Your Grandma Was Worth $3,000 More With HIV She Didn’t Have.

The Sicker the Patient Looks on Paper, the More CMS Pays.

Medicare Advantage is the privatized alternative to traditional Medicare: private insurers receive a fixed monthly payment from CMS for each enrolled beneficiary, then manage that beneficiary’s care. The payment is risk-adjusted — a beneficiary with diabetes, heart disease, or HIV receives a higher monthly payment than a healthy beneficiary, because sicker patients are expected to cost more to treat.

The fraud is simple: add more diagnoses to beneficiary records, collect higher risk-adjusted payments. Insurers discovered they could send nurses to beneficiaries’ homes to conduct “wellness visits” — not to treat patients, but to document diagnoses. They hired third-party firms to conduct retrospective “chart reviews” — scanning old records for any diagnosis codes that hadn’t been submitted for payment. They added diagnoses that had no corresponding treatment, because the treatment was never necessary. The HIV patient who never received antiretrovirals was worth an extra $3,000 a year.

Every Major Insurer. Hundreds of Millions in Settlements. No Admissions.

All settlements resolved False Claims Act allegations without admission of wrongdoing. Settlements represent a fraction of estimated overpayments.

The CMS Administrator Who Did Nothing Became CEO of the Insurance Lobby.

Marilyn Tavenner served as CMS Administrator from 2013 to 2015, presiding over the period when Medicare Advantage overbilling was first being systematically documented by HHS OIG. During her tenure, CMS did not implement the risk adjustment data validation audit results that would have required insurers to repay overbilled amounts at scale. In 2015, Tavenner left CMS to become President and CEO of America’s Health Insurance Plans (AHIP) — the primary lobbying organization for Medicare Advantage insurers.

“CMS has been aware for years that Medicare Advantage plans are submitting diagnoses that increase payments but are not supported by medical records. CMS has not implemented adequate audit procedures to identify and recover these overpayments.”

HHS OIG — Medicare Advantage Risk Adjustment Fraud Oversight Gaps (2024)

CMS Proposed a Fix. The Lobby Met With Officials. The Rule Died.

In 2018, CMS proposed a rule that would have required Medicare Advantage insurers to repay risk adjustment overpayments identified through data validation audits — effectively closing the retrospective chart review loophole. The insurance industry lobbied aggressively against it. The rule was proposed in February 2018. By June 2018 — four months later — CMS had withdrawn the most consequential provisions. A federal court later found CMS had violated the Administrative Procedure Act by abandoning the rule without adequate explanation.

A subsequent, weaker rule was eventually finalized in 2023. MedPAC, the independent congressional advisory body for Medicare, projects that even with new audit procedures, overpayments to Medicare Advantage plans will total $1.2 trillion between 2025 and 2034 — roughly $120 billion per year.