Aetna Agrees to Pay $117.7 Million to Settle Medicare Advantage Fraud Allegations — Nursing Home Residents Caught in the Crossfire

WASHINGTON, D.C. — Aetna Inc. has agreed to pay $117.7 million to settle federal allegations that the national insurer manipulated Medicare Advantage billing to pocket millions in inflated payments — a scheme that put senior care funding directly at risk.

The U.S. Department of Justice announced the False Claims Act settlement this week, alleging that Aetna submitted inaccurate patient diagnosis codes to the Centers for Medicare and Medicaid Services in order to overstate how sick its Medicare Advantage enrollees were. Under the MA program, sicker patients mean higher payments. The government says Aetna played that system.

How the Scheme Worked

The government’s case spans nearly a decade. For payment year 2015, Aetna ran what it called a “chart review” program — paying outside coders to scan patient records for any diagnoses that could be billed to CMS. When those reviews found additional diagnoses, Aetna added them to inflate payments. When the same reviews showed diagnoses that didn’t hold up — ones that would have required Aetna to pay money back — the company simply looked the other way.

“Aetna used the results of its chart reviews to identify instances where Aetna could seek additional payments from CMS while ignoring those same results when they indicated Aetna was overpaid,” the DOJ alleged in its announcement.

The settlement also covers a separate morbid obesity billing scheme that ran from 2018 through 2023. Aetna allegedly submitted or failed to delete diagnosis codes for morbid obesity for patients whose documented body mass index readings didn’t actually support that diagnosis. That case started with a whistleblower — a former Aetna risk-adjustment coding auditor — who filed suit under the False Claims Act and will receive $2 million from the settlement.

What It Means for Nursing Homes

The stakes go well beyond Aetna’s balance sheet. Medicare Advantage now covers more than half of all Medicare beneficiaries, and MA plans are an increasingly dominant payer for skilled nursing facilities. When insurers game risk-adjustment payments, the downstream effect is a distorted payment system — one that affects which patients get admitted, what services they receive, and how facilities are reimbursed.

The settlement comes as CMS is under growing scrutiny over its Medicare Advantage oversight. A recent MedPAC report found that Medicare overpays MA plans by an estimated $76 billion annually, driven largely by the kind of coding manipulation that Aetna is now paying to settle. As scrutiny of Medicare Advantage insurers intensifies in the courts, nursing home operators are watching closely — many have struggled with MA plans delaying or denying post-acute care authorizations.

“The government pays private insurers over $530 billion each year to care for Americans enrolled in Medicare Advantage,” said Assistant Attorney General Brett A. Shumate. “We will continue to hold accountable insurers that knowingly submit inaccurate or unsupported diagnoses to improperly inflate reimbursement.”

Growing Enforcement Pressure

The Aetna settlement isn’t an isolated move. The Trump administration has made healthcare fraud a top priority, recently freezing $259 million in Medicaid funds from Minnesota over potentially fraudulent claims and imposing a moratorium on Medicare enrollment for certain durable medical equipment suppliers.

Acting HHS Inspector General Scott J. Lampert put it directly: “No company is beyond accountability, no matter how large or well known.”

For nursing homes already squeezed by rising costs and flat reimbursement rates, settlements like this serve as a reminder that the entire Medicare Advantage ecosystem — which facilities rely on for a growing share of their revenue — is under a federal microscope. And that pressure isn’t going away anytime soon.