Independence Blue Cross has agreed to pay $22.5 million to resolve allegations that it violated the False Claims Act by submitting inflated Medicare Advantage diagnosis codes to obtain higher payments. The settlement stems from a 2020 whistleblower lawsuit filed by a former employee, who will receive $3.8 million. The Department of Justice alleged the insurer ran a chart review program that added new codes but failed to withdraw unsubstantiated ones. Independence Blue Cross did not admit wrongdoing.
Details of the settlement
- ▪Independence Blue Cross agreed to pay $22.5 million to settle allegations it defrauded Medicare in its Medicare Advantage program, did not admit any wrongdoing, and settled to avoid prolonged litigation
- ▪Independence Blue Cross's $22.5 million settlement resolves a whistleblower lawsuit filed in 2020 under the False Claims Act by a former employee, who will receive $3,825,000 from the recovery
Alleged False Claims Act violations
- ▪The Department of Justice contended that Independence Blue Cross submitted inaccurate diagnosis codes that made Medicare Advantage patients appear sicker than they actually were to receive higher payments
- ▪Independence Blue Cross falsely certified in writing to the Centers for Medicare & Medicaid Services that its submitted diagnosis data was accurate, complete, and truthful
- ▪The Department of Justice alleged that Independence Blue Cross violated the False Claims Act, which holds individuals and companies liable for purposely defrauding federal programs
Retrospective chart review allegations
- ▪The Department of Justice alleged that Independence Blue Cross failed to investigate, delete, or withdraw inaccurate or unsubstantiated diagnosis codes identified during its chart reviews
- ▪Independence Blue Cross ran a retrospective chart review program for payment years 2017 through 2021 to identify additional diagnosis codes the insurer could submit to Medicare
Government spending on Medicare Advantage
- ▪The Medicare Payment Advisory Commission anticipates that the U.S. government will spend 14% more, or an additional $76 billion, on seniors in Medicare Advantage this year than in traditional Medicare
- ▪The Centers for Medicare & Medicaid Services pays Medicare Advantage organizations on a per-member basis, adjusting payments based on the severity of the enrollee's health conditions through risk adjustment
- ▪Assistant Attorney General Brett A. Shumate stated that the federal government pays private insurers over $530 billion each year to care for Americans enrolled in Medicare Advantage
Wider Medicare Advantage fraud issues
- ▪The Department of Health and Human Services Office of Inspector General has filed multiple reports sounding the alarm about improper payments, upcoding, and fraud in Medicare Advantage
- ▪Health plan affiliates of Kaiser Permanente settled for $556 million in January 2026 to resolve False Claims Act allegations stemming from upcoding in Medicare Advantage
Debatable claims
- ▪The Medicare Advantage risk adjustment system inherently encourages billing fraud
- ▪Medicare Advantage insurers should be banned from conducting retrospective chart reviews
- ▪Settling healthcare fraud cases without admitting wrongdoing fails to deter corporate misconduct
- ▪Multi-million dollar whistleblower payouts are necessary to expose corporate healthcare fraud
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