Medicare Advantage Programs’ Increasing Popularity Invites Heightened FCA and Regulatory Scrutiny


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Eye on Enforcement

As Medicare Advantage attracts more eligible beneficiaries, it is also drawing attention from False Claims Act (FCA) prosecutors. In 2022, enrollment in Medicare Advantage plans reached 28.7 million Medicare beneficiaries, or 49% of eligible beneficiaries. Recently, the United States intervened in a qui tam case against Cigna filed in the Southern District of New York and later transferred to the Middle District of Tennessee. The government’s intervention in Cigna is the latest example of high-profile Medicare Advantage cases against prominent insurers. This reflects the government’s conviction that, as Medicare Advantage’s share of the healthcare market grows, many Medicare Advantage plans are manipulating the risk adjustment process (RAP) to fraudulently obtain higher payments from the federal government. 

Unlike traditional Medicare Parts A and B, Medicare Advantage (Part C) does not directly reimburse healthcare providers for services rendered. Instead, Medicare pays private insurance companies a capitated, or fixed, rate for care to Medicare Advantage beneficiaries. This rate is determined, in part, by a complex RAP that factors in the beneficiaries’ relative health, as well as diagnoses codes. Certain diagnoses increase the amounts paid for the beneficiary. 

In addition to the lawsuit against CIGNA, the government is also involved in suits against other large insurance companies, including Kaiser Permanente in the Northern District of California (United States ex rel. Osinek v. Kaiser Permanente), and Anthem, Inc. in the Southern District of New York (United States of America v. Anthem, Inc.). In Summer 2021, DOJ also announced a settlement with Sutter Health in California for $90 millionKaiser and Anthem have both recently lost motions to dismiss the government’s cases against them. 

In all these cases, the government alleges that insurers or providers fraudulently added diagnosis codes to patient records without medical justification or in violation of Medicare’s rules. Examples of fraudulent behavior include proactive and retroactive chart reviews to pressure physicians to add diagnoses to patient’s records, establishing benchmarks to “improve” diagnosis capture, and tracking physician performance in adding diagnoses to patient records. As is customary where the government alleges fraud, many of the allegedly fraudulent practices have legitimate medical utility when implemented in a compliant fashion. 

Healthcare regulators are also increasing focus on Medicare Advantage plans. In 2019, 2020, and 2021, the Office of the Inspector General of the Department of Health and Human Services (OIG) issued significant reports detailing alleged abuses of the RAP process for improper financial gain. In 2019, OIG’s report focused on billions in overpayment related to diagnoses identified in chart reviews. In 2020, OIG focused on $2.6 billion in payments resulting from diagnoses reported only on health risk assessments as opposed to other encounter records. Finally in 2022, OIG analyzed specific health plans’ use of both chart reviews and health risk assessments. The analysis found that one insurance company was responsible for 40% of payments for diagnoses reported only in chart reviews or health risk assessments. OIG has also audited specific Medicare Advantage plans and publicized its finding of overpayments for improper diagnoses.

Government enforcement in the Medicare Advantage space continues to increase. With more Americans reaching Medicare eligibility, we can only expect Medicare Advantage plans to continue to grow. With billions of dollars in potentially improper payments at stake, the Department of Justice and OIG will likely deploy more resources to this area.