reduce government spending and eliminate employment.
