OIG Audit Insights: Medicare Advantage Compliance Challenges with Humana
On December 16, 2025, the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services released an audit report focused on a Medicare Advantage contract with Humana. This audit, part of extensive regulatory efforts, scrutinizes specific diagnosis codes submitted by Medicare Advantage Organizations (MAOs) for payments from the Centers for Medicare & Medicaid Services (CMS). The findings reveal ongoing concerns about compliance with regulatory standards, payer-provider dynamics, and significant implications for risk management in the industry.
Background on Medicare Advantage
The Medicare Advantage program initiated nearly three decades ago, allowing private insurers to collaborate with CMS in providing Medicare benefits. Covering over half of Medicare beneficiaries, these plans account for approximately 54% of Medicare expenditure. Unlike traditional Medicare's fee-for-service model, Medicare Advantage uses a 'capitated' payment system. Insurers receive a fixed monthly payment per member, adjusted for health conditions—this risk adjustment aims to align costs with CMS expectations for traditional Medicare.
CMS performs risk adjustment data validation (RADV) audits to verify payment accuracy, backed by OIG’s authority to audit these contracts. Recently, OIG published guidance on high-risk diagnosis codes prone to inaccuracies, signaling heightened regulatory compliance requirements for payers and carriers within the sector.
OIG's Focus on High-Risk Codes
In the Humana audit, OIG concentrated on high-risk diagnosis categories like stroke and heart attack, known for coding errors. Out of 240 codes reviewed, 218 lacked adequate medical record support, resulting in overpayments. The audit's extrapolation suggests over $10 million in overpayments for Humana's Louisiana contract for 2017 and 2018. Recommendations include CMS recovering overpayments from 2018, constrained by regulatory limits on extrapolation for prior years.
Disputed Audit Methodologies
The audit renews debates over CMS's methodologies, particularly the use of extrapolation in RADV audits and considerations for underpayments. Humana contested extrapolation without actuarial equivalency adjustments, asserting a breach of statutory requirements. They argue for mechanisms that address unsupported high-risk codes, reflecting similar vulnerabilities in traditional Medicare.
Despite Humana's challenges, OIG maintains its stance due to the absence of CMS directives for overpayment reductions amidst ongoing legal proceedings. While Humana perceives the audit as skewed toward overpayments, OIG counters that accounting for underpayments exceeded the audit’s scope, albeit recognizing alternative codes when justified.
Conclusion
The audit results highlight persistent issues MAOs face regarding CMS audits, particularly concerning extrapolation and regulatory compliance. With CMS’s appeal against recent court rulings, MAOs must vigilantly track developments and robustly document during audits to prepare for potential legal challenges. Such diligence is crucial for navigating complex regulatory environments in the insurance industry.