United States: Proposed Overpayment Reporting Requirements For MA And Part D Programs May Increase False Claims Act Liability

The Centers for Medicare & Medicaid Services continues to take an expansive view of the overpayment refund requirement, which in turn can give rise to False Claims Act liability for Medicare Advantage Organizations and Part D Plan Sponsors.

Among the proposals in the Centers for Medicare & Medicaid Services' (CMS's) proposed rule for the Medicare Advantage (MA) and Part D Programs (Proposed Rule) is its interpretation of the overpayment refund and reporting requirements from the Affordable Care Act (ACA) for MA Organizations and Part D Plan Sponsors (collectively, Plan Sponsors).  The Proposed Rule does not apply directly to health care providers; an earlier 2012 proposed rule applied to Medicare Parts A and B (2012 A/B Proposal) but has not yet been released in final form.  The Proposed Rule, like the 2012 A/B Proposal, continues to take an expansive view of the overpayment refund requirement, which in turn can give rise to False Claims Act liability.

This summary is the third in a series regarding the Proposed Rule and focuses on CMS's proposal to implement this overpayment provision.  The first two On the Subjects in this series address issues of interest for both Medicare Advantage (MA) Organizations and Sponsors, and issues specific to the Part D Program, respectively.  A forthcoming On the Subject will focus specifically on risk adjustment data validation proposals for the MA Program.

Comments on the Proposed Rule, which was published in the Federal Register on January 10, 2014, are due to CMS by 5 p.m. EST on March 7, 2014.


Section 6402(a) of the ACA requires Plan Sponsors to report and return to CMS any overpayment under the MA or Part D Programs within 60 days of the date the overpayment is identified.  Plan Sponsors that "improperly avoid" the overpayment refund obligation may face liability under the False Claims Act.

The Proposed Rule

When Is an Overpayment Identified?

Under the Proposed Rule, a Plan Sponsor identifies an overpayment when it (i) has actual knowledge of the overpayment, (ii) shows reckless disregard to whether an overpayment occurred or (iii) remains deliberately ignorant to the presence of an overpayment.

Like the 2012 A/B Proposal, the Proposed Rule defines an overpayment as having been "identified" even in instances where the Plan Sponsor is not actually aware of the overpayment and has yet to quantify the overpayment amount.  Comments to the 2012 A/B Proposal argued that CMS should limit the term "identified" to circumstances where a provider had actual knowledge of, and had quantified, the amount of the overpayment; an entity could not be expected to "refund" an amount of which it was not actually aware.  CMS, in this Proposed Rule, continues to define the term "identified" more broadly to encompass instances in which actual knowledge does not exist.

The Proposed Rule also requires that a Plan Sponsor "exercise reasonable diligence to determine the accuracy of information it receives that an overpayment may exist."  The concept of "reasonable diligence" with respect to overpayments that "may" exist could be read to create a violation of the overpayment refund requirement based on simple negligence in not uncovering an overpayment.  Moreover, if failure to "exercise reasonable diligence" amounts to "improperly avoiding" a repayment obligation, the threshold for False Claims Act violations may be lowered (from where it stands today) to include instances of simple negligence.

The Look-Back Requirement: Six Years, or Unlimited in Cases of Fraud

The Proposed Rule would require Plan Sponsors to report and return identified overpayments that occurred during the prior six payment years, referred to as the "look-back" period.  This is shorter than the 10-year look-back requirement in the 2012 A/B Proposal and the time period referenced in other MA and Part D Program proposals.  In the preamble to the Proposed Rule, CMS states that it believes a six-year period balances the interests of the federal government in recouping overpayments with Plan Sponsors' desire for certainty and finality.

The Proposed Rule provides, however, that overpayments "resulting from fraud" are not subject to any time limitation.  As a result, it is unclear whether Plan Sponsors that become aware that an overpayment more than six years old may exist would have an obligation both to investigate whether an overpayment occurred and to determine whether the overpayment was the result of fraud.  Criminal and civil fraud enforcement statutes typically contain a statute of limitations providing for finality, and Plan Sponsors may believe that there should be some time period after which there is absolute finality.

Overpayments Would Be Limited to Funds Resulting from Data Submitted by the Plan Sponsor

The Proposed Rule exempts Plan Sponsors from responsibility for overpayments resulting from data that Plan Sponsors do not submit or control.  Specifically, the Proposed Rule applies the overpayment refund requirement only to payments "based on data submitted by the [Plan Sponsor] to CMS for payment purposes," such as risk adjustment and enrollment data.  CMS will not hold Plan Sponsors responsible for payments resulting from data from third parties if CMS considers that third party an "authoritative source."  For example, if the Social Security Administration reports an inaccurate date of death for a beneficiary to CMS, improper payments to a Plan Sponsor made in reliance on such data will not constitute an overpayment.  Plan Sponsors' contractors would not qualify as an "authoritative source."  If the Plan Sponsor—or any of its contractors—collects or reports the relevant dataset to CMS, the Plan Sponsor would be responsible for its accuracy and payments based on this data subject to the overpayment provisions.

Proposed Definitions of Reconciliation Dates After Which an Overpayment Exists

CMS also proposes different deadlines (known as "reconciliation dates") after which a payment can become an overpayment.  For MA Organizations, the reconciliation date falls after the deadline for submitting risk adjustment data for the applicable benefit year.  MA Organizations that submit risk adjustment data for the Part D component of their Medicare Advantage-Prescription Drug (MA-PD) plans also would have to comply with this reconciliation date.  For Part D Plan Sponsors, the reconciliation date occurs at the later of the annual deadline for submitting prescription drug event (PDE) data or the annual deadline for submitting direct and indirect remuneration (DIR) data.


As numerous requirements for reporting and returning overpayments remain undecided, Plan Sponsors should closely monitor developments on this issue.  Plan Sponsors also may consider the extent to which they intend to address overpayment obligations in contracts with health care and administrative service providers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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