Humana pays $90 million to settle whistleblower Medicare fraud case

LOUISVILLE, Ky. (WDRB) -- Louisville-based Humana has agreed to pay the federal government $90 million to settle a whistleblower lawsuit over alleged Medicare drug fraud.

In a release, Phillips & Cohen LLP said the healthcare company settled the case filed under the False Claims Act just before it was to go to trial.

The lawsuit filed in California alleges that Humana submitted fraudulent bids to the Centers for Medicare & Medicaid Services (CMS) for Medicare Part D prescription drug contracts from 2011-2017.

The suit claims the company significantly overcharged the government. The lawyers who filed the case said this is the first case of its kind to resolve allegations of fraud in the Part D contracting process.

"We alleged that Humana kept two sets of books – one set that its actuaries prepared for bids Humana submitted to the government and a separate internal set that Humana’s actuaries prepared with Humana’s actual anticipated costs, which Humana used for all its business dealings including its internal budgeting,” said Edward Arens, a Phillips & Cohen partner who represented the whistleblower, in a statement.

Humana statement on the settlement

WDRB reached out to Humana for a statement regarding the settlement:

Humana firmly believes that the actuarial assumptions in its prescription drug plan were reasonable and in full compliance with all laws and regulatory requirements, and that the plaintiff’s claims in the case are without merit.

After a thorough investigation into the allegations, the US Department of Justice chose not to intervene in the case. While we are confident in our position and expected to prevail at trial, we have made the decision to enter into a settlement agreement without admitting any wrongdoing to avoid the uncertainty, distraction, inconvenience, and expense of a lengthy jury trial.

Whistleblower allegations

The whistleblower lawsuit was filed in 2016 by Steven Scott, a former actuary for Humana. The complaint alleges that he discovered that Humana had accurately predicted internally each year the costs for its Part D "Walmart Plan." But he claimed Humana based its bids to the government on different and unsupported numbers the company used for only that purpose.

Scott said the bids were always "way off" and in Humana's favor by hundreds of millions of dollars. Scott's lawsuit said Humana changed that practice after the government launched an investigation in 2017.

What is Medicare Part D?

Medicare Part D is the Government’s voluntary prescription drug program. It requires CMS contracts with private insurance companies to cover prescription drug benefits for people enrolled in Medicare. By law, the insurance companies must offer plans that cover a minimum required portion of drug costs. The government and Medicare beneficiaries cover the rest.

CMS requires insurance companies to submit annual bids for report the benefits they propose to cover benefits to meet Part D’s minimum coverage level.

The complaint in this case alleged that Humana said it would provide the required level of coverage, but the lawsuit said the company planned to provide less, which meant the government and beneficiaries unknowingly picked up more of the cost.

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Humana pays $90 million to settle whistleblower Medicare fraud case