A growing percentage of Medicare and Medicaid beneficiaries are enrolling in Medicare Advantage plans and managed Medicaid, creating opportunities for violations of § 3729(a)(1)(G) of the False Claims Act, “the reverse false claims” provision, involving those programs. In recent years, cases brought under the False Claims Act have shown the ways in which fraud can impact these programs, including through the fraudulent retention of overpayments from the government.

The reverse false claims provision provides that one who “…acts improperly…to avoid having to pay money to the government” faces FCA liability. Such violations related to managed care can include Medical Loss Ratio (“MLR”) fraud. Medicare and Medicaid require many plans to maintain a MLR minimum, which is intended to prevent healthcare insurance plans from overspending government funds in areas such as marketing and administrative matters. Under the MLR rules, plans must spend 85% of their revenue from the government on healthcare services as opposed to things like administrative and overhead costs. Otherwise, the plans must refund the government the difference. Further, MLR rules require that plans report data to the government proving their compliance.

To avoid having to repay the government for noncompliance with MLR rules, plans have been known to engage in fraudulent schemes. For example, plans may baselessly overpay providers (or merely document doing so) to boost the amount reportedly spent on healthcare services. Another scheme involves plans falsely claiming that administrative expenses are expenses related to patient care. When plans report inaccurate MLR information to the government in order to avoid refunding the government, they violate the reverse false claims section.

For example, in the case, United States of America ex rel. Maithel v. Ventura Co. Medi-Cal Managed Care Commission d/b/a Gold Coast Health Plan, No. 15-7760AB TJH (JEMx) (C.D. Cal.), the government and the whistleblowers brought an action against a California-based health system, along with three medical providers for Medicaid fraud. In 2014, Medi-Cal expanded coverage, as provided for in the Affordable Care Act, and began covering adults between the ages of 19 and 64 without dependent children and with annual incomes up to 133 percent of the federal poverty level. After receiving funds from the government for this population, the health systems were required to meet the MLR and allocate at least 85% of the funds to “allowed medical expenses.” Failing to do so would result in the health systems being obligated to return money to state and federal governments. Here, the whistleblowers alleged that the health systems defrauded Medi-Cal by improperly reclassifying payments that were not medical expenses as if they were.  Over three settlements, the defendants agreed to pay $70.7 million to settle the allegations of MLR fraud.  

This case serves as an example of how MLR fraud may take place in the managed care space in violation of the reverse false claims provision. As the percentage of Medicare and Medicaid beneficiaries in managed care increases, there is a risk that, in attempt to avoid repaying the government, fraudsters will misrepresent MLRs to the government. The role of whistleblowers will be crucial in the prevention of reverse false claims section violations.

Julia-Jeane Lighten is the Public Interest Advocacy Fellow at Taxpayers Against Fraud.