Kickbacks in the Medicare Advantage Program: $12.5 million Settlement in Whistleblower Case

The first of its kind FCA case involves Roche and Medicare Advantage insurer Humana.

The recent settlement of a whistleblower case involving the government’s Medicare Advantage program might be a sign of things to come for litigation filed under the False Claims Act (FCA), including those initiated by whistleblowers. On Monday, it was announced that the pharmaceutical company Roche and Medicare Advantage insurer Humana have agreed to pay $12.5 million to the U.S. government to resolve allegations that the companies violated the anti-kickback statute. This is the first FCA settlement resulting from a pharmaceutical company’s alleged payment of kickbacks to a Medicare Advantage Organization.

Medicare Advantage, also known as Part C of the Medicare program, is a managed care model wherein the government pays Medicare Advantage Organizations (private insurance companies such as Humana) premiums to insure Medicare beneficiaries. The premium amounts are determined by the demographic makeup and the health status of the insured beneficiaries, with sicker, older members drawing a higher payment from the government than younger, healthier ones. This model contrasts with “traditional” Medicare (Parts A and B of the program), wherein the government pays for each individual healthcare service performed, in what is known as a fee-for-service model. In the Medicare Advantage program, the amounts of government payments are not directly linked to which healthcare services are performed.

Crystal Derrick, an account manager for Roche’s diabetes testing products and the whistleblower who initiated this case in 2014, alleged that Humana and Roche entered into a kickback arrangement wherein Roche forgave certain Humana debts in exchange for Humana purchasing Roche diabetes testing supplies – and favoring those supplies over competitors’ products in Humana’s Medicare Advantage plans. Ms. Derrick alleged that this was a violation of the anti-kickback statute, which prohibits medical decision-makers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare. Ms. Derrick also alleged that Roche fired her as retaliation for blowing the whistle on the company’s corrupt scheme.

Humana argued that because of the payment mechanism of the Medicare Advantage program, it collected no additional money from the government due to Roche’s debt forgiveness. Specifically, the insurer argued that because Medicare Advantage payments are not based on the cost of provided services, but only the demographics and health status of beneficiaries, it did not receive a benefit. Derrick argued that Humana had agreed to follow all conditions of the Medicare program, including not violating the anti-kickback statute. In 2018, a federal court in Chicago sided with the whistleblower and denied Humana’s motion to dismiss the case.

The case was brought under the whistleblower provisions of the False Claims Act, which allows private parties like Derrick to file suit on behalf of the government, alleging that the government was defrauded. To incentivize whistleblowing, the government shares a portion of any recovery with the whistleblower. Here, Ms. Derrick will receive 29 percent of the recovery, or just over $3.6 million.

As this case demonstrates, whistleblower insiders who are willing to come forward and share inside information regarding the goings-on within Medicare Advantage Organizations can help the government recover taxpayer dollars.