New Settlement Demonstrates New Fraud Type in Medicare Advantage program – Inflation of bids

Two payers allegedly inflated their bids.

Earlier this month, two Independence Blue Cross (IBC) subsidiaries in Pennsylvania agreed to pay $2.25 million to resolve allegations that they defrauded the Medicare Advantage (MA) program and violated the False Claims Act by improperly inflating their bids.

Medicare Advantage, also known as Medicare Part C, is a popular alternative to traditional Medicare where beneficiaries’ healthcare is managed by a private insurer instead of the government. In turn, the government pays that private insurer premiums on behalf of Medicare beneficiaries. Premiums are determined via a method called risk adjustment, where each plan member receives a risk score, a sum of coefficients that indicate either demography (i.e. sex and age) or health status, and certain medical conditions have assigned coefficient values.

For example, the demographic factor for an 82-year-old woman living in the community (i.e. not in assisted living) is .528, if that member also has been diagnosed with diabetes and morbid obesity, coefficients of .105 and .25 would be added to her risk score, resulting in a total risk score of .883. Risk scores are normalized so that an average beneficiary has a score of 1.0.

That risk score is then multiplied by a plan’s bid to the Medicare program to determine annual premium paid by Medicare. In the previous example, if a plan bid that insuring an average beneficiary would cost it $10,000 per year, insuring that aforementioned beneficiary would yield an annual premium of $8,830 (.883×10,000).

As an essential component of billions of dollars of government spending, Medicare Advantage bids are highly regulated. Violating those regulations is what IBC is accused of. An essential component of Medicare bids are estimated future costs, and how to estimate costs is dictated, in detail, by CMS, the agency overseeing Medicare. According to a whistleblower, IBC improperly inflated estimated costs, leading to improperly inflated bids, which then caused The Centers for Medicare & Medicaid Services (CMS) to pay premiums that were too high.

The whistleblower brought this lawsuit under the False Claims Act, a law that allows private persons to sue in the name of the government, alleging that the government has been defrauded, and share in up to 30 percent of any recovery. Here, the whistleblower will receive roughly $500,000.

This case is the latest in a recent pattern of government enforcement surrounding the Medicare Advantage program, an area that the Department of Justice has indicated is a priority. But most fraud allegations have focused on insurers exaggerating the diseases state of their members, making their populations appear sicker, and hence boosting premiums. Industry giants Anthem and UnitedHealth are currently fighting such allegations. This settlement is different, and relatively unique, because it focuses on bids, an area that has not yet been explored in fraud cases.

Facebook
Twitter
LinkedIn

Mary Inman, Esq.

Mary Inman is a partner and co-founder of Whistleblower Partners LLP, a law firm dedicated to representing whistleblowers under the various U.S. whistleblower reward programs. Mary and her colleagues have pioneered a series of successful whistleblower cases against prominent health insurers, hospitals, provider groups, and vendors under the False Claims Act alleging manipulation of the risk scores of Medicare Advantage patients. Mary is a recognized expert and frequent author, commentator, and speaker on frauds in the healthcare industry, particularly those exposed by whistleblowers. Mary is a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

Related Stories

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

I050825

Mastering ICD-10-CM Coding for Diabetes and it’s Complications: Avoiding Denials & Ensuring Compliance

Struggling with ICD-10-CM coding for diabetes and complications? This expert-led webcast clarifies complex combination codes, documentation gaps, and sequencing rules to reduce denials and ensure compliance. Dr. Angela Comfort will provide actionable strategies to accurately link diabetes to complications, improve provider documentation, and optimize reimbursement—helping coders, CDI specialists, and HIM leaders minimize audit risks and strengthen revenue integrity. Don’t miss this chance to master diabetes coding with real-world case studies, key takeaways, and live Q&A!

May 8, 2025

Trending News

Featured Webcasts

Navigating the 3-Day & 1-Day Payment Window: Compliance, Billing, and Revenue Protection

Navigating the 3-Day & 1-Day Payment Window: Compliance, Billing, and Revenue Protection

Struggling with CMS’s 3-Day Payment Window? Join compliance expert Michael G. Calahan, PA, MBA, CCO, to master billing restrictions for pre-admission and inter-facility services. Learn how to avoid audit risks, optimize revenue cycle workflows, and ensure compliance across departments. Critical for C-suite leaders, providers, coders, revenue cycle teams, and compliance teams—this webcast delivers actionable strategies to protect reimbursements and meet federal regulations.

May 15, 2025
Audit-Proof Your Wound Care Procedures: Expert Insights on Compliance and Risk Mitigation

Audit-Proof Your Wound Care Procedures: Expert Insights on Compliance and Risk Mitigation

Providers face increasing Medicare audits when using skin substitute grafts, leaving many unprepared for claim denials and financial liabilities. Join veteran healthcare attorney Andrew B. Wachler, Esq., in this essential webcast and master the Medicare audit process, learn best practices for compliant billing and documentation, and mitigate fraud and abuse risks. With actionable insights and a live Q&A session, you’ll gain the tools to defend your practice and ensure compliance in this rapidly evolving landscape.

April 17, 2025
Utilization Review Essentials: What Every Professional Needs to Know About Medicare

Utilization Review Essentials: What Every Professional Needs to Know About Medicare

Dr. Ronald Hirsch dives into the basics of Medicare for clinicians to be successful as utilization review professionals. He’ll break down what Medicare does and doesn’t pay for, what services it provides and how hospitals get paid for providing those services – including both inpatient and outpatient. Learn how claims are prepared and how much patients must pay for their care. By attending our webcast, you will gain a new understanding of these issues and be better equipped to talk to patients, to their medical staff, and to their administrative team.

March 20, 2025

Rethinking Observation Metrics: Standardizing Data for Better Outcomes

Hospitals face growing challenges in measuring observation metrics due to inconsistencies in classification, payer policies, and benchmarking practices. Join Tiffany Ferguson, LMSW, CMAC, ACM, and Anuja Mohla, DO, FACP, MBA, ACPA-C, CHCQM-PHYADV as they provide critical insights into refining observation metrics. This webcast will address key issues affecting observation data integrity and offer strategies for improving consistency in reporting. You will learn how to define meaningful metrics, clarify commonly misinterpreted terms, and apply best practices for benchmarking, and gain actionable strategies to enhance observation data reliability, mitigate financial risk, and drive better decision-making.

February 25, 2025

Trending News

Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24