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Stopping Medicare Advantage Fraud: Risk Adjustment and Whistleblowers

In 2019, over 23 million beneficiaries were enrolled in Medicare Advantage Plans, with the federal government paying out over $264 billion to Medicare Advantage Organizations. Yet, the Inspector General of the United States Department of Health and Human Services reported that in 2019 alone, $2.6 billion was paid out to these Medicare Advantage Organizations without the correct supporting information. How much of this was fraud perpetrated against the government? The unfortunate answer is that we don’t really know.

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Khurana Law Firm, P.C.

Medicare Advantage Fraud

In 2019, over 23 million beneficiaries were enrolled in Medicare Advantage Plans, with the federal government paying out over $264 billion to Medicare Advantage Organizations. Yet, the Inspector General of the United States Department of Health and Human Services reported that in 2019 alone, $2.6 billion was paid out to these Medicare Advantage Organizations without the correct supporting information. How much of this was fraud perpetrated against the government? The unfortunate answer is that we don’t really know.

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The Vulnerability of Medicare

Public Medicare funds, those that are paid by every single taxpayer in the United States, are extremely vulnerable to fraud. The federal government doesn’t have enough resources of its own to follow up on every potential case of fraud, so it relies on medical fraud whistleblowers to come forward with this information. They are able to do this through the federal False Claims Act. 

The False Claims Act entitles whistleblowers with knowledge of Medicare advantage fraud to file civil lawsuits called qui tam lawsuits on behalf of the government. In exchange for their courage and dedication, they are entitled to receive a whistleblower reward for their efforts. If you have become aware of Medicare fraud, you should understand your rights and protections under the False Claims Act. At Khurana Law Firm, we are Medicare Advantage fraud lawyers who have represented clients from around the country who have come forward to report against Medicare fraud. 

What is a Medicare Advantage Organization?

Medicare, the federal health insurance program for those over 65, certain disabled individuals, and those individuals with end-stage renal disease, is federally funded through our taxes. Medicare, as offered through the government, has several parts: 

While individuals can take part in Medicare directly through the government, there are benefits that traditional Medicare doesn’t cover. This often leads individuals to take out supplemental policies or look to a Medicare Advantage Plan for their Medicare coverage.

An Increasing Number of Medicare Beneficiaries Are Choosing Medicare Advantage Plans

An increasing number of individuals are now taking part in the Medicare system through Medicare Advantage Organizations. Unlike traditional Medicare, Medicare Advantage Organizations are private insurance companies and organizations that are approved by Medicare to offer Medicare Advantage Plans, often called Medicare part C. These are plans that offer traditional Medicare benefits in addition to other benefits such as out-of-pocket maximum amounts, dental and hearing coverage, and even fitness opportunities. 

These Medicare Advantage Plans charge premiums depending on which plan is chosen and typically limit doctors and providers to a network in order to get the lowest possible costs. Over the past couple of decades, the government has dramatically increased their payments to these private companies that serve as a control center for receiving payments from Medicare and paying providers.

How the Medicare Advantage Billing System Differs From Traditional Medicare

Unlike traditional Medicare, which is a fee-for-service program, Medicare Advantage Plans operate under what is known as a “capitated” payment system. Private Medicare Advantage Organizations receive a fixed payment per patient depending on the patient’s risk score and then pay their providers. The difference in what they collect from Medicare and what they pay to their providers is profit for them. 

Although this system was implemented to rein in costs and work more efficiently, in theory, it also opens incredible opportunities for manipulation and fraud by the Medicare Advantage Plans and their providers. On one hand, the Medicare Advantage Organization can manipulate a risk assessment for a patient that looks far more serious than it actually is. This increases their payments from Medicare for that individual. On the other hand, they pay providers based on the real risk assessment of the patient and keep the difference. Now take this scenario and multiply it by the millions of individuals who are Medicare Advantage Plan patients.  

Frequently asked questions

About Medicare Advantage Fraud

Who Engages in Medicare Advantage Fraud?

Medicare Advantage fraud can be perpetrated by the Medicare Advantage Organizations themselves or in cooperation with the individual doctors, providers, suppliers, or other private companies that work with them. While most doctors and providers who work with Medicare Advantage Organizations conduct their practices and services honestly, there are many who don’t. Fraud not only costs the government billions of dollars each year but it also costs individuals in higher health care costs.


How Medicare Advantage Fraud Happens

An Medicare Advantage Organization or other entity commits fraud against Medicare when they knowingly submit false information in order to be paid higher payments from Medicare. This often happens when inaccurate risk-adjustment information is submitted to Medicare.

How Does Risk Adjustment Fraud Happen?

When a Medicare Advantage Plan reports false information to Medicare, making their members look like they have more serious health issues than they do in order to be paid more by Medicare, this is risk adjustment fraud. The data that is submitted to Medicare is fraudulent, and the Medicare Advantage Organization is getting paid more because of it. 


Medicare pays Medicare Advantage Organizations fixed sums for every Medicare beneficiary. Each individual is assigned a risk assessment figure based on their health and demographics. Unfortunately, information the Medicare Advantage Organizations report to Medicare and what they report to providers may be entirely different. Neither Medicare nor providers are able to see what the other is being reported about any beneficiary. 


Consequently, an Medicare Advantage Organization is financially incentivized to report information to Medicare to get the highest payment from the government while reporting quite a different picture to their network of providers to limit their financial exposure.

How Do Risk Scores and Risk Adjustment Work?

A risk adjustment is the method that Medicare Advantage Plans and Medicare use to assess the health status of a patient in order to predict what their future healthcare costs may be. When a Medicare patient visits a doctor or healthcare provider for a Medicare visit, that provider submits information that is then used to assign the patient a risk “score.” A patient with more serious health issues or multiple conditions has a higher risk score than someone who is healthy. The higher a risk score, the more Medicare will pay out to the Medicare Advantage Plan. 


Medicare pays Medicare Advantage Organizations for every beneficiary on their plan. Higher risk adjustments increase the amount that Medicare pays to them. Needless to say, higher risk adjustments can be quite a financial incentive to a Medicare Advantage Plan and can exponentially increase their revenues. 


Risk adjustment scores represent a substantial amount of revenue to Medicare Advantage Organizations, increasing the amount it collects from Medicare by thousands of dollars on an annual basis. Consequently, the Medicare Advantage Organizations dedicate much time and effort to getting significant information from their patients and reviewing their medical records to ensure the best possible revenues from the government. They will often hire outside groups or organizations to do this analysis for them.


Who Commits Medicare Advantage Fraud?

Fraud can be perpetrated by the Medicare Advantage Organization itself or by any of the doctors, providers, or other contractors and consultants that work with them.


Some outside contractors offer patient chart review and risk-adjustment data submission services to Medicare Advantage Organizations. These are marketed to the Medicare Advantage Organization to improve revenues but may provide false information. Medicare Advantage Organizations often pay these companies by contingency based on how much information they find, regardless of whether they are correct. Consequently, these contractors are equally incentivized to “find” information on patients to increase risk adjustments. 


Some doctors have specific contracts with the Medicare Advantage Organization which offer a share of the additional money they receive from Medicare. These physicians agree to report diagnoses for patients that Medicare pays more for, getting a portion of that overpayment to the Medicare Advantage Organization. 


There are times when the Medicare Advantage Organization is unaware that the diagnosis is incorrect. But upon learning that a diagnosis is incorrect or the code is not supported, it is up to the Medicare Advantage Plan to correct it and delete the incorrect code, reporting it to Medicare. Failure to do that is also considered risk adjustment fraud. 


Regardless of where the information comes from, a Medicare Advantage Plan is responsible for any codes that it submits to Medicare or the codes that a hired third party submits on their behalf. Under the federal False Claims Act, the Medicare Advantage Organization, a doctor, a contractor, or any consultant that is hired on their behalf may be held liable for Medicare Advantage fraud perpetrated against the Medicare program.

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Common Examples of Medicare Advantage Fraud

There are many different ways that Medicare Advantage fraud can take place, including:


Upcoding occus when a Medicare Advantage Plan, physician, or contractor uses billing codes to suggest higher levels of services than were performed or reflecting more serious patient conditions than the patient has. Upcoding can also include filing claims for procedures for a condition a patient formerly had but no longer has.  Upcoding is illegal.

Chart mining

Chart mining refers to the practice where the Medicare Advantage Organization or a hired third-party contractor changes a patient’s chart after it has been created to upcode for conditions on that chart. This makes it appear as if the patient’s medical condition is more severe than it is and Medicare will reimburse at a higher amount for it. Chart mining that only looks to upcode instead of correct improperly coded conditions is also considered fraudulent chart mining.


Unbundling happens when a single service is billed as multiple services with the intention of being paid more by Medicare.


When physicians and healthcare providers are encouraged and incentivized by the Medicare Advantage Organization to provide more serious diagnoses for larger reimbursements.

Ineligible or unapproved claims

It is considered fraud when claims are made that are not allowable under the Medicare program.

Healthcare provider or contractor incentivizing

When healthcare coders are encouraged, trained, and financially incentivized to input additional services, and incorrect diagnoses and codes that are not consistent with the patient’s medical chart, it is considered Medicare Advantage fraud.

Compliance failure

When an Medicare Advantage Organization, physicians, healthcare entities, or contractors fail to establish or maintain procedures to detect and correct information and adhere to Medicare requirements, this is considered purposeful oversight and it is considered fraud.

Improper reporting to Medicare

Fraud occurs when code errors and diagnoses are not reported when they are found during internal audits or data is not filtered properly for purposes of the audit.

Fraudulent risk adjustments

Falsifying claims, exaggerating patients’ conditions, claims for unnecessary testing or retesting based on passed diagnoses, and inferring diagnoses from insufficient information are all considered fraudulent activity.

Kickbacks and other financial arrangements

Laws prohibit financial arrangements between providers for monetary gain.

Why is Medicare Advantage Fraud So Common?

Unfortunately, the coding systems that Medicare Advantage Plans use are very vulnerable to fraud. There are two independent systems that these plans use, but there is no synchronization with each other. Consequently, the information cannot be cross-referenced between all parties. 

The first system determines the amount that a Medicare Advantage Plan will pay a provider. It is based on the same payment method that Medicare uses, called the MS-DRG. Each instance of care is a fixed fee based on what procedures were performed and what was reported as the patient’s diagnosis. This information flows between the provider and the Medicare Advantage Plan. 

The other system determines what Medicare pays the Medicare Advantage Plan for all of a patient’s care during a relevant period. Medicare estimates this cost by using the risk adjustment score for each patient. This information flows between the Medicare Advantage Plan and Medicare.

The problem with this flow of information and data is that the government has no access to the data between the provider and the Medicare Advantage Plan to cross-reference what is submitted to them. This means that there is no integration or transparency between all parties. Consequently, a Medicare Advantage Plan or other entities often use partial or manipulated data to benefit financially from what it reports to Medicare.

How Can Medicare Advantage Fraud Be Prevented?

Unfortunately, between the inconsistency and vulnerability in reporting systems used by Medicare Advantage Plans and the fact that the government has limited resources to police fraud, Medicare Advantage Organizations have the opportunity to continue to take advantage of the system. Consequently, the government has come to rely on private whistleblowers to bring matters of fraud to their attention. 

The most effective tool to remedy and potentially deter future Medicare Advantage fraud is the federal False Claims Act. The False Claims Act enables private whistleblowers to bring civil lawsuits against the offending MCOs, doctors, and contractors on behalf of the federal government. It allows the government to hold these offending parties accountable and gives them the ability to collect monetary damages and penalties. In return, the False Claims Act allows whistleblowers to collect a portion of the recoveries as a reward. Whistleblowers are also protected against any retaliation by their employer as a result of bringing forth a lawsuit or assisting the government.

Spotting Medicare Advantage Fraud as a Patient

Patients should keep watchful of any errors or incorrect or suspicious information on statements received by the Medicare Advantage Organization. All claims should be checked carefully for inconsistencies and errors and check all receipts and statements received from providers. 

If a patient suspects that Medicare was improperly charged for services they did not get or based on an incorrect diagnosis, it can be reported directly to Medicare.

Spotting Medicare Advantage Fraud as a Provider or Employee

Medicare puts a great deal of trust in Medicare Advantage Organizations and the doctors and contractors they work with. They trust that these entities are providing the correct care and services to patients and submitting the correct information to the program. Unfortunately, each year, Medicare is defrauded out of billions of taxpayer dollars because of fraud and abuse by these very entities. 

Each year, Medicare Advantage Plans, healthcare providers, and third-party contractors exploit the Medicare program for personal gain. They may do this through various types of business relationships and behaviors between providers, vendors, contractors, and other entities that provide services and data to the Medicare Advantage Plans. False information and inconsistencies may raise red flags. Some healthcare employees may even be asked to manipulate patient information. 

Medicare Advantage fraud whistleblowers are often healthcare employees who become aware of fraudulent activity as they are going about their jobs. They can include:

When an employee of a Medicare Advantage Organization, a provider, or an outside contractor or consultant uncovers activity meant to defraud the Medicare program, they have rights and protections under the law.

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What is the False Claims Act?

Although the False Claims Act has had many incarnations over the years, the modern-day version allows private individuals, or whistleblowers, the ability to file a civil lawsuit against a company, individual. organization, or other entity that is committing fraud against the federal government. Many states have enacted their own versions of the False Claims Act to allow whistleblowers to come forward against fraud to state governments. A whistleblower who files a civil suit is entitled to receive a financial reward for their efforts in addition to protection against any retaliation by their employer.

The False Claims Act makes organizations, individuals, and entities liable for things such as:

Under the federal False Claims Act, companies and organizations such as Medicare Advantage Organizations and their networks of doctors and contractors may be held liable for up to three times the amount of financial harm that was caused to the Medicare program. In addition, they can be charged substantial penalties for each false claim that was presented. 

A qui tam lawsuit is one critical way that whistleblowers can assist the federal government in holding Medicare Advantage Organizations accountable for their actions and help Medicare recover funds. For their efforts, whistleblowers who file successful lawsuits can be awarded from 15 to 30 percent of all money that the government recovers. The defendant will also be responsible for all costs associated with filing the lawsuit.

Whistleblowers Preventing Medicare Advantage Fraud

Today, Medicare Advantage fraud continues to expand, and these large organizations continue taking advantage of the Medicare program and taxpayers alike. Although Medicare Advantage fraud is pervasive, the federal government does not have enough resources to police it. This is why the False Claims Act is such a critical tool in combating Medicare Advantage fraud. 

Under the False Claims Act, the government relies on courageous whistleblowers to come forward with qui tam claims. Whistleblower lawsuits have become one of the most effective remedies and deterrents for Medicare Advantage fraud and holding those who perpetrate it accountable.

When You Should Get Legal Advice

Whistleblowers who report Medicare Advantage fraud provide an invaluable service to the country. If you have become aware of Medicare fraud through your place of employment or have been fired or demoted for refusing to take part in fraudulent activity, you should seek the counsel of an experienced whistleblower lawyer. At the Khurana Law Firm, P.C., we have dedicated our careers to holding those who perpetrate fraud against the government accountable. 

We provide representation to whistleblowers throughout the country. Each case we take is on contingency, meaning that you pay us only if your qui tam lawsuit is successful and you are awarded a reward for your services. In most cases, we seek reimbursement for fees and costs from the defendant if the claim is successful. We understand that you are coming forward at great risk to yourself and we take all actions possible for your confidentiality.

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Contact a Skilled Qui Tam Lawyer to Learn About Your Rights and Protections as a Whistleblower

At the Khurana Law Firm, P.C., our experienced Medicare Advantage fraud lawyers provide a confidential, no-cost consultation to discuss your case and discuss your rights and protections under the False Claims Act. As a whistleblower, you may be entitled to between 15 and 30 percent of the government’s recovery. Call us to schedule an appointment today. Our consultations are always free.

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