Humana to pay $90 million to settle allegedly fraudulent Part D bids

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Insurer Humana has said it will pay $90 million to resolve a False Claims Act case alleging that the company submitted fraudulent bids to the Centers for Medicare and Medicaid Services to secure Part D prescription drug contracts between 2011 and 2017.

This led to significant overcharges, according to the lawsuit filed by Phillips and Cohen LLP.

Medicare Part D is the government's voluntary prescription drug program under which CMS contracts with private insurance companies to cover prescription drug benefits for people enrolled in Medicare. 

By law, insurance companies must offer plans that cover a minimum required portion of drug costs, with the government and Medicare beneficiaries covering the rest. CMS requires insurance companies to submit annual bids in which they report the benefits they propose to cover and confirm that those benefits meet Part D's minimum coverage level.

The complaint in this case alleged that Humana committed to providing the required level of coverage, but in fact planned to provide less, with the government and beneficiaries unknowingly picking up more than their share.

WHAT'S THE IMPACT?

Steven Scott, the whistleblower who filed the lawsuit in 2016, is a former actuary for Humana. The complaint alleges that he discovered Humana had accurately and internally predicted the costs for its Part D "Walmart Plan" each year, while basing its bids to the government on different and unsupported assumptions that were used for no other purpose.

The complaint alleged that, each year, Humana's internal assumptions proved accurate and those underlying its bids were wildly off – and always in Humana's favor, benefitting the insurance company by hundreds of millions of dollars.

"We alleged that Humana kept two sets of books – one set that its actuaries prepared for bids Humana submitted to the government and a separate internal set that Humana's actuaries prepared with Humana's actual anticipated costs, which Humana used for all its business dealings including its internal budgeting," said Edward Arens, a Phillips and Cohen partner who also represented the whistleblower.

"Although Humana asserted in court papers that the predictions underlying its bids were merely estimates about future behavior, they worked in Humana's favor 100% of the time over seven years and for 245 bids," said Arens. "The odds that a big insurer would 'miss' on an important assumption in the same way that many times in a row are too small to measure."

In papers filed with the district court, the whistleblower alleged that in 2017, shortly after Humana received the Civil Investigative Demand that the government issued when investigating this case, the alleged practice of using separate sets of assumptions abruptly ended, reducing future harm to the government.

The Department of Justice did not intervene in the case after the district court declined further extensions of time to investigate. After extensive motion practice, the district court denied both parties' motions for summary judgment, notably rejecting Humana's argument that its bids represented opinions that are insufficient to prove falsity.

THE LARGER TREND

In June a federal judge for the Northern District of Texas in Fort Worth ruled against the DOJ's motion to dismiss a case brought by Humana, meaning the insurer's case over Medicare Advantage audits can move forward. Humana brought the lawsuit on September 1, 2023, based on a final rule issued by CMS that changes previous audit procedures.

The final rule issued on February 1, 2023, allows CMS to recover funds from MA plans by statistically extrapolating audit results across the contract's entire enrollee population to recover contract-wide repayments.

Historically, CMS recouped only payments corresponding to individual diagnosis codes from the enrollee sample. Humana argued that the final rule results in financial loss and new compliance costs for actuarial work.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.