The U.S. government has joined a former UnitedHealth executive in a whistleblower lawsuit alleging the company “engaged in systematic fraud” that allowed it, subsidiary companies, and other insurers to fraudulently overcharge Medicare by “hundreds of millions — and likely billions — of dollars.”
Benjamin Poehling, the former finance director for UnitedHealthcare Medicare and Retirement, a subsidiary that works with the Medicare Advantage program, filed the lawsuit in federal court in Los Angeles in 2011 under the whistleblower provisions of the False Claims Act.
The lawsuit remained under seal for years while federal officials investigated Mr. Poehling’s claims. It became public Feb. 16 after the U.S. Department of Justice (DOJ) chose to intervene.
In the lawsuit, Mr. Poehling and the DOJ allege that UnitedHealth “engaged in a widespread scheme to knowingly submit … false claims for payment to the United States by submitting false ‘risk adjustment’ information to the Centers for Medicare & Medicaid Services.”
Medicare used to pay health maintenance organizations (HMOs) a fixed rate per member regardless of how sick the members were. But that structure led HMOs to avoid enrolling unhealthy people because they required more medical care, increased costs, and reduced corporate profits.
To fix that, the Centers for Medicare and Medicaid Services added a “risk adjustment factor” to its reimbursement schedules for managed care in 2003, allowing HMOs to bill the government programs more for enrollees who were chronically ill and required more care.
While this change made HMOs more willing to cover unhealthy people, it also gave them an incentive to make enrollees appear sicker than they actually were in Medicare billings.
Ingenix, a UnitedHealth unit that performed risk adjustment calculations, helped UnitedHealth and other insurers overstate the risk for enrollees, thereby boosting its Medicare revenues and overall profits, the lawsuit alleges.
Mr. Poehling alleges UnitedHealth evaluated its employees based on how well they achieved risk-adjustment targets and how much their risk scores had increased. He further alleged that the company did not set performance goals for risk-adjustment accuracy and said there was no accountability for reducing the number of false claims submitted to federal health care programs.
According to The New York Times, “the realization that medical records could be mined for extra money appears to have given rise to a cottage industry of consulting firms,” such as Ingenix, that “screen patient histories and look for indications of long-term health problems that could be used to increase Medicare reimbursements.”
U.S. government audits of the Medicare Advantage program indicate that HMO fraud has driven up Medicare costs, but efforts to issue tighter rules have been successfully blocked by the health care industry.