Aetna, a health insurance subsidiary of CVS Health, has agreed to pay $117.7 million to resolve allegations by the U.S. government that it improperly submitted inaccurate diagnostic codes to inflate payments under the Medicare Advantage system. The settlement addresses claims that the insurer misrepresented certain patient conditions, including severe obesity, resulting in higher reimbursements from the federal healthcare program. Analysts at YourDailyAnalysis note that the case underscores growing regulatory scrutiny of risk-adjustment practices within privately managed Medicare plans.
The dispute centers on the structure of Medicare Advantage, also known as Medicare Part C, which allows beneficiaries to receive coverage through private insurers instead of traditional Medicare. Under this model, insurers receive payments from the federal government that are adjusted based on the reported health risks of enrolled patients. Higher risk scores – typically linked to more serious diagnoses – translate into higher government payments, creating a system that regulators have increasingly examined for potential abuse.
The United States Department of Justice said the civil settlement resolves allegations that Aetna submitted diagnosis codes related to severe obesity for patients whose documented body mass index did not support the classification. According to government claims, these inaccurate submissions occurred between 2018 and 2023 and led to inflated reimbursements through the risk-adjustment framework administered by the Centers for Medicare & Medicaid Services.
Analysts at YourDailyAnalysis point out that the financial incentives embedded in Medicare Advantage’s risk-adjustment system have long been a source of tension between insurers and regulators. While the structure is intended to ensure that plans treating sicker populations receive adequate funding, it also creates opportunities for coding practices that can significantly increase federal payments if diagnoses are overstated or inaccurately recorded.
In addition to the coding allegations, federal authorities claimed Aetna failed to retract inaccurate diagnostic codes identified during a 2015 medical-record audit. Analysts at YourDailyAnalysis observe that such audits play a critical role in verifying whether insurers’ reported diagnoses match underlying medical documentation, a process that has become increasingly central as Medicare Advantage spending continues to expand.
The scale of the program adds to the regulatory pressure. According to the Justice Department, private insurers collectively receive more than $530 billion annually to administer Medicare Advantage plans. Analysts at YourDailyAnalysis note that this rapid growth has turned risk-adjustment oversight into one of the most closely monitored areas of federal healthcare spending.
Despite agreeing to the settlement, CVS Health said the decision was made to avoid the uncertainty and expense associated with prolonged litigation. The company emphasized that Aetna disputes the government’s allegations and maintains that the agreement should not be interpreted as an admission of wrongdoing.
The settlement follows a whistleblower lawsuit filed in January 2024 in federal court in Philadelphia by Mary Melette Thomas, a former Aetna risk-adjustment coding auditor based in Arizona. Under the terms of the resolution, the Justice Department said she will receive approximately $2.01 million from the recovered funds. Analysts at YourDailyAnalysis note that whistleblower provisions under the False Claims Act continue to play a major role in exposing alleged healthcare billing irregularities across the industry.
More broadly, the case reflects a wider enforcement trend targeting billing practices in federal healthcare programs. As Your Daily Analysis highlights, regulators are increasingly focused on ensuring that diagnostic coding accurately reflects patients’ medical conditions, particularly as Medicare Advantage enrollment continues to grow and federal spending on the program reaches record levels.
