The fastest growing form of government healthcare, Medicare Advantage, has been revealed by whistleblowers as the site of an alarming amount of fraud.
For the second time in one month, the U.S. Justice Department has sued UnitedHealth Group for wrongfully obtaining over $1 billion from Medicare. The Justice Department’s involvement highlights the gravity of the situation and the DOJ says it intends to investigate other Medicare Advantage participants as well.
This second lawsuit on behalf of the DOJ was spurred by whistleblower Benjamin Poehling’s allegations that private insurance companies systematically game the system.
Thanks to Poehling and other whistleblowing industry insiders filing suit under the False Claims Act, the truth about how deep corruption runs within private insurance companies has come out and the government has a chance of recovering the billions in taxpayer dollars stolen by them.
Poehling v. UnitedHealth
Poehling is a former finance director at UnitedHealth Group. In this role, he explained in an interview with The New York Times, he monitored projects that were designed to cheat the system, making patients look sicker than they were so that the insurer could charge Medicare Advantage more to cover them.
He filed suit against UnitedHealth and 14 other companies involved in Medicare Advantage in 2011, but the lawsuit was only recently unsealed by a federal judge this February.
Poehling’s suit seeks to recover excess payments and big penalties for the Centers for Medicare and Medicaid Services (CMS). Under the False Claims Act, Poehling is entitled to a percentage of any money recovered as a whistleblower.
“They’ve set up a perfect scheme here,” Mr. Poehling said. “It was rigged so there was no way they could lose.”
UnitedHealth has stated it will contest Poehling’s allegations. Evidence suggests, however, that UnitedHealth has a long history of being involved in the kind of fraud that has plagued the healthcare industry for decades.
UnitedHealth’s Shady Track Record
Earlier this year, the Justice Department intervened in another related whistleblower lawsuit. The lawsuit was brought by James Swoben, a former data manager at Senior Care Action Network Health Plan and a consultant to the risk adjustment industry. Swoben accused UnitedHealth and several other companies of defrauding Medicare Advantage by looking for ways to raise people’s risk scores.
UnitedHealth’s shady track record goes even further back. It sued the Centers for Medicare and Medicaid Services, seeking to vacate its 2014 rule requiring insurers to confirm the diagnoses they report to the government are in fact in congruence with people’s charts. This same 2014 rule imposes penalties for overstatements of patients’ diagnoses.
UnitedHealth’s argument is that if it were to follow the rule, it wouldn’t be meeting the statutory mandates requiring “actuarial equivalence” between Medicare Advantage and the traditional Medicare program. Because research, not only lawsuits, found that UnitedHealth has indeed engaged in overpayments, it is reasonable to conclude that the insurance company does not care about following mandates strictly. Instead, that they are using the argument that if they have to confirm diagnoses to receive payments where traditional Medicare does not in order to get out of confirming diagnoses so they can continue to exploit the risk scoring system.
UnitedHealth isn’t the only insurer in hot water, however. The Justice Department is investigating four other Medicare Advantage insurers: Aetna, Humana, Health Net and Cigna’s Bravo Health, suggesting other whistleblowers have come forward. Humana is one of four healthcare fraud repeat offenders exposed by a whistleblower in the past.
How Medicare Payments Work (In Theory, and in Practice)
The amount reported stolen by UnitedHealth in overpayments is staggering. So, how exactly could they have gotten away with it for so long?
Medicare serves more than 50 million Americans who are elderly or disabled. In the late 1990s, facing a $13 trillion funding gap, Congress decided to privatize part of Medicare, handing over part of the program to insurance companies and eventually naming it Medicare Advantage. Now, more than one-third of those enrolled in Medicare are in Medicare Advantage plans run by private insurers like UnitedHealth.
Under traditional Medicare, doctors are reimbursed directly by the government for procedures performed. In order to guard against unnecessary treatments, Medicare Advantage was set up differently. The government pays insurers a yearly fee for each member they enroll instead of per procedure. Patients who were recently treated for certain conditions are deemed higher risk, so the fee is higher for those patients in order to discourage insurers from only choosing to enroll healthy people for their plans. The risk scoring system in place is based on diagnoses.
But unintentionally, this risk scoring system created an incentive for Medicare Advantage insurers to search for diagnoses of illness in their patients and exaggerate their conditions in order to charge more to insure them.
According to Poehling, the projects he monitored at UnitedHealth were able to increase the government’s payments by about $3,000. Additionally, employees were only focused on conditions that raised risk scores, ignoring other dangerous afflictions like high blood pressure that might actually exacerbate conditions.
For example, according to Poehling’s attorney, insurance companies could bilk extra money from the government if they claimed that one condition was the result of another. For example, if they asserted that diabetes had caused a patient’s kidney failure, the insurer could charge almost $13,000 to insure the person instead of $9,580.
In fact, Poehling says employees were encouraged to engage in this behavior; he included in his complaint an email from his supervisor urging his team to “really go after the potential risk scoring,” specifically those “with huge $ opportunities.”
Poehling and his team were given bonuses when they hit their revenue targets. Tellingly, they did not receive bonuses for better health outcomes or for more accurate patients’ charts.
Basically, the sicker the patient, the more UnitedHealth was paid by Medicare Advantage, and the bigger the bonuses people earned.
Poehling told the New York Times: “You or I or the average person is probably appalled by this. But the scheme here was not about delivering better care to members — the thing you would expect from a healthcare company. It was about increasing the bottom line.”
A Long History of Fraud
Increasing the bottom line is often the only thing corporations care about. In the healthcare industry, this holds true for insurance companies, hospitals, and pharmaceutical companies, and it ends up hurting the government and in turn, us as citizens.
Risk scoring was phased into Medicare Advantage from 2004 to 2008. Since then, auditors and analysts have warned that the program is vulnerable to cheating. The inspector general of the Department of Health and Human Services audited a small sample of Medicare Advantage plans and found overpayments of up to $650 million in 2007. According to The Times, audits were stopped when the budget was cut the following year.
A nonprofit research group called the Center for Public Integrity analyzed the only available Medicare Advantage data in 2014. They found that insurers had obtained about $70 billion in overpayments from 2008 to 2013.
The center’s research was led by Fred Schulte, who now works for Kaiser Health News. Schulte sued the CMS to get more data. He reported in January that he obtained confidential documents that showed the agency had tried to recover $128 million of overpayments from five insurers in 2007 but “under intense pressure from the health insurance industry,” settled for only $3.4 million in 2012.
The CMS’s failure to curtail corruption by insurance companies has not gone unnoticed by others in government. Senator Charles E. Grassley (R-Iowa) wrote to the agency’s administrator last month asking for an explanation for the “striking” difference between the agency’s assessment and recovery.
The Government Accountability Office issued a report last year stating that CMS needs to fundamentally improve its lacking efforts to recover improper payments. The CMS had identified $14.1 billion of overpayments to insurers in 2013 and had no clear plan for recovering it.
What Can Be Done?
Healthcare fraud is a problem that is widespread and well-known, yet the agencies in charge of addressing the problem are not taking sufficient action. Meanwhile, patient health is put on the back burner and and taxpayer money is wasted.
That’s why whistleblowers are so important. By bringing lawsuits under the False Claims Act, brave men and women are exposing widespread fraud and getting the DOJ’s attention. For Poehling, it was about not being able to stand by any longer. He said, “I came to the point where I just couldn’t participate in what they were asking me to do anymore.”
If you, too, have reached a breaking point after witnessing fraud against the government and are considering speaking out, learn more about whistleblower rights here.