Claire Rowe
Associate Editor
Loyola University Chicago School of Law, JD 2026

The Department of Justice (DOJ) has launched a civil fraud investigation into UnitedHealth’s Medicare billing practices, scrutinizing allegations that the company improperly inflated patient diagnoses to secure higher federal payments. While the investigation was publicly announced via the Wall Street Journal recently, it has been underway since 2024. This development follows the December 2024 death of UnitedHealth CEO Brian Thompson, which sparked renewed public discourse on the ethics of insurance companies. Many individuals came forward with stories of denied coverage for life-saving treatments, raising broader concerns about the practices of private insurers managing Medicare benefits.

Medicaid, Medicare, and Medicare Advantage

Medicaid is a joint federal and state program that provides health insurance for low-income individuals and families. Medicare, on the other hand, is a federal program that offers health coverage to people aged 65 and older, as well as individuals with certain disabilities. Medicare has four main components: Part A covers hospital stays, skilled nursing care, and some home health services. Part B includes outpatient care, doctor visits, and preventive services. Part C, also known as Medicare Advantage, is a private health plan alternative that combines Parts A and B and often provides additional benefits. Lastly, Part D offers prescription drug coverage. Over 65 million Americans are enrolled in Medicare. Roughly half of these beneficiaries are enrolled in Medicare Advantage plans, a system that allows private insurers to manage patient care while receiving federal payments. Under this structure, insurers receive higher reimbursements when patients are diagnosed with certain conditions, creating an incentive to inflate diagnoses.

Fraudulent billing practices and patient harm

Medicare Advantage insurers have long been accused of using fraudulent schemes to maximize profits at the expense of taxpayers and patients. One major tactic involves inflating diagnoses to trigger higher government reimbursements. Insurers have been found adding serious conditions, such as diabetic cataracts and HIV, to patient records without medical evidence, resulting in approximately $50 billion in excess payments from 2019 to 2021. Additionally, insurers deployed nurses for home visits to diagnose conditions that doctors had not identified, generating another $15 billion in Medicare payments. These questionable diagnostic methods further raise concerns about the accuracy and integrity of patient records.

Another scheme involved enrolling veterans who primarily used the Department of Veterans Affairs (VA) for healthcare. Since the VA cannot bill Medicare, insurers collected Medicare payments for veterans while providing minimal services. Similarly, insurers incentivized doctors to over-diagnose patients by offering financial bonuses for adding unchecked conditions to patient records. UnitedHealth reportedly used physician checklists to artificially inflate patient illness severity, making them appear significantly sicker than they actually were.

Perhaps most concerning, Medicare Advantage insurers have been accused of pushing out high-cost, seriously ill patients. Many individuals requiring expensive treatments, such as nursing home care, left Medicare Advantage plans at disproportionately high rates, saving insurers billions while shifting costs to traditional Medicare and taxpayers. This pattern suggests that insurers may be systematically denying critical care to their sickest patients, forcing them to seek alternative coverage.

UnitedHealth’s role

The DOJ’s recent investigation is focused on UnitedHealth Group, the largest Medicare Advantage provider, over allegations that it inflated patient diagnoses to secure higher federal payments. Reports indicate that when patients switched from traditional Medicare to UnitedHealth’s plans, they were documented as 55% sicker in their first year—an artificial increase that led to an estimated $8.7 billion in extra federal payments in 2021 alone.

The investigation focused on UnitedHealth’s use of incentive programs and software that allegedly suggested unnecessary diagnoses, prompting concerns about the accuracy of patient records and potential fraud. Medical providers have been questioned about these practices, and the scrutiny has caused a decline in UnitedHealth’s stock value. While the company denies any wrongdoing, stating that its methods improve disease detection and efficiency, the probe has intensified regulatory concerns.

Beyond the DOJ’s efforts, Iowa Senator Chuck Grassley has launched a separate inquiry, requesting information on UnitedHealth’s training manuals, compliance programs, and audit results. His investigation aims to determine whether the company’s billing practices contribute to fraud, waste, and abuse within Medicare, further amplifying scrutiny on the insurer’s role in the program.

Regulatory landscape and future implications

Insurance regulation in the U.S. is shaped by decades of federal laws. The McCarran-Ferguson Act (1945) granted states primary control over insurance regulation, while the Employee Retirement Income Security Act (ERISA) of 1974 set standards for employer-sponsored plans. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 introduced protections for pre-existing conditions, and the Affordable Care Act (ACA) of 2010 expanded Medicaid and improved affordability. More recently, the No Surprises Act (2021) implemented protections against unexpected out-of-network charges. Despite the rise of abusive health insurance practices, no federal law has been enacted to curb them.

The UnitedHealth investigation highlights the ongoing tension between the role of private insurers in public healthcare programs. Medicare Advantage was intended to enhance efficiency and patient outcomes but mounting fraud allegations raise concerns that insurers may be gaming the system for profit. If the DOJ confirms these claims, it could trigger major reforms in how Medicare funds are allocated and regulated. Increased oversight, legislative changes, and stricter enforcement could follow to curb abuse and ensure taxpayer money is used responsibly.

Beyond the legal implications, the case also sheds light on deeper ethical issues in the healthcare industry, particularly how insurers balance profit motives with patient care. Whether this investigation leads to meaningful policy changes remains uncertain, but it has certainly intensified scrutiny on Medicare Advantage insurers and their billing practices.