Kaiser Health News reports that Medicare Advantage plans for seniors dodged a major financial bullet this month as government officials gave them a reprieve for returning hundreds of millions of dollars or more in government overpayments – some dating back a decade or more.

The health insurance industry had long feared the Centers for Medicare & Medicaid Services would demand repayment of billions of dollars in overcharges the popular health plans received as far back as 2011.

But in a surprise action, CMS announced it would require next to nothing from insurers for any excess payments they received from 2011 through 2017. CMS will not impose major penalties until audits for payment years 2018 and beyond are conducted, which have yet to be started.

While the decision could cost Medicare plans billions of dollars in the future, it will take years before any penalty comes due. And health plans will be allowed to pocket hundreds of millions of dollars in overcharges and possibly much more for audits before 2018. Exactly how much is not clear because audits as far back as 2011 have yet to be completed.

Over the years, CMS audits – and others conducted by government watchdogs – have found that health plans often cannot document that they deserved extra payments for patients they said were sicker than average.

The decision to take earlier audit findings off the table means that CMS has spent tens of millions of dollars conducting audits as far back as 2011 -much more than the government will be able to recoup. In 2018, CMS said it pays $54 million annually to conduct 30 of the audits.

CMS Deputy Administrator Dara Corrigan called the final rule a “commonsense approach to oversight.” Corrigan said she did not know how much money would go uncollected from years prior to 2018.

But Medicare Advantage plans also face potentially hundreds of millions of dollars in clawbacks from a set of unrelated audits conducted by the Health and Human Services inspector general. The audits include an April 2021 review alleging that a Humana Medicare Advantage plan in Florida had overcharged the government by nearly $200 million in 2015.

Carolyn Kapustij, the Office of the Inspector General’s senior adviser for managed care, said the agency has conducted 17 such audits that found widespread payment errors – on average 69% for some medical diagnoses. In these cases, the health plans “did not have the necessary support [for these conditions] in the medical records, which has caused overpayments.”