Missed Opportunities: $50 Billion Medicare Fraud
Missed Opportunity: How a $50 Billion Medicare Fraud Shows the Need for Vigilant Whistleblowers
Recent investigations have revealed a staggering $50 billion fraud perpetrated by insurers who exploited the Medicare Advantage program by inflating patient diagnoses. This fraud, which allowed insurers to collect payments for diseases that were never treated—or even diagnosed—by doctors, represents a massive scandal in the healthcare industry. What is even more significant is the missed opportunity for whistleblowers to come forward and potentially claim a massive reward for exposing this fraudulent activity.
The fraudulent scheme
Private insurers involved in the Medicare Advantage program have been accused of manipulating diagnoses to increase their payments from the government. Gloria Lee, a retired accountant, experienced this firsthand when a nurse diagnosed her with diabetic cataracts during a home visit arranged by her insurer, UnitedHealth. Although Lee doesn’t have diabetes, this false diagnosis could have increased the insurer’s payments by up to $2,700 per year.
A Wall Street Journal analysis revealed that such practices were widespread from 2018 to 2021, with insurers adding questionable or outright false diagnoses to patient records to maximize profits. These diagnoses often contradicted those made by patients’ primary care doctors and sometimes involved serious conditions like HIV and diabetic cataracts, for which patients received no treatment. The Journal found that Medicare Advantage, which was supposed to reduce healthcare costs, has instead led to an additional $50 billion in government spending over three years due to these practices.
Insurers, including UnitedHealth and Humana, claim that these diagnoses help coordinate care and improve health outcomes. However, the Journal’s analysis and expert opinions suggest that these practices are more about inflating payments than improving patient care. In many cases, patients and their doctors were unaware of these added diagnoses, which often did not result in any corresponding treatment.
Government agencies have begun auditing these practices and adjusting payment formulas to reduce the incentive for insurers to add unnecessary or false diagnoses. However, experts warn that as long as payments are tied to diagnosis codes, there will be opportunities for abuse. Despite these ongoing issues, Medicare Advantage continues to be a popular option, covering more than half of the seniors and disabled individuals on Medicare.
The case of Gloria Lee highlights the potential harm these practices can cause to patients, who may be misdiagnosed and subjected to unnecessary worry and medical tests. Lee’s experience ultimately led her to switch to a different health plan, and her story is a stark reminder of the need for greater oversight and accountability in the Medicare Advantage program.
The Whistleblower's Missed Opportunity
We’ve written in the past about how anyone can be a whistleblower. Even patients can blow the whistle. And in this case, the WSJ reports on how ordinary people—patients—received unsolicited phone calls to do a quick checkup that resulted in diagnoses, including for AIDS, cataracts, and other deadly illnesses, that the patients did not have. Any of those patients could have blown the whistle, exposed the scheme, and saved $50 billion.
The magnitude of this fraud should have sounded alarms for potential whistleblowers within the industry. Under the False Claims Act, whistleblowers who expose fraud against government programs are entitled to a portion of any recovered funds. This could have been a multi-billion-dollar payday for a whistleblower—or several whistleblowers—who brought this scheme to light. The whistleblower could receive anywhere from 15% to 30% of that amount. For comparison, in past cases, whistleblowers have received tens of millions of dollars for exposing far smaller schemes.
Yet, this case appears to have gone unnoticed by potential whistleblowers, who might have lacked the awareness or courage to come forward. This scenario underscores the critical importance of being vigilant and knowledgeable about the signs of fraud, particularly in industries as complex and heavily regulated as healthcare.
The Importance of Vigilance
This case highlights a broader issue: the need for individuals working within industries susceptible to fraud to remain vigilant and informed about their rights and responsibilities under whistleblower protection laws. Whether you work for a healthcare provider, an insurance company, or any other entity involved with government programs, it is crucial to be aware of the signs of fraud and to know that you have legal protections if you decide to report it.
Potential whistleblowers should also be aware of the massive rewards that can come with exposing fraud. The False Claims Act is one of the most powerful tools available to combat fraud against the government, but it relies on the courage of insiders to step forward.
Next time
The $50 billion Medicare Advantage fraud is a sobering reminder of how easily fraud can go undetected and unpunished if insiders fail to act. While the details of this case are still emerging, the sheer scale of the fraud underscores the critical role that whistleblowers can play in protecting public funds. This case could have been a golden opportunity for someone to make a significant impact—and claim a substantial reward in the process.
If you think you’ve observed fraud or misconduct, we can evaluate your options. Vivek Kothari is a former federal prosecutor who represents whistleblowers. For a free consultation, contact Vivek by email, phone, Signal, or fill out the contact form.