Humana Settles $90 Mn Whistleblower Lawsuit Over Medicare Part D Fraud Allegations

The case, led by the law firm Phillips & Cohen, claimed that these fraudulent bids led to significant overcharges to the Centers for Medicare & Medicaid Services (CMS).

Humana, one of the largest health insurers in the United States, agreed to pay $90 million to settle allegations of fraud tied to its Medicare Part D contracts. 

The settlement was reached after a whistleblower lawsuit accused the company of submitting fraudulent bids to the federal government between 2011 and 2017. 

The case, led by the law firm Phillips & Cohen, claimed that these fraudulent bids led to significant overcharges to the Centers for Medicare & Medicaid Services (CMS).

Allegations of Fraudulent Bidding Process

The lawsuit, initiated by whistleblower Steven Scott, a former actuary at Humana, alleged that the company used deceptive practices during the bidding process for Medicare Part D contracts. 

Medicare Part D is a federal program that provides prescription drug coverage to millions of Americans. 

Insurers such as Humana must cover a minimum level of drug costs, with the government and enrollees covering the remainder through out-of-pocket expenses.

Scott claimed that while Humana's internal predictions for costs under its Part D program, co-branded with Walmart, were accurate, the company allegedly submitted lower cost estimates to the government in their bids. 

These lower estimates allowed Humana to secure contracts while planning to cover less than the mandated level of drug costs. This resulted in the federal government and enrollees "unknowingly picking up more than their share," according to the lawsuit.

Phillips & Cohen emphasized that this case is "the first of its kind to resolve allegations of fraud in the Part D contracting process."

Impact on Healthcare Costs

The alleged fraudulent actions had significant financial implications. According to the lawsuit, both the government and Medicare beneficiaries paid millions more than Congress intended, while Humana benefitted from these savings. 

Claire Sylvia, a whistleblower attorney and partner at Phillips & Cohen, stated, "The Part D program depends on insurance companies paying their minimum share of drug costs. We argued that Humana shirked its responsibility by telling the government that its plan would cover drug costs that Humana did not actually plan to cover." 

Sylvia added that their complaint detailed how the government and beneficiaries were left with paying tens of millions of dollars more than necessary, while Humana pocketed the money as ‘savings’.

The lawsuit also highlighted the broader implications of such practices on healthcare costs in the United States. 

Medicare Part D is a crucial program for many Americans, particularly seniors, who rely on it for affordable access to prescription drugs. Any manipulation of the bidding process could potentially drive up costs for both the government and individual beneficiaries, further straining an already burdened healthcare system.

Settlement Reached Before Trial

The case was set to proceed to trial after a federal district court denied additional time for further investigation, and the Justice Department chose not to intervene. 

However, a settlement was reached before the trial began, avoiding what could have been a lengthy and costly legal battle.

While the $90 million settlement resolves the allegations, it does not imply an admission of wrongdoing by Humana. The company allegedly dropped the fraudulent bidding practices after receiving a civil investigation demand from the government.