By Samantha Liss

Federal regulators likely will claw back billions of dollars in overpayments made to Medicare Advantage plans beginning in 2018, backtracking from an earlier proposal that sought to collect on overpayments made to insurers more than a decade ago.

Regulators had proposed to go back further, reaching back as far as 2011 to claw back overpayments. The CMS released the final rule on Monday for health insurers that operate Medicare Advantage plans, which cover about 29 million Americans.

One key change is that regulators will extrapolate from a small subset of audits and apply the error rate to the insurer’s Medicare Advantage business.

Before, insurers didn’t have to worry about these audits financially, Ted Doolittle, former deputy director for CMS’ Center for Program Integrity, which oversees Medicare fraud, said in an interview.

“A little bit of a free pass has gone away,” Doolittle said, adding that the financial penalty wasn’t steep enough before because it was only applied to an audit of a small subset of claims.

The CMS said the common-sense policies will strengthen oversight of the program to help ensure Medicare’s fiscal sustainability.

Federal regulators have raised concerns about alleged payment abuses in the MA program for years, specifically for those tied to risk adjustments.

“Today we are taking long overdue steps to conduct audits and recoup funds,” HHS Secretary Xavier Becerra said in a statement on Monday.

Medicare Advantage plans, run by private insurers, are paid capitated rates to provide health coverage to millions of Americans.

The plans also receive what are called risk-adjusted payments designed to raise payments to plans for sicker members.

Sicker members generate higher risk scores, which results in higher payments to plans.

Federal regulators have said the arrangement creates a financial incentive for health plans to inflate risk scores and “game the system.” The HHS Office of Inspector General (OIG) has flagged the use of health risk assessments that plans use to collect information on members in an effort to boost risk scores.

A previous OIG report said that by CMS’ own estimates, Medicare made $50 billion in overpayments from 2013 through 2017 from “from plan-submitted diagnoses that were not supported by beneficiaries’ medical records.”

The final rule that seeks to bolster audits on overpayments comes as enrollment in Medicare Advantage is expected to reach a milestone this year, more seniors will be enrolled in an MA plans than traditional fee-for-service Medicare.