Medicare Advantage, or Part C, was created with the idea that private insurers could provide more cost-effective healthcare than traditional Medicare. But while the program has become popular — it’s the largest taxpayer-funded health insurance program in the United States with a $450 billion annual budget and more than 31 million participants — it is losing billions to fraud.

As recent False Claims Act settlements and a recent report in the Wall Street Journal show, one of the costliest schemes that threatens the financial health of Medicare Advantage is risk adjustment fraud. Simply put, Medicare Part C insurers can diagnose patients with diseases they are never treated for, then pocket the extra money the government pays insurance companies to provide treatment for certain medical conditions.

The WSJ’s analysis of billions of Medicare records found private insurers made “hundreds of thousands of questionable diagnoses that triggered extra taxpayer-funded” Medicare Part C payments from 2018-2021. The newspaper’s analysis showed that Medicare paid insurers about $50 billion for diagnoses added just by insurers in the three years ending in 2021. Reporting by the WSJ also found that:

• Insurers added diabetic cataract diagnoses to 148 patients treated by one ophthalmologist in Arizona, who said he saw “at most one or two such cases” of that diagnosis per year. 
• “18,000 Medicare Advantage recipients had insurer-driven diagnoses of HIV, the virus that causes AIDS, but weren’t receiving treatment for the virus from doctors, between 2018 and 2021, the data showed. Each HIV diagnosis generates about $3,000 a year in added payments to insurers.”

Whereas in traditional Medicare the government is paying providers for each medically necessary need or service that’s covered by the plan, in Part C the government pays private insurance plans a fixed monthly payment per each Medicare Advantage enrollee to cover their needs.

That fixed monthly payment can be increased, however, through risk adjustment payments, which provide private insurers an additional amount above the fixed monthly payment to account for specific needs of Medicare Advantage enrollees and discourage plans only enrolling healthier people. The Centers for Medicare & Medicaid Services bases risk adjustment payments on enrollee diagnoses contained in encounters or claims that Medicare Advantage plans submit. If a beneficiary is diagnosed with cancer, for example, the plan will receive a higher payment as long as the patient has a cancer diagnosis in their medical record.

Partly because of risk adjustment fraud, Medicare Advantage has cost the government an extra $591 billion over the past 18 years, compared with what Medicare would have cost without the help of the private plans, according to a March report by the nonpartisan Medicare Payment Advisory Commission (MedPAC). According to the WSJ, that amounts to $4,300 per U.S. tax filer when adjusted for inflation. 

Keller Grover attorneys have unique experience in risk adjustment fraud and a proven track record of getting the government’s attention to address it. We represented the whistleblower whose information led to a $90 million payout by Sutter Health, a precedent-setting settlement against a hospital system involving Medicare Advantage fraud allegations.

In that case, the whistleblower was a Certified Coder and risk adjustment manager who alleged Sutter artificially inflated its reimbursements for Medicare Advantage enrollees, claiming patients were treated for conditions they either did not have or were not treated for, which increased their risk scores and how much the government reimbursed Sutter for their care.

In another case last year, Cigna agreed to pay $172 million to resolve allegations that it violated the False Claims Act after it was accused of submitting inaccurate diagnoses codes based on health risk assessments and chart reviews for its Medicare Advantage enrollees. 

Oftentimes, whistleblowers are the only ones who can speak up and stop risk adjustment fraud in Medicare Part C. When a FCA case is successful, the whistleblower typically receives a portion of the fraud recovered, ranging between 15% and 30%. In fiscal year 2023, the government paid $350 million to whistleblowers.

If you have information about risk adjustment fraud or other fraud in Medicare Part C, contact Keller Grover for a confidential, free consultation. We can advise potential whistleblowers about the best path forward from the very beginning, helping minimize the impact of reporting, protect rights and achieve the best possible outcome for the situation.