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January 25, 2017 Healthcare Fraud

Medicare Advantage Fraud Part I: Presentment of False Claims by Medical Providers to Medicare Advantage Organizations

Medicare fraud is one of the prime drivers of litigation under the False Claims Act (“FCA”). Under traditional Medicare, service providers are directly reimbursed with federal government funds. In 2003, Congress significantly expanded the availability of an alternative to traditional Medicare known as Medicare Advantage.

Medicare Advantage differs from traditional Medicare in that private entities directly provide coverage to beneficiaries and pay reimbursements to medical providers in return for payments from the government. This blog entry addresses why this difference does not prevent FCA liability for the submission of false claims by medical providers to the private entities that provide Medicare Advantage plans.

Do you have evidence of Medicare Advantage fraud? If so, contact a Berger Montague qui tam attorney today to have a free, confidential discussion about your claim.

History of Medicare Advantage

Unlike traditional Medicare, Medicare Advantage (sometimes referred to as Medicare+Choice or Medicare Part C) plans are offered by private entities known as Medicare Advantage organizations (“MAOs”).

Medicare beneficiaries receive insurance coverage directly through an MAO, and MAOs are responsible for processing and reimbursing claims from healthcare providers. In return, MAOs are funded by the federal government in the form of capitation payments.

A capitation payment “is a fixed monthly payment regardless of the volume of services an enrollee uses.”[1] Put differently, the government makes capitation payments to MAOs regardless of the actual costs of providing coverage. This means if an enrollee’s reimbursable healthcare costs exceed the capitation payment, an MAO loses money. Inversely, if an enrollee’s reimbursable healthcare costs are less than the capitation payment, an MAO profits.

The amount of the government’s capitation payment to MAOs is tied to an enrollee’s health status through a process known as “risk adjustment.” MAOs receive “less for healthier enrollees and more for less healthy enrollees” since less healthy enrollees are anticipated to require more medical services and thus will cause increased costs for MAOs.[2]

CMS calculates a capitation payment for each enrollee based on information known as “risk adjustment data.” The most important component of risk adjustment data is whether an enrollee suffers from chronic and expensive conditions. This information is conveyed to CMS through diagnostic codes. “Physicians and other health care providers submit diagnosis codes to the Medicare Advantage organizations, which in turn submit them to CMS.”[3]

In 2003, Congress significantly expanded the availability of Medicare Advantage. Since then, Medicare Advantage has seen tremendous growth and continues to expand. A 2016 government report provides that 32% of all Medicare beneficiaries, or approximately 18.5 million beneficiaries, are projected to be enrolled in Medicare Advantage plans in 2017.

False Claims Act Liability for Medicare Advantage Fraud

There are at least two avenues of FCA liability arising from Medicare Advantage: (1) asserting claims against providers for submitting false medical claims to MAOs, and (2) asserting claims against MAOs for submitting inaccurate diagnostic information to Medicare to receive increased capitation payments. This blog only addresses the first category of liability. We will blog about the second category of liability in the future.

There are two questions with respect to whether liability exists for claims presented to an MAO: (1) does the FCA permit liability for claims submitted to MAOs rather than to the government itself, and (2) do false medical claims made to MAO satisfy the FCA’s definition of “claim”?

1. Liability for Presentment of False Claim to Government Agent

Before 2009, imposing FCA liability for claims presented to MAOs was difficult. The FCA previously only imposed liability for a person who “knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . .  a false or fraudulent claim for payment or approval.”[4]

As a result, courts interpreted the statute to only cover situations where a claim was presented “to an officer or employee of the United States Government.” Because of this interpretation, the statute did not to extend to situations where claims were presented to recipients of government funds, even where government funds were used to pay the false claims.[5]

In 2009, Congress amended the FCA to address this issue and eliminated the language “to an officer or employee of the United States.” The FCA now provides that a person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” violates the FCA. [6]

A legislative report explains that the 2009 Amendments “clarif[y] that liability . . .  attaches whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the Government without regard to whether the wrongdoer deals directly with the Federal Government.” [7]

After the 2009 Amendments, false claims presented to recipients of government funds are actionable under the FCA. Indeed, the Supreme Court observed that “[a] ‘claim’ now includes direct requests to the Government for payment as well as reimbursement requests made to the recipients of federal funds under federal benefits programs.”[8] Other courts have done so as well. [9]

2. Whether False Medical Claims to MAOs are “Claims” Within the FCA

In part, the FCA defines “claim” as:

“Any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that . . . is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government . . . provides or has provided any portion of the money or property requested or demanded.” 31 U.S.C. 3279(b)(2) (2009).

Applying this definition, a reimbursement request presented by a medical provider to an MAO easily satisfies the definition of “claim.”

  • A medical provider who submits an invoice to an MAO for reimbursement is making a “request or demand . . . for money.”
  • It is immaterial that the Government does not “ha[ve] title to the money” being demanded by a medical provider to an MAO.
  • Under these circumstances, an MAO is reimbursing medical providers “to advance a Government program or interest” because Medicare Advantage is an alternative to traditional Medicare (a Government program) and provides a mechanism by which to provide healthcare services to elderly and disabled individuals (a Government interest).
  • Under these circumstances, “the Government . . . provides or has provided any portion of the money or property requested or demanded.” As explained above, the Government makes capitation payments to MAOs, and the MAOs use the capitation payment to reimburse providers.

Additionally, while case law has not resolved the issue yet, the amount of damages under these circumstances would presumably be the MAO’s total payment to the medical provider for the false claim(s).

Defendants may contend that damages should be some portion of the Government’s capitation payment to the MAO, but given that capitation payments are unrelated to actual costs, it would likely be impossible to quantify the precise portion of the capitation payments that was used  to pay the false claim(s). Defendants may also contend that this undermines FCA liability in the first place, but as discussed above, the FCA supports liability when the Government pays “any portion” of the money. 31 U.S.C. 3279(b)(2)(A)(ii).


Following the 2009 Amendments to the FCA, false medical claims presented to MAOs with respect to Medicare Advantage plans are actionable under the FCA in the same way that false claims presented to the federal government with respect to traditional Medicare have always given rise to FCA liability.

This makes perfect sense, as medical providers should not escape FCA liability simply because a Medicare beneficiary elects to receive coverage through a Medicare Advantage plan. Given the continued growth of Medicare Advantage, there will likely be a substantial number of FCA cases premised on Medicare Advantage fraud over the coming years.

Contact Us to Learn More

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There are three easy ways to contact our firm for a free, confidential evaluation with one of our whistleblower attorneys:

  1. Fill out the contact form on this page.
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Your submission will be reviewed by a Berger Montague qui tam attorney and remain confidential.

[1] United States v. United Healthcare Ins. Co., 2016 WL 7378731, at *3 (9th Cir. Aug. 10, 2016 as amended Dec. 16, 2016).  Find the Ninth Circuit’s opinion here.

[2] Id. at *3.

[3] United Healthcare, 2016 WL 7378731, at *3.

[4] 31 U.S.C. 3279(a)(1) (1994).

[5] E.g U.S. ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004).

[6] 31 U.S.C. 3279(a)(1)(A) (2009).

[7] S. REP. 111-10, 11, 2009 WL 787872, 2009 U.S.C.C.A.N. 430, 438 (2009).

[8] Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 1996 (2016).

[9] E.g. United States ex rel. Garbe v. Kmart Corp., 824 F.3d 632, 638 (7th Cir. 2016) (“The new language underscored Congress’s intent that FCA liability attach to any false claim made to an entity implementing a program with government funds, regardless of whether that entity was public or private.”); McCrary v. Knox Cty., Indiana, 2016 WL 4140982, at *5 (S.D. Ind. Aug. 4, 2016) (“[T]he text of the statute was amended such that the definition of ‘claim’ now explicitly includes demands for payment or reimbursement made to grantees of federal money who use that money for federal purposes or will ask for payment or reimbursement from the federal government.”);Graves v. Plaza Med. Centers, Corp., 2015 WL 11199839, at *6 (S.D. Fla. Apr. 1, 2015) (“[D]irect submission to the federal government need not be alleged in a post-[2009 Amendment] FCA claim.”).