Illustration by Jandos Rothstein
Valerie O’Meara had been working as a nurse for the Polyclinic in Seattle for over a month before it dawned on her that she actually worked for the risk adjustment department of the health insurance juggernaut UnitedHealth.
A physician had interviewed her for the job. Her employment contract named a gastroenterologist she had never met as the owner and medical director of the practice. But it was a risk adjustment manager Zooming in from Minnesota, where UnitedHealth is based, who told her where to report for duty each morning and increasingly micromanaged her patient visits. “Aren’t you using the QuantaFlo to check if your patients have peripheral artery disease?” the risk adjustment guy would ask. She had never heard of a QuantaFlo, or proactively trying to test random Medicare patients for a condition as obscure and slow-moving as peripheral artery disease (PAD).
“Screening asymptomatic patients for peripheral artery disease is not a thing,” she told him, vaguely annoyed that someone with no apparent clinical experience whatsoever would second-guess her medical judgement. She didn’t realize at the time that it most definitely was a thing, not only at UnitedHealth—which had used QuantaFlo to diagnose more than a million patients with PAD between 2018 and 2021 and billed the Centers for Medicare and Medicaid Services an extra $4 billion over that period for “covering” it—but at pretty much every major national provider of privatized Medicare Advantage insurance plans.
Health care corporations have been defrauding Medicare by claiming to treat patients who are not actually sick for diseases they don’t actually have since the dawn of the Medicare system. But during the 1990s, lobbyists convinced Republican lawmakers that they could fix the problem of widespread “overtreatment” of patients if only the government handed over the Medicare budget to insurance companies and allowed them to decide how much care senior citizens truly “needed.” And so over time, the insurance companies displaced nursing homes and for-profit hospital chains (hi, Rick Scott) as the most prodigious looters of Medicare, by convincing the Centers for Medicare and Medicaid Services to fork over ever-larger flat fees for the service of covering ever more esoteric diseases.
Courtesy Valerie O’Meara
Nurse Valerie O’Meara
A diagnosis of PAD, by way of example, pads the annual payment an insurer receives for covering a Medicare Advantage patient by about $2,500, according to a series The Wall Street Journal published last summer. UnitedHealth alone collects some $8.5 billion every year for covering supposed maladies no doctor has ever treated, according to the Journal. Added to fictitious maladies a doctor may have treated at one time and other scams, Medicare Advantage fraud is estimated to cost the federal government at least $100 billion a year in unnecessary overpayments, according to most of the think tanks that have studied the issue. Even Medicare Advantage boosters like Ezekiel Emanuel estimate the program costs between $20 billion and $30 billion more than it should, making bogus insurance company–concocted diagnoses the single most conspicuous source of fraud, waste, and abuse in the federal budget, not that DOGE has found it yet.
The problem is that for decades now the laws that prohibit defrauding Medicare have been under attack by a cabal of lobbyists, conservative judges, and cynical wonks who essentially believe rampant Medicare fraud is the price America must pay to nurture insurance companies willing to perform the odious task of cutting senior citizens off when their lives have gotten too costly to sustain. “The line I would hear every time I brought up” some questionable billing practice, says O’Meara, “is, this is just what you have to do to survive in value-based care, and ‘CMS says we can do it, so it’s OK.’”
But she didn’t think it was OK, and after quitting the Polyclinic last spring and reading a lot of books, articles, and white papers on “value-based care,” she reached out to Wall Street Journal reporter Anna Mathews to talk about what she had experienced. That call turned into the aforementioned series detailing UnitedHealth’s efforts to milk the Medicare Advantage program while systematically denying coverage to patients it ostensibly covered.
Then in late January, after Donald Trump’s inauguration, O’Meara got a call from an assistant U.S. attorney, claiming to be conducting an investigation into Medicare Advantage fraud at UnitedHealth. On January 31, two Department of Justice litigators interviewed her for an hour. Exactly a week later, the agency contacted QuantaFlo manufacturer Semler Scientific to ask if the company was interested in engaging in talks to settle a long-dormant investigation it had initiated eight years earlier. Those talks lasted all of a single day, according to a disclosure Semler filed with the Securities and Exchange Commission earlier this week. “We do not believe the amount of loss can be reasonably estimated,” the filing stated. The stock plunged more than 20 percent after briefly soaring on the unrelated announcement of Trump’s Strategic Crypto Reserve; for the past year, Semler Scientific has been converting a large portion of its cash flows into Bitcoin.
For decades now, the laws that prohibit defrauding Medicare have been under attack by a cabal of lobbyists, conservative judges, and cynical wonks.
What is shocking about these investigations is that they appear to have intensified, even as the Trump administration has repeatedly signaled its intention to accelerate the privatization of Medicare while moving aggressively to shut down corporate malfeasance investigations—89 cases against corporations have been halted or dismissed thus far, according to research from Public Citizen—and reassign attorneys to litigate the swelling ranks of lawsuits challenging the administration’s authority to dismantle the federal government.
The spectacle of DOJ attorneys defending such blatantly illegal acts as firing the inspector general of the Department of Health and Human Services, who by default was positioned to know more about the scope of Medicare fraud than almost anyone, while also investigating Medicare fraud, is hard to fit into your brain at the same time. UnitedHealth has long recruited its lobbyist army from both sides of the aisle, and its most recent strategies have been redolent of MAGA swagger. Longtime Trump official Adam Boehler, who is currently reported to be in Qatar leading unprecedented “bilateral” hostage negotiations with Hamas, sold his home health agency to UnitedHealth in 2021 and calls himself a close personal friend of Brian Thompson, the chief executive officer allegedly murdered in December by Luigi Mangione. Earlier this year, UnitedHealth hired Federalist Society–adjacent defamation law firm Clare Locke to strike back against Dr. Elisabeth Potter, a plastic surgeon who had posted a video on TikTok from the parking lot of her hospital, incredulously relating the story of the UnitedHealth employee who had interrupted her surgery on a breast cancer patient to deny the patient’s claim. The company’s official response to news of the federal investigation is an angry diatribe against The Wall Street Journal’s “year-long campaign” of “misinformation” to “to defend a legacy system that rewards volume over keeping patients healthy.”
But there are signs the unexpected bipartisan outpouring of popular support for Mangione, especially among UnitedHealth policyholders, may have influenced the administration’s decision to play hardball with the health care colossus. Trump backer and hedge fund influencer Bill Ackman posted a long missive detailing his investigation into Dr. Potter’s accusations and the insurer’s smear campaign against her and concluding “there is likely something systemically wrong with this company.” The following week, Elon Musk greeted news of the DOJ investigation with an approving post: “Not that it justifies murder, but maybe Luigi knew something.” Shortly after, Steve Bannon suggested that the crowds lining up to cheer on Mangione in court and even donate to his $652,000 legal defense fund are evidence of “seething anger underneath … a certain part of the population” that “don’t feel like the insurance companies are looking out for their interests.” The administration, Bannon said, should view this as a “flashing red” signal that they needed to look at “alternative models” of health care delivery.
“You can’t have this kind of situation where you have this anger and it boils over to people gunning down people, shooting them in the back in the middle of midtown Manhattan,” he told The Free Press in December. “You’re literally gonna have a French Revolution, and that’s what I’m trying to avoid.”
THE LAUNCH AND/OR PRESERVATION OF THE CIVIL INVESTIGATION into UnitedHealth’s billing practices, which is also the subject of a sprawling year-old federal antitrust probe, comes at an especially weird time, as the agency is still litigating a 14-year-old case about the company’s rampant use of fake diagnoses to juice revenues. That litigation is not going well. Earlier this week, a former judge appointed as a “special master” to sift through discovery in the case issued a baffling opinion recommending the judge dismiss it entirely. The 50-page ruling, in which the judge essentially accuses the government of trying to prosecute innocent clerical errors, makes for an insane read for anyone familiar with the facts of the case as originally laid out in the whistleblower complaint filed by Ben Poehling, a former risk adjustment executive, in 2011. “When I first saw Ben’s case, I immediately sold all my shares in the company,” a former UnitedHealth executive tells the Prospect.
Poehling’s case dates back to 2005, when UnitedHealth bought a massive California-based HMO called PacifiCare that had specialized in Medicare patients. Two years earlier, George W. Bush’s Centers for Medicare and Medicaid Services, under the direction of Tom Scully, had introduced the concept of the “risk score,” by which Medicare HMOs were reimbursed for covering patients commensurate with a patient’s relative “risk” of needing expensive care. It was an open secret throughout PacifiCare that its doctors had been “incentivized” to concoct phony diagnoses in order to juice its scores. At least 30 percent of the diagnoses on patients’ charts were not supported by a cursory glance at their medical records, the lawsuit claims, and by 2008 this “open secret” had reached the highest levels of UnitedHealth. By 2011, subsequent audits suggested the number of bogus diagnoses among practices in California and Texas that had profit-sharing contracts with PacifiCare was closer to 45 percent. A practice called Edinger had reported alcohol and drug dependence in its patients at more than triple the rate of the broader population; another called CAIPA reported more than triple the rate of chronic hepatitis.
Unlike a bogus MRI or an unnecessary hospital stay, this new wrinkle required CMS to pay PacifiCare a substantial additional sum of money every year until the patient died. So the agency had begun to vow to crack down on conspicuous cases of abuse. Poehling flagged the problem repeatedly with his superiors, who in turn alerted the UnitedHealth compliance department. Over the 20 years that followed the insurance giant’s buyout of PacifiCare, UnitedHealth repeatedly convened efforts to review random samples of its patients’ medical charts for signs of fraud, only to use the exercise as a kind of mass training session for how to squeeze out more profits from the government.
George W. Bush’s CMS, under the direction of Tom Scully, had introduced the concept of the “risk score,” by which Medicare HMOs were reimbursed.
To diagnose these conditions, the insurer proceeded to buy up dozens of medical practices in every corner of the country. But the doctors they acquired were not as easy to “incentivize” as the ones at Edinger and CAIPA had been for PacifiCare. “They were always saying, doctors are stuck in the past, they don’t ‘get’ value-based care,” says O’Meara. “That was supposed to be my job.” But O’Meara soon realized she didn’t totally “get” it either.
O’Meara’s job title was “embedded NP,” and it was a new one for UnitedHealth. It was supposed to involve a mix of duties: helping out at the clinic and a sister practice to see patients who hadn’t seen a primary care provider since the COVID lockdowns and plugging in other “care gaps”; training physicians at a partner clinic in the ways of value-based care; and occasional home visits of patients who were either bedbound, hadn’t been seen for multiple years by any health care provider and needed to be tracked down, or whose names simply popped up on the risk adjustment guy’s algorithms for one reason or another. “You need to think of this as a startup,” a population health physician told her when she complained that the role was too nebulous.
The office managers were particularly grateful for her help: The clinics had seen a mass physician exodus since the UnitedHealth acquisition, and they lost five orthopedic surgeons right after she took the job. Every primary care physician had so many patients that they were not allowed to take on new ones, but UnitedHealth kept squeezing new Medicare Advantage enrollees onto their schedules. O’Meara quickly realized that she couldn’t refill medications or get back to a patient on lab test results if she was out visiting a nursing home or trying to train doctors at a network practice with a totally different electronic medical records system. And she eventually gleaned that she hadn’t actually been hired to “fill care gaps” even if there were plenty of gaps needing to be filled. “Care” was more like a pretext for what the risk adjustment guy needed her to do, which was gain access to patients’ medical records so as to add new diagnoses to their charts.
The easiest way to do this was to show up at a patient’s visit with a specialist and spend 15 to 20 minutes running a software program called Clinovations, which would scan a patient’s medical record and spit out as many as 20 new illnesses or conditions to screen. In theory, the doctors were supposed to run the algorithm themselves, but “it’s so time-consuming I don’t understand how anyone expected them to do that.” NPs were allowed to diagnose certain things like PAD or secondary hyperaldosteronism, which O’Meara’s bosses claimed she could add to the chart of any patient with congestive heart failure on her own. But she felt much more comfortable checking with a specialist physician first, which is how she learned that the clinic’s nephrologists did not endorse Clinovations’ liberal approach to secondary hyperaldosteronism. (Neither do most doctors outside UnitedHealth, whose Medicare Advantage patients are 40 times likelier to be diagnosed with the condition than traditional Medicare patients.) Sometimes the algorithm would prompt her to pore over long-ago chest X-rays for signs of “aortic calcification,” or screen a patient for serious mental illnesses despite their exhibiting no signs of suffering from one.
Home visits were even more enigmatic. Once, she found herself outside a halfway house looking for a patient no one knew; she later learned that major depressive, bipolar, and paranoid disorders could add an “adjustment” in excess of $4,000 per year to UnitedHealth’s annual premium for a patient. Another time, she drove five hours and took two ferry rides to see a homebound man who simply needed someone to refill his prescriptions, a task UnitedHealth could have easily accomplished through the mail. “There was this attitude that because I was a nurse, I could go anywhere without an appointment,” O’Meara says. “But the culture around everything was so pushy and sometimes desperate, it felt more like sales.”
There was a twist, because every day brought a new “mystery mission.” She began to read more about the philosophy of value-based care and compared notes with a friend who had been working at the insurer’s Home Visits subsidiary. The puzzle pieces began to click together. They had both been hired specifically to add bogus diagnoses to patients’ charts; they just hadn’t quite realized it because the actual institutions through which the insurer came into contact with its patients were so hollowed out and chaotic. The algorithms had been “nudging” them in that direction, but no one had ever reprimanded her for refusing to be nudged. It felt like a perfect crime.
Still, she was glad to tell the assistant U.S. attorneys all she knew, and she was impressed when one said she had been working on UnitedHealth since Poehling had been working undercover as a whistleblower. In a mind-numbingly specific amended complaint naming no fewer than 73 UnitedHealth executives, Poehling, armed with an arsenal of internal company documents, details how efforts to purge the fake diseases and refund CMS were repeatedly scrapped. One group of executives pushed the auditors to step up their efforts to scour the charts for new unlisted diagnoses, while another lobbied CMS—in vain—to essentially give them permission to continue defrauding the agency, at one point threatening to sue the government if it refused to credit the company for new maladies unearthed in the process of deleting (or thinking about deleting) bogus diagnoses. Finally in 2014, three bosses, including the late Brian Thompson, decided to scrap the “chart verification” effort entirely and pretend it never happened.
It is difficult to imagine how Special Master Suzanne Segal, a retired judge and mediator for hire to whom the appointed judge has apparently outsourced the case—Medicare Advantage–style?—was able to conclude, as she did this week, that Poehling and the Justice Department were “lacking any evidence.” Segal criticized the DOJ for failing to present specific evidence that certain patients’ medical records conflicted with their risk scores, but this likely stems from a failure during the discovery process, during which UnitedHealth repeatedly refused to comply with the government’s “onerous” and “arbitrary” demands and Segal frequently sided with the health care juggernaut.
O’Meara is not optimistic that Attorney General Pam Bondi’s new investigation into the abuses it has promoted for two decades now will be any more successful, but she was impressed that investigators had not given up the fight. “The system works this way because the people in power are really, really invested in ‘value based care,’” sighs O’Meara, whose own background research has led her to “credit” Obama health reform czar Zeke Emanuel for planting the ideological seeds from which UnitedHealth’s kudzu conquered the health system. “But if most Americans knew that value-based care is just a fancy word for ‘rationing’ they’d never stand for it.”
