After facing a declination from the U.S. Department of Justice, a whistleblower saw their Medicare Part D fraud case end with a $90 million settlement. Insurance company Humana allegedly used fraudulent financial information in their bids to gain government approval for one of their Medicare Part D prescription drug plans. The whistleblower was a former actuary with the insurer. Under the qui tam provision of the False Claims Act, the whistleblower is entitled to 15-30% of the settlement.

Summary of the Allegations

According to the allegations, Humana as a Medicare Part D Plan Sponsor submitted false information in connection with its bids to the Centers for Medicare and Medicaid Services (CMS) in order to secure CMS’ approval for offering Part D plans to Medicare beneficiaries. As detailed in the complaint, Humana allegedly kept two sets of books: one with accurate finances, and one with false financial projections, the latter of which it used to secure Part D contracts. This created a snowball effect of fraud, leading to the government overpaying claims to Humana and picking up costs for low-income beneficiaries based on this false information.

Medicare Part D Plans Actuarial Value

Medicare Part D is the voluntary prescription drug portion of the lettered Medicare parts (A is hospital insurance, B is physician coverage, C is Medicare Advantage). Medicare beneficiaries pay a premium for this prescription drug program, which is administered by private insurers, and federal funds subsidize the cost of prescription drugs. When insurers contract with the government to be a Medicare Part D plan sponsor, they must certify that their plans are actuarially equivalent or better than the “defined standard benefit,” though they have some flexibility in how they organize their plans’ deductibles, co-pays, formularies, and other components. In this qui tam lawsuit, the whistleblower alleged that Humana knowingly and falsely certified that their prescription drug plan called the “basic Walmart Plan” was actuarially equivalent, when in fact it was not. Moreover, the whistleblower alleged that Humana intentionally designed the Walmart plan to make a profit, paying less than 75% of the costs of drugs and passing the difference onto both Medicare beneficiaries and the government (for low income beneficiaries).

Medicare Part D Whistleblower

The whistleblower or relator, Steven Scott, was a Managing Actuary for the insurer at the time he filed the qui tam lawsuit. As stated in the complaint, the whistleblower was an insider, “with responsibility for modeling the cost of Humana’s Medicare health insurance benefits under different actuarial assumptions.” Thanks to the whistleblower’s persistence after the Department of Justice declined to intervene, the insurer is finally paying a $90 million settlement.