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EXCLUSIVE: Huge Medicare Fraud Tied to Top Obama Appointee’s Old Firm

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Federal prosecutors slapped a multi-billion dollar Medicare fraud charge against United Health Group (UHG) and a key subsidiary President Barack Obama’s former top insurance official once headed, according to an investigation by The Daily Caller News Foundation.

It was the third time health fraud charges have been filed against United and its two major subsidiaries, Optum and OptumInsight.

United spokesman Matthew Burns denied the allegations, saying in a statement, “We reject these more than 5-year-old claims and will contest them vigorously.”

Andy Slavitt, who led the Center for Medicare and Medicaid Services (CMS) under Obama and the Obamacare health insurance program, was CEO of OptumInsight and Group Executive Vice President for Optum where the fraud allegedly was committed.

He was a senior executive with UHG from 2003 to 2013 before he entered the Obama administration. Prosecutors claim the fraud continued from at least 2005 to 2014.

Slavitt also was the CEO of Ingenix, which UHG originally purchased, then rebranded into Optum following a 2009 medical fraud scandal.

The United subsidiaries were at the heart of the fraud according to a Department of Justice (DOJ) civil suit filed Tuesday in the United States District Court for the Central District of California.

UHG is the largest health insurance company in the nation and the largest Medicare Advantage insurer. It runs more than 50 Medicare Advantage and prescription drug programs.

United and its Optum subsidiaries reported they earned “more than half a trillion” in “gross billed charges” in 2016, according to the company’s latest annual report filed before the Securities and Exchange Commission.

Federal prosecutors on Tuesday charged “UHG knowingly obtained inflated risk adjustment payments based on untruthful and inaccurate information about the health status of beneficiaries enrolled in UHG’s Medicare Advantage Plans throughout the United States.”

The suit was filed under the False Claims Act, which allows whistleblowers to receive a percentage of recovered funds if their charges of fraud against the government are successful.

Prosecutors identified the whistleblower as Benjamin Poehling, the former Director of Finance for UHG’s Medicare & Retirement program.

Earlier this month in “United States ex rel. Swoben v. Secure Horizons,” the Justice Department joined in another false claims case against UHG, charging it submitted similar false claims under Medicare. James Swoben, a consultant to the risk adjustment health industry, filed the allegations.

Slavitt’s previous firm paid a $400 million settlement in 2009 — then the largest single health insurance settlement in the sector’s history — when his company fraudulently calculated reimbursements for out-of-network medical services provided to policyholders.

Barbara Duck, a software developer who consults in the health IT field, told TheDCNF that the case shows the importance of algorithms, which were the specialty of Ingenix and later Optum.

“We’re going right down memory lane again because if you reflect in what happened in 2009, we have the same type of scenario again. It was not just a matter of people doing things, but it was processors done with algorithms,” she said.

When Slavitt left Optum and United to join CMS in 2013, he had so many conflicts the Office of Government Ethics awarded him a broad “ethics waiver.” He also was permitted to pocket, $4.8 million in UHG stock tax free.

Tuesday’s suit addressed the company’s decision to collect “inflated” risk adjustment payments ranging over a decade. Medicare Advantage payments to health insurance companies are based on the severity of a patient’s illness, which must be confirmed by diagnostic codes produced by doctors.

UHG allegedly used phony diagnostic codes about its customers, claiming they were sicker than the information reflected in their real medical records. Those codes were sent to CMS, allowing United to collect higher Medicare Advantage payments.

“For payment years 2010 to 2015 combined, United obtained over $3 billion in additional risk adjustment payments from Medicare,” federal prosecutors estimated.

“United improperly generated and reported skewed data artificially inflating beneficiaries’ risk scores and retained payments to which it was not entitled,” the prosecutors contended.

“People are scored based, their livelihoods, their health — everything is scored based on what these algorithms are putting out in the way data,” Duck said.

Prosecutors said UHG “incentivized” doctors to overstate the medical condition of their patients through “gainsharing agreements.”

United “incentivized these providers to increase the number of diagnoses that they reported to United and to report diagnoses for more severe medical conditions,” prosecutors charged.

Thomas Miller, a resident fellow at the American Enterprise Institute and an expert in health policy, told TheDCNF financial incentives to stretch the truth are very powerful.

“We have one-sided incentives or unbalanced incentives. For an insurer, all the signals facing them is to ‘maximize’ their revenues by boosting the health status of the patients” which make them seem sicker than they really are, Miller said.

The Justice Department charged senior executives at United would set “revenue targets” for the Medicare Advantage program, and they changed diagnostic codes when it looked like they would fail to meet their goals.

“Prior to the start of each annual cycle, United’s senior executives set a revenue target for the program,” according to DOJ. “United’s senior executives then closely monitored the progress of the program and, if the forecast did not look like the program would achieve the revenue target, United made changes to the diagnostic coding being performed by the coders.”

In 2012, for example, when it appeared that it would not meet its target, United “liberalized its coding policies to enable the coders to identify more diagnosis codes purportedly supported by the beneficiaries’ medical records,” prosecutors allege.

Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division announced the case. President Trump appointed him to his position in January.

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