Humana recently reached a $90 million settlement with the United States to resolve allegations that Humana submitted fraudulent bids to the Centers for Medicare and Medicaid Services (CMS) for Medicare Part D prescription drug contracts from 2011 to 2017. Humana allegedly misrepresented the true costs of its administration of Part D Medicare benefits to obtain more lucrative contracts from the government.
When health insurance plans submit annual bids to CMS to participate in Medicare Part D, they must report their proposed benefits in the proposal and confirm that the proposed benefits meet the minimum standard set forth in Part D.
In this case, a former actuary for Humana, Steven Scott, filed the qui tam suit. Scott alleged that Humana inflated its costs in its Part D proposals to obtain higher paying contracts from the government, despite providing coverage below the required Part D levels. Humana then pocketed the difference between what it was receiving from the government and what it was providing to beneficiaries.
Scott further alleged that Humana maintained two separate sets of books in furtherance of the scheme: one with the correct numbers (the internal assumptions) and one with inflated numbers (the assumptions provided to the government). The internal assumptions proved to be accurate year after year and the bids submitted to the government were always far removed from reality, and the errors were always in Humana’s favor – to the tune of hundreds of millions of dollars.
The whistleblower noted that the separate sets of books were used for no purpose other than to mislead the government, as the internal assumptions were used for all business dealings – including internal budgeting.
“Although Humana asserted in court papers that the predictions underlying its bids were merely estimates about future behavior, they worked in Humana’s favor 100% of the time over seven years and for 245 bids,” said Edward Arens, an attorney at Phillips & Cohen, LLP, the firm representing the whistleblower in the case. “The odds that a big insurer would ‘miss’ on an important assumption in the same way that many times in a row are too small to measure.” He added that “in contrast to the predictions used for its bids, Humana’s internal predictions about drug costs were very accurate.”
The United States opted not to intervene in the case. This settlement is the first of its kind that resolves allegations of fraud in the Part D contracting process.