Healthcare Technology Featured Article

October 21, 2020

What You Should Know About Medicare Advantage Risk Adjustment Fraud And False Claims Act

With the increasing number of people who need hospital and medical assistance, Medicare Advantage Plans have been implemented to provide healthcare benefits that traditional Medicare insurance plans for seniors and other individuals don’t. Typically, these healthcare-related plans are offered by a private insurance company that partners with Medicare to provide individual beneficiaries access to certain healthcare services in the United States.

Unfortunately, making a claim against this plan is increasingly becoming difficult because of the insurers’ fraudulent acts against the government. This is where the Medicare Advantage Risk Adjustment Fraud and False Claims Act comes into play.

Here’s what you need to know about this subject matter.

What Is The Principle Behind Risk Adjustment?

Ideally, the Center for Medicare and Medicaid Services acknowledges the fact that there are beneficiaries whose health conditions are somehow expensive to treat compared to other healthier beneficiaries.  Hence, to make the Medicare Advantage plans beneficial to individual members, the government applies the principle of risk adjustment. This allows the CMS to make risk adjustment payments for patients treated for a costly condition.

Moreover, the risk adjustment payments are computed based on the patients’ diagnoses. This is usually done by submitting diagnosis codes as risk adjustment claims. This type of claim must contain statements that the patient has the diagnosis which is properly documented in their medical records, that the patient’s diagnosis was treated by a legitimate and qualified healthcare provider, and that the patient received the treatment through face-to-face visits.

What Is Medicare Advantage Risk Adjustment Fraud?

In its simplest terms, Medicare Advantage Risk Adjustment Fraud happens when insurers contracted by the government to provide healthcare benefits defraud the system by increasing the risk profile of the patients for their personal gains. In other words, they report to the Center for Medicare and Medicaid Services (CMS) that the members are sicker than they actually are. Consequently, the CMS will overpay the insurance companies for their members’ Medicare Advantage plans.

The following are the common acts of risk adjustment fraud in the Medicare Advantage program:

  • Making false claims for payments despite the fact that the patient wasn’t treated for the condition stated in the claim form;

  • Exaggerating the patient’s condition to adjust the risk score. This increases the amount of the per member per month (pm/pm) capitation rate that the insurer receives for the member;

  • Linking complications or conditions without adequate evidence to support that the latter is caused by an underlying diagnosis. In doing so, the insurers receive high reimbursement amounts from the CMS;

  • Submitting diagnosis codes for health conditions that the doctors have ruled out, allowing them to gain more money;

  • Submitting diagnosis codes based on laboratory claims wherein the healthcare providers didn’t actually record the confirmed diagnosis.

As mentioned, Medicare and Medicaid are victims of fraudulent activities perpetrated by private insurance companies that are aimed at unlawfully increasing the member’s risk profile to get higher risk adjustment payments.

Fortunately, the illegal practices mentioned above are sanctioned under the False Claim Act. This law creates an independent violation for each of the following violations:

  • Any false document made to justify the submission of an unsupported claim;
  • Each unsupported and falsified adjustment risk claim was submitted to the government for payment.

What Is False Claim Act?

Now that you have an idea about the Medicare Advantage Risk Adjustment Fraud, it’s time to get familiar with how the False Claim Act as a law can protect you and the government against fraudulent activities. Primarily, the False Claim Act is a federal law that criminalizes any person or entity that knowingly and deliberately makes a false claim about any federal health care program funded by the government.

Some of the common false claims punishable under this law include billing for a medical service more than once, billing for services not actually rendered, making false statements to earn easy money.

Moreover, like other criminal laws of the country, the violations committed under the False Claim Act can lead to significant legal consequences, including the payment of hefty penalties. Depending on the punishable act committed, the person or organization involved in fraudulent acts is liable for damages and other penalties triple the amount of the false claim.

Lastly, the False Claim Act is instrumental to the capture of these fraudulent activities committed by certain individuals and companies against the government. This law protects any employee who reports any violations from all forms of discrimination, harassment, suspension, or termination of work as a consequence of reporting fraud. This is commonly referred to as whistleblower protection under the False Claim Act.

Therefore, if you want to become a healthcare fraud whistleblower, it’s best to find a good lawyer to help you with the process. They’ll also protect you from the personal and professional consequences of reporting a potential fraud in the healthcare industry.


With the information mentioned above, there’s no doubt that fraud in the healthcare system exists. Luckily, there are laws and regulations that can help prevent these fraudulent activities from ruining the reputation of the healthcare industry. With the help of some technological innovations, making false claims for illegal gains can be easily and quickly detected.

Hence, if you think you’re a victim of fraud in your Medicare Advantage program, keep this article in mind so you’ll know what to do next.

Author: Kristie Sanders
As a blogger with more than ten years of experience in the industry, Kristie Sanders has gained the loyalty of thousands of readers around the world. Kristie writes articles on law, parenthood, and health and wellness on her blog, and submits guest posts about these topics, as well.  

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