The Justice Department’s years-long court battle to force UnitedHealth Group to return billions of dollars in alleged Medicare Advantage overpayments hit a major setback Monday when a special master ruled the government had failed to prove its case.

In finding for UnitedHealth, Special Master Suzanne Segal found that the DOJ had not presented evidence to support its claim that the giant health insurer exaggerated how sick patients were to illegally pocket more than $2 billion in overpayments.

“A mere possibility of an overpayment is not enough for the government to carry its burden,” Segal wrote in an initial ruling. She recommended that UnitedHealth’s motion to dismiss the case be granted. The recommendation, which is to be presented to the federal judge handling the case, can be appealed within two weeks.

The civil fraud case against UnitedHealth Group, the nation’s largest Medicare Advantage insurer, was filed in 2011 by whistleblower Benjamin Poehling, a former company employee. The DOJ took over the case in 2017. Medicare Advantage is the privately run alternative to the traditional Medicare program for seniors.

“After more than a decade of DOJ’s wasteful and expensive challenge to our Medicare Advantage business, the Special Master concluded there was no evidence to support the DOJ’s claims we were overpaid or that we did anything wrong,” UnitedHealth spokesperson Heather Soule said in a statement.

Wyn Hornbuckle, a spokesperson for the Justice Department, said the agency wouldn’t comment on the ruling, which was filed in federal court in Los Angeles. Attorneys for whistleblower Poehling had no comment.

Medicare pays Advantage health plans higher rates to cover sicker patients but requires that their conditions be properly documented in medical records.

The DOJ alleges Medicare paid UnitedHealth Group more than $7.2 billion from 2009 through 2016 based on the company’s efforts to boost revenue by reviewing patient records to find additional diagnoses and adding medical billing codes to their files. According to the DOJ, Medicare would have paid the company $2.1 billion less if it had deleted unsupported billing codes.

The Justice Department also alleged that in these chart reviews, the health insurance giant ignored overcharges that might have reduced bills.

But the special master, who was appointed by U.S. District Judge Fernando Olguin, concluded the government’s case “depends entirely on speculation and assumptions about what the codes found by the United coders actually mean.”

“If this stands, I think it is a major defeat for the government,” said William Hanagami, an attorney who represented a different whistleblower in one of the earliest cases alleging billing fraud by a Medicare Advantage insurance company. Hanagami said he expects the government to appeal the decision.

Segal noted that UnitedHealth executives told Centers for Medicare & Medicaid Services officials about its chart review policies at an April 2014 meeting. At the time, CMS was considering a regulation to restrict use of chart reviews, but the agency backed off the regulation under pressure from the insurance industry. At the time, a CMS official described the industry’s response as an “uproar.”

The special master noted that United had requested the meeting with CMS officials, which she called “the opposite of concealment.”

“The problem with the government’s allegations is that the government knew of the very chart review practices which it now claims United prevented it from learning, and thus the government cannot have been duped into relying on any action or inaction by United in determining whether it had been the victim of overpayments,” Segal wrote.

Segal noted CMS audits of UnitedHealth’s Medicare Advantage plans had found that about 89% of billing codes were supported by patient medical records. The audit findings “undercut” the government’s claim that the company engaged in widespread overbilling.

“This litigation has been pending for more than a decade,” she wrote, “and the government has had ample opportunity to develop evidence in support of its theories. It has not.”

The decision comes as UnitedHealth faces renewed investigations into its handling of Medicare Advantage coding, including a new Justice Department review.

Medicare Advantage insurance plans have grown explosively in recent years and now enroll about 33 million members, more than half of people eligible for Medicare.

The industry has been the target of dozens of whistleblower lawsuits and government audits alleging that the plans cost taxpayers too much money, including a demand last month by Senate Judiciary Committee chair Chuck Grassley (R-Iowa) that UnitedHealth explain its billing practices.

By Fred Schulte, KFF Health News
Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.