Independence Blue Cross (IBX) has agreed to pay $22.5 million to resolve allegations that it kept Medicare Advantage overpayments by failing to withdraw inaccurate diagnosis codes, the Justice Department announced Sept. 30. The Justice Department alleges the insurer ran chart reviews from 2017 through 2021 and used them in one direction only. The settlement is an agreement without any finding of wrongdoing.
According to the Justice Department’s announcement, IBX “violated the False Claims Act by failing to withdraw inaccurate and untruthful diagnosis codes.” The department says the company “used the results of its chart reviews to identify instances where IBX could seek additional payments from CMS while ignoring those same results when they indicated IBX was overpaid.” The settlement resolves a whistleblower suit, United States ex rel. Crawford v. Independence Blue Cross, No. 20-cv-5818, in federal court in the Eastern District of Pennsylvania.
For members, the question is whether this changes anything about their own Medicare Advantage coverage. The announcement describes a payment to the government over how the insurer billed Medicare, not a change to plan benefits, premiums or networks, and it says “the claims resolved by the settlement are allegations only and there has been no determination of liability.”
Medicare Advantage dates and rules shift every fall, and The Retirement Money Brief sends the ones that matter, one email each weekday.
Get the free deadline brief → Free from RetireShield. Unsubscribe anytime.
A look back at 2017 through 2021
The conduct the department describes ended in 2021, so the settlement addresses payments from years ago rather than the plan year now being sold. That timing is one reason the announcement reads as a billing matter between an insurer and the government. Resolving the case by settlement also means a court never ruled on whether the codes in question were wrong.
How diagnosis codes turn into payments
Medicare pays private Medicare Advantage insurers a monthly amount for each member, and that amount rises with the member’s documented health conditions. The Centers for Medicare & Medicaid Services (CMS) runs the arrangement through a risk adjustment model called CMS-HCC, short for Hierarchical Condition Category. Each diagnosis code an insurer submits can raise the payment it receives for a member, which is why the accuracy of those codes matters to the federal budget.
A chart review is an audit of a patient’s medical records. A review can find a diagnosis that was missed, which can add a code and raise a payment, or it can find a code that was never supported, which should be withdrawn. The Justice Department’s allegation is that IBX acted on the first kind of finding and ignored the second.
The whistleblower’s share
The whistleblower who brought the case receives $3.825 million of the $22.5 million, the Justice Department said. The False Claims Act lets private individuals sue on the government’s behalf, known as qui tam suits, and typically gives them between 15% and 30% of what the government recovers. The $3.825 million works out to about 17% of the settlement. The same law allows treble damages, or three times the government’s losses, when a case ends in a judgment rather than a settlement.
The Department of Health and Human Services’ Office of Inspector General listed the case in its enforcement actions on Sept. 30, saying the allegation was that IBX acted “in order to improperly retain overpayments from Medicare.”
The size of the program behind the case
Assistant Attorney General Brett Shumate noted in the announcement that the government pays private insurers more than $530 billion each year to care for Americans enrolled in Medicare Advantage. A 2019 inspector general report had earlier flagged chart reviews as a concern, estimating that diagnoses reported only on chart reviews produced $6.7 billion in risk-adjusted payments for 2017, and finding that over 99% of the reviews it examined added diagnoses rather than deleting them.
What the settlement means for Independence Medicare Advantage members
A member of an Independence plan does not have a form to file or a deadline tied to this settlement, because the money goes to the federal government and the whistleblower. Coverage, premiums and doctors are governed by the plan’s own rules for 2027, which the plan reports to members in its fall paperwork.
Members who want to review their coverage can do so during annual enrollment, which runs Oct. 15 through Dec. 7. The free starting point is the Medicare Plan Finder, which compares plans by ZIP code on premiums, drug costs and star ratings. Anyone with questions about a particular bill or a diagnosis listed in their records can ask the plan or their doctor’s office for an explanation.
The Justice Department’s announcement lists the settlement at $22.5 million, with the whistleblower’s $3.825 million share paid out of that sum, and says plainly that the claims are allegations only.
More Financial Reading
- How many CDs can you park at 1 bank? FDIC rules you must know
- Adding someone to your bank account: tax traps and smart moves
- What really happens to your joint savings account when you die?
This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
