Humana agrees to pay $90 million to settle Medicare fraud lawsuit

Humana must pay 90 million US dollars in the False Claims Act case. (Image credit: Thomas Breher from Pixabay)

Law firm Phillips & Cohen said health insurer Humana has agreed to pay $90 million to settle a False Claims Act case accusing it of defrauding the Medicare Part D Prescription Drug Program.

The whistleblower lawsuit was filed by Phillips & Cohen.

The lawsuit alleges that from 2011 to 2017, Humana submitted fraudulent bids for Medicare Part D contracts to the Centers for Medicare & Medicaid Services (CMS), resulting in significant overpayments to the government.

The case is the first of its kind involving allegations of fraud in the Part D contracting process.

Medicare Part D is the government's optional drug program under which CMS contracts with private insurance companies to provide prescription drug benefits to Medicare beneficiaries.

These insurance companies are required by law to offer plans that cover at least a minimum portion of drug costs, with the remaining costs being borne by the government and Medicare beneficiaries.

Each year, CMS requires these companies to submit proposals detailing the services they intend to offer and demonstrating that those services meet Part D's minimum coverage requirements.

The lawsuit alleged that Humana promised to provide the required amount of coverage but intended to provide less, resulting in the government and beneficiaries unwittingly bearing a larger share of the costs.

Claire Sylvia, a partner at Phillips & Cohen and whistleblower attorney, said: “The Part D program depends on insurance companies paying their minimum share of drug costs.

“We argued that Humana had evaded its responsibility by telling the government that its plan would cover drug costs that Humana did not actually plan to cover.

“Our complaint detailed how, for years, the government and recipients were forced to pay tens of millions of dollars more than Congress intended, while Humana pocketed the money as 'savings.'”

Steven Scott, who filed the lawsuit in 2016, previously worked as an actuary at Humana.

Scott alleged that Humana accurately predicted the cost of its Walmart Part D plan internally each year but used different, unsubstantiated assumptions for its government offerings.

According to the lawsuit, while the insurer's internal forecasts were correct, the assumptions underlying the offers were often significantly off, which benefited the company.