Aetna Settles Medicare Advantage Fraud Claims for $117.7 Million

Aetna Inc., a major US health insurer and subsidiary of CVS Health, has agreed to pay $117.7 million (£88.7 million) to resolve allegations that it violated federal fraud laws by submitting inaccurate diagnosis codes to inflate payments from the Medicare Advantage program. The settlement, announced by the US Department of Justice on Wednesday, concludes claims that the insurer made false and misleading submissions to federal healthcare authorities over several years.

Under the terms of the settlement, Aetna will resolve allegations brought under the False Claims Act, which allows the government to pursue civil penalties when entities knowingly submit false claims for government funds. The Justice Department stated that Aetna submitted inaccurate and untruthful diagnosis data to the Centers for Medicare & Medicaid Services (CMS) to inflate risk-adjusted payments received for Medicare Advantage Plan enrollees.

The complaint alleged that Aetna failed to delete or withdraw inaccurate diagnosis codes after chart reviews revealed they were unsupported by medical records. Additionally, between 2018 and 2023, Aetna allegedly knowingly submitted or failed to correct inaccurate codes for morbid obesity, including instances where patients’ Body Mass Index (BMI) did not support such diagnoses.

Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division emphasized the importance of accountability in healthcare reimbursement. “The government pays private insurers over $530 billion (£399.41 billion) each year to care for Americans enrolled in Medicare Advantage,” Shumate said. “We will continue to hold accountable insurers that knowingly submit inaccurate or unsupported diagnoses to improperly inflate reimbursement.”

The Justice Department highlighted that the settlement resulted from coordinated efforts between its Civil Division, the Fraud Section, and the US Attorney’s Office for the Eastern District of Pennsylvania, with investigatory support from the US Department of Health and Human Services Office of Inspector General (HHS-OIG).

Despite the settlement, Aetna and parent company CVS Health denied the underlying allegations. A company spokesman stated that the settlement should not be interpreted as an admission of liability, noting that the insurer chose to resolve the matter to avoid the uncertainty and expense of protracted litigation.

The settlement originated from a qui tam lawsuit filed under the False Claims Act, which permits private individuals to sue on the government’s behalf and share in any recovery. The case was brought by Mary Melette Thomas, a former Aetna risk-adjustment coding auditor, who will receive $2,012,500 (£1,516,624) as her share under whistleblower provisions.

Whistleblower suits serve as important tools in the government’s enforcement arsenal, often revealing systemic issues that might otherwise remain hidden. These cases provide crucial evidence that helps authorities pursue complex fraud cases against large corporations.

The Aetna settlement reflects broader federal scrutiny of how private insurers handle Medicare Advantage risk-adjustment coding. This process directly affects the level of payments insurers receive from CMS. Federal authorities have increasingly focused on ensuring that government funds are distributed based on legitimate patient health needs rather than inflated or unsupported diagnoses.

Several other insurers and healthcare organizations have faced similar allegations in recent years, with the government pursuing cases over unsupported diagnosis codes and improper billing practices. These enforcement actions underscore ongoing efforts to protect the integrity of taxpayer-funded healthcare programs covering millions of Americans.

For the healthcare industry, this settlement emphasizes the critical importance of compliance and accurate reporting within the Medicare Advantage system. As private insurers administer plans for seniors and other beneficiaries, federal enforcement continues to signal that errors or misconduct in coding and reporting carry significant financial consequences, even for established industry players.

The resolution allows Aetna and CVS Health to redirect focus to their core operations while navigating the increasingly regulated environment surrounding US federal healthcare programs. However, the case raises broader questions about risk-adjustment strategies across the healthcare industry and how insurers manage the complex requirements of government healthcare programs.

The Medicare Advantage program, which offers an alternative to traditional Medicare through private insurers, has grown substantially in recent years, making the integrity of its payment systems a priority for federal enforcement agencies as they work to ensure proper use of public funds.