Medicare Advantage Fraud: Misallocation

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Medicare and Medicaid managed care organizations (MCOs), including Medicare Advantage plans, are paid monthly for managing the cost of providing medical services to Medicare and Medicaid beneficiaries. This vested power comes with important restrictions and obligations. Most importantly, MCOs who discover material errors or omissions in claims or supporting documents that result in overpayments, or that erroneously decrease or avoid their obligation to pay or transmit money to the Government or to a state, are required to timely disclose those errors or omissions to Medicare or Medicaid. This includes specific profit limits, requiring MCOs to return excessive profits back to the Government. For example, relevant contractual language typically reads: “80 percent of the capitation paid to the plan shall be expended for the provision of designated health care services. In the event the plan expends less than 80 percent of the capitation, the difference shall be returned to the Government no later than May 1 of each year.”

Medicare Advantage Plans that turn a blind eye to their repayment or reporting obligations, or who wrongfully pocket overpayments of government funds, violate the Reverse False Claims Act provision, 31 U.S.C. 3729(a)(1) (2008) or 31 U.S.C. 3729(a)(1)(G)(2009). This statutory language specifically prohibits the wrongful retention of an overpayment, and it prohibits knowingly making, using, or causing to be made or used, “a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the Government.”