07/15/2026

Recent RAC Monitor Article

This edition includes articles on

Aetna’s Severity Adjustment Policy: How to React When a Payer Stops Playing by the Rules

I first have to say that Aetna’s Medicare Advantage (MA) severity adjustment policy is sheer brilliance. We probably shouldn’t be surprised, since this is the same payer whose medical director admitted to denying claims without any review, which recently accepted a settlement with the U.S. Department of Justice for $117 million to settle false-claims allegations, and which is currently being sued by the Kansas Attorney General for allegedly diverting State Employee Health Plan funds.

As a brief overview, Aetna announced in 2025 that it would approve all inpatient MA stays of a duration of 1-5 days. However, for stays fewer than five days, it would also apply a what it calls a “level-of-severity” reimbursement reduction. This policy does things. READ READ MORE

Reimbursement Increases Loom

Inflation in the United States has averaged approximately 2-3 percent annually in recent years, with the Social Security Administration announcing a 2.8-percent cost-of-living adjustment (COLA) for 2026. The purpose of the COLA is straightforward: to preserve purchasing power as prices increase.

In fact, many government programs and economic benchmarks automatically adjust every year. Social Security benefits are subject to annual COLAs. Federal tax brackets are indexed for inflation. Social Security’s taxable wage base increases almost every year. Many commercial leases contain inflation escalators. Labor contracts frequently include annual cost-of-living adjustments. Even hospital reimbursement systems under Medicare often receive annual “market basket” updates specifically designed to account for increasing costs of labor, supplies, and services.

So why are physicians, therapists, and many other healthcare providers constantly fighting reimbursement cuts?

The answer lies in how Medicare payment systems are structured. READ MORE

Coming Medicaid Work Requirements Face Legal Test as Federal Healthcare Priorities Shift

Last week, a coalition of 25 Democratic-led states sued the Trump Administration over its OBBBA Medicaid work requirement rules, specifically as they were outlined in recently published Centers for Medicare & Medicaid Services (CMS) regulations. At the center of the lawsuit is the Administration’s definition of the term “medically frail individuals” who may qualify for exemptions from work requirements.

As this audience is aware, the OBBBA requires Medicaid beneficiaries to work 80 hours a month, across the 40 states that expanded Medicaid under the Patient Protection and Affordable Care Act (PPACA). States must implement the requirement by Jan. 1, 2027.

The 80-hour requirement applies to all beneficiaries, with a notable exception, which is what makes up much of the chatter around CMS’s recent final rule. READ MORE

AI’s Benefits for Healthcare Must Be Weighed Against Potential Harms

Hospitals across the country are facing mounting financial pressure from Medicare Advantage (MA) plans. One increasingly common tactic used by MA payers is systematic downcoding: paying hospitals at a lower level of care or service than was billed. While many hospitals accept these reduced payments, doing so may expose them to significant False Claims Act (FCA) and related legal risks. READ MORE