While a specific, widely-publicized lawsuit against CareMore Health Plan with the exact title “Billed Medicare Advantage for Diagnoses Never Documented” could not be verified in major legal databases or news sources, the underlying issue is real and well-documented across the Medicare Advantage industry. Multiple major health insurers—including Kaiser Permanente ($556 million settlement), Aetna ($117.7 million), and Independent Health ($100 million)—have been charged and settled with the U.S. Department of Justice for submitting inaccurate diagnosis codes that were never documented in patient encounters.
The core problem is simple: health plans submit diagnosis codes to Medicare to determine how much risk adjustment payment they receive. When those codes don’t match what was actually documented during patient visits, or when diagnoses are added retroactively without medical justification, the health plan receives inflated payments for supposedly sicker populations than they actually serve. For beneficiaries enrolled in these plans, this can mean higher out-of-pocket costs, coverage denials, and inaccurate health records.
Table of Contents
- How Do Health Plans Commit Diagnosis Code Fraud in Medicare Advantage?
- The Mechanics of Risk Score Inflation and Why It Matters
- Major Settlements and the Pattern They Reveal
- How These Overcharges Affect Medicare Beneficiaries and Taxpayers
- Why Some Cases Are Hard to Detect and Common Defense Arguments
- What Affected Beneficiaries Should Do
- The Future of Compliance and Prevention
How Do Health Plans Commit Diagnosis Code Fraud in Medicare Advantage?
Diagnosis code fraud in Medicare Advantage begins with the risk adjustment system itself. Medicare pays health plans a capitated (fixed) amount per enrollee, adjusted for that person’s predicted healthcare costs. The adjustment is based on diagnoses submitted by the plan—codes that theoretically reflect the member’s actual medical conditions.
If a plan submits codes for conditions that were never documented or that don’t match the clinical evidence, Medicare overpays them for managing that “sicker” member than they actually are. The fraud typically takes one of two forms: (1) submitting diagnosis codes without any documented clinical basis in the patient’s medical record, and (2) retroactively adding codes after the encounter has ended, without the provider’s knowledge or without any supporting clinical note. Kaiser Permanente’s $556 million settlement, the largest Medicare Advantage fraud case to date, involved submitting inaccurate diagnosis codes—including for conditions like diabetes and heart disease—that inflated illness severity scores after patient visits. The DOJ found that Kaiser submitted these codes even when patients’ own medical records did not support the diagnoses, allowing Kaiser to bill medicare for higher-risk members than they were actually treating.
The Mechanics of Risk Score Inflation and Why It Matters
Every Medicare Advantage enrollee is assigned a Hierarchical Condition Category (HCC) risk score, a number that tells Medicare how expensive that person is likely to be to treat. For example, a beneficiary with documented hypertension, diabetes, and chronic kidney disease receives a higher risk score than someone with no chronic conditions. Medicare then pays the health plan based on that score—a sicker population means more money from the government. When health plans submit false or unsupported diagnosis codes, they artificially raise these risk scores. This is where the money leaks out of the system. If a plan submits a diabetes code for a member with no documented diabetes, Medicare pays the plan more—sometimes thousands of dollars more per year per false code.
Multiplied across thousands or tens of thousands of members with inflated codes, the overcharges balloon into the hundreds of millions of dollars. The Aetna settlement ($117.7 million) centered on exactly this: Aetna submitted inaccurate diagnosis codes that increased Medicare Advantage payment amounts, and the company did not have adequate processes to verify that those codes matched clinical documentation. However, not all coding errors constitute fraud. A coding error—where a provider submits a code that is technically incorrect but made in good faith—is different from systematic billing for conditions that were never evaluated or documented. The distinction matters because coding errors are common in healthcare, but fraud requires intentional misrepresentation or reckless disregard for accuracy. In settlements, the DOJ typically focuses on cases where the health plan either knew or should have known that codes were unsupported.
Major Settlements and the Pattern They Reveal
The settlements against large health plans reveal a consistent pattern across the Medicare Advantage industry. Kaiser Permanente’s $556 million settlement (the largest) addressed diagnosis codes that artificially inflated member illness levels. Independent Health’s $100 million settlement focused on inflating beneficiary risk scores through upcoding—submitting higher-severity diagnosis codes than were clinically justified. Cigna’s $172 million settlement involved inaccurate diagnosis codes on Medicare Advantage enrollees. Aetna’s $117.7 million settlement covered submitting inaccurate codes to increase Medicare Advantage payments.
What’s striking is that these aren’t rare, isolated mistakes. These settlements suggest systemic problems: inadequate audits of diagnosis codes against medical records, pressure to maximize risk scores, and insufficient controls over which codes get submitted to Medicare. In Kaiser’s case, the settlement alleged that after a patient visit, Kaiser staff would add diagnosis codes to medical records even when those conditions were not discussed or examined during the visit. This wasn’t a coder misreading a note—it was retroactively inflating records. For beneficiaries, the impact includes higher premiums, higher cost-sharing, and inaccurate health information in their medical records. If a plan has submitted a false diabetes diagnosis, that code may follow you through your health record and affect future coverage, claims, and medical decisions.
How These Overcharges Affect Medicare Beneficiaries and Taxpayers
When a health plan submits inflated diagnosis codes, two groups lose: beneficiaries and taxpayers. For beneficiaries, inflated risk scores can lead to higher cost-sharing in supplemental coverage, higher premiums, and inaccurate medical records that may trigger unnecessary treatments or denial of coverage for unrelated conditions. If your health record falsely shows you have diabetes or heart disease, that misinformation can persist and affect future care. For taxpayers, the impact is direct: Medicare’s annual budget increases to pay for these fraudulent risk adjustments.
Every dollar a health plan obtains through false diagnosis codes is a dollar that could have funded actual care, research, or reduced the federal deficit. The settlements recovered so far—Kaiser ($556 million), Independent Health ($100 million), Aetna ($117.7 million), Cigna ($172 million)—represent billions in overcharges before the lawsuits forced repayment. But because these cases are based on years of claims data, the actual amount overcharged is often much larger than what’s recovered. Unlike traditional fee-for-service Medicare, where overcharges are more immediately detectable (too many bills for the same service), Medicare Advantage fraud is harder to catch because it’s embedded in the risk adjustment system itself. The plan submits codes, Medicare pays based on those codes, and without ongoing audits comparing submitted codes to actual medical records, the fraud can continue for years.
Why Some Cases Are Hard to Detect and Common Defense Arguments
One reason diagnosis code fraud persists is that the system is complex and the fraud is not always obvious. Health plans argue that coding can be subjective—that different coders might legitimately assign different codes based on the same clinical note. They claim that their systems have built-in errors, not intentional fraud. However, the DOJ’s settlements focus on cases where the gap between submitted codes and documented conditions is so large that it suggests intentional or reckless conduct. A common defense from health plans is that they rely on providers (doctors, hospitals) to submit accurate diagnoses, and the plan simply processes those codes.
But this defense fails when the plan itself retroactively adds codes to records, when it doesn’t verify codes against medical records, or when it has systematic policies that encourage higher coding. In Independent Health’s case, the settlement found that the plan inflated risk scores through upcoding without adequate clinical justification—meaning the plan wasn’t passively receiving codes; it was actively inflating them. It’s also important to note that CMS (Centers for Medicare & Medicaid Services) does conduct audits and recoveries through programs like the Risk Adjustment Data Validation (RADV) program, but these audits are resource-limited and often focus on samples rather than entire claims. A health plan might face a RADV audit years after the claims were submitted, and the audit might only review 200 records out of tens of thousands of submitted codes. This is why individual whistleblowers and DOJ investigations, powered by qui tam False Claims Act lawsuits, have been crucial in uncovering the largest schemes.
What Affected Beneficiaries Should Do
If you believe you’ve been enrolled in a Medicare Advantage plan that submitted false or unsupported diagnosis codes in your medical record, you have several options. First, obtain a copy of your medical records and health plan records from the plan and from any providers you’ve seen. Look for diagnoses in your health plan records that you don’t recall being evaluated for during your visits. Compare the diagnoses listed in the plan’s records to what’s documented in your provider’s notes.
Second, if you find discrepancies, contact your health plan’s member services and ask them to explain the diagnosis codes in your record. Request a review and correction if the codes are unsupported. If the plan doesn’t respond satisfactorily, file a complaint with your state’s insurance commissioner and with CMS. You can also consult with an attorney who handles health law or class action cases, particularly if you’ve been harmed by incorrect diagnoses (denied coverage, inflated cost-sharing, or inaccurate treatment).
The Future of Compliance and Prevention
The large settlements of recent years have increased pressure on Medicare Advantage plans to strengthen their diagnosis code audit and verification processes. Most major plans now conduct internal audits comparing submitted codes to medical records, train staff on coding accuracy, and implement policies against retroactive code additions. However, the problem is not fully solved—CMS continues to pursue investigations, and new settlements are likely as older claims are audited.
Going forward, improved technology and data analytics may help. Plans are investing in AI-driven tools that flag suspicious diagnosis patterns (e.g., a sudden spike in rare diseases in a given month, or consistent upcoding by specific providers). CMS is also strengthening RADV audits and recovery rates. For beneficiaries, the trend toward transparency in medical records and increased availability of patient portals makes it easier to spot discrepancies in your health record and challenge them.
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