UnitedHealth Confirms DOJ Criminal and Civil Investigation for Medicare Advantage Upcoding Fraud

On July 24, 2025, UnitedHealth Group confirmed in an SEC filing that the Department of Justice has launched both criminal and civil investigations into the company’s Medicare Advantage billing practices, focusing on systematic upcoding fraud that may have generated billions in government overpayments. This represents the largest Medicare Advantage fraud investigation in history, targeting the nation’s largest health insurer for allegedly manipulating diagnosis codes to inflate patient risk scores and extract higher federal reimbursements.

The Upcoding Fraud Scheme

The DOJ investigation focuses on whether UnitedHealth systematically inflated or fabricated patient diagnoses to increase “risk scores” that determine Medicare Advantage payments from the Centers for Medicare & Medicaid Services (CMS). Higher risk scores trigger larger monthly payments, creating financial incentives to make patients appear sicker on paper than they actually are.

According to the Wall Street Journal’s analysis of Medicare data between 2019 and 2021, UnitedHealth received $8.7 billion in payments from the federal government for diagnoses not documented in treatment claims from members—suggesting widespread diagnosis coding that never resulted in actual medical care.

Key patterns identified in the investigation include:

In-Home Health Risk Assessments: The Journal found that in-home assessments conducted by UnitedHealth nurses triggered an average of $2,735 in added federal payments per visit. These assessments frequently added high-value diagnoses that inflated risk scores without corresponding treatment.

Rare Disease Over-Diagnosis: Patients under UnitedHealth-employed physicians were diagnosed at significantly higher rates with rare conditions like hyperaldosteronism (a hormonal disorder) compared to patients seeing non-UnitedHealth physicians—suggesting diagnosis coding for billing purposes rather than legitimate clinical findings.

Vertical Integration Exploitation: UnitedHealth’s acquisition of physician practices through its Optum division created incentives to diagnose Medicare Advantage patients with additional conditions that increased payments to UnitedHealth’s insurance arm, creating systematic conflicts of interest.

Scale of Alleged Overpayments

A 2024 report by the Department of Health and Human Services Office of Inspector General found that UnitedHealth stood out from its competitors in using questionable diagnosis data to boost Medicare Advantage payments. The government alleges UnitedHealth failed to return at least $2 billion in Medicare Advantage overpayments—though the actual figure may be substantially higher based on ongoing audits.

Industry-wide, CMS estimates the Medicare Advantage program pays out $10 billion annually based on unsupported diagnoses. UnitedHealth, as the largest Medicare Advantage insurer covering approximately 7.9 million Medicare Advantage beneficiaries, likely accounts for a substantial portion of these fraudulent payments.

The Medicare Payment Advisory Commission (MedPAC) estimates overall Medicare Advantage overpayments could reach $43 billion per year when accounting for systematic upcoding across all insurers—representing a massive transfer of taxpayer funds to private insurance companies through fraudulent billing.

Criminal and Civil Investigations

The dual nature of the DOJ investigation—both criminal and civil—indicates prosecutors believe they have evidence of intentional fraud, not merely billing errors or compliance mistakes.

Criminal Investigation: Launched in early 2024, the criminal probe examines whether UnitedHealth executives and employees knowingly submitted false claims to the government, which could result in criminal charges including wire fraud, conspiracy, and making false statements. Criminal charges would require proving intent to defraud the government.

Civil Investigation: The civil False Claims Act investigation seeks to recover fraudulent payments and assess penalties. Under the False Claims Act, the government can recover triple damages plus penalties of $11,000 to $23,000 per false claim—potentially resulting in penalties in the tens of billions of dollars if the government prevails.

The investigations appear to be based in part on whistleblower complaints filed under the False Claims Act, though the government has not publicly disclosed the whistleblowers’ identities or specific allegations.

UnitedHealth’s Defense and Regulatory Capture

In its SEC filing, UnitedHealth defended its practices by claiming “a long record of responsible conduct and effective compliance.” The company stated that “independent CMS audits confirm that the Company’s practices are among the most accurate in the industry.”

This defense demonstrates regulatory capture dynamics:

Audit Gaming: CMS audits sample only a small fraction of diagnosis codes, and insurers have learned to ensure sampled records meet documentation requirements while continuing questionable practices on unaudited claims.

Industry-Wide Comparisons: Claiming to be “among the most accurate in the industry” acknowledges widespread fraud while arguing UnitedHealth is no worse than competitors—a defense that validates systemic corruption rather than demonstrating compliance.

Special Master Defense: UnitedHealth cited a court-appointed Special Master’s conclusion that there was “no evidence to support claims of wrongdoing” in a previous Medicare Advantage challenge. However, this finding came after a decade of litigation during which UnitedHealth could have altered practices to obscure earlier fraud.

Vertical Integration as Fraud Enabler

The investigation scrutinizes how UnitedHealth’s vertical integration—owning both the insurance company (UnitedHealthcare) and physician networks (Optum)—facilitates systematic upcoding. Optum employs or contracts with approximately 90,000 physicians, making it the largest physician employer in the United States.

This integration creates multiple fraud opportunities:

Physician Financial Incentives: UnitedHealth-employed physicians know their diagnosis coding directly increases payments to their corporate parent, creating pressure to upcode patient risk scores.

Data Control: UnitedHealth controls both the medical records and the billing systems, making it easier to add diagnosis codes that lack clinical support without detection.

In-Home Assessments: UnitedHealth can send its own nurses to conduct “health risk assessments” that add diagnoses without the patient’s regular physician’s knowledge, circumventing normal clinical oversight.

Protected Information: Vertical integration allows UnitedHealth to keep diagnosis coding practices internal, preventing external physicians, competitors, or regulators from easily detecting patterns of fraud.

Industry-Wide Business Model

While UnitedHealth faces the largest investigation, Medicare Advantage upcoding represents an industry-wide business model, not an isolated case:

• Humana faces DOJ audits showing 69% of risk-adjustment diagnoses lacked medical record support in some audits
• CVS/Aetna is under federal audit for inaccurate risk-adjustment scores
• Cigna paid $170 million in 2023 to settle similar upcoding allegations

The systematic nature across all major Medicare Advantage insurers demonstrates that fraud is built into the Medicare Advantage program’s risk-adjustment payment system, which creates perverse incentives for insurers to maximize diagnosis codes regardless of clinical accuracy.

Market Impact and Stock Decline

Following reports of the DOJ investigations, UnitedHealth Group’s stock declined more than 42% in 2025. Credit rating agencies S&P Global and AM Best downgraded UnitedHealth’s outlook to negative in June 2025, citing rising costs in its Medicare Advantage business and the risk of large fines or clawbacks of past payments.

The stock decline reflects investors’ recognition that Medicare Advantage upcoding fraud has been central to UnitedHealth’s profitability. If forced to stop fraudulent billing practices and return past overpayments, the company’s financial model becomes unsustainable—revealing that its market dominance was built on systematic fraud rather than legitimate business operations.

Regulatory Capture and Delayed Enforcement

The DOJ investigations represent a rare instance of federal enforcement against Medicare Advantage fraud, but they come after years of documented fraud with minimal consequences:

Delayed Action: Evidence of Medicare Advantage upcoding has been documented since at least 2007, yet criminal investigations only began in 2024—allowing nearly two decades of fraudulent billing to continue.

Audit Backlogs: CMS has failed to complete audits of Medicare Advantage plans for payment years 2011-2017, creating a backlog that allows fraud to continue without consequences. The Trump administration only announced plans to clear this backlog in 2025.

Weak Penalties: Previous enforcement actions resulted in settlements that represented a tiny fraction of fraudulent gains, creating a business model where fraud remains profitable even after penalties.

Industry Lobbying: Medicare Advantage insurers spent hundreds of millions on lobbying to prevent stronger oversight, weaken audit processes, and limit recovery of overpayments.

Systematic Corruption vs. Billing Errors

The DOJ investigations target systematic fraud, not isolated billing errors or compliance mistakes. Evidence suggests UnitedHealth designed systems specifically to maximize diagnosis coding regardless of clinical accuracy:

• In-home health risk assessments conducted by company employees specifically to add diagnoses
• Physician employment contracts that financially reward higher risk scores
• Technology systems that suggest diagnosis codes to maximize payments
• Corporate cultures that measure physician “productivity” based on risk adjustment revenue

This represents institutional capture where a private company systematically defrauds a government program, demonstrating that Medicare Advantage itself has become a vehicle for transferring taxpayer funds to corporations through legalized and illegal fraud.

Public Health Implications

The upcoding fraud diverts billions from actual healthcare delivery to insurance company profits:

• Medicare Advantage plans receive higher payments while providing fewer benefits than traditional Medicare
• Resources spent on fraudulent diagnosis coding could fund actual patient care
• Patients may receive unnecessary diagnoses on their medical records, potentially affecting future care and insurance coverage
• The fraud undermines trust in Medicare and provides ammunition for those seeking to privatize or cut the program

Ongoing Investigation Status

As of July 2025, the investigations remain active with UnitedHealth cooperating with “both criminal and civil requests” from the DOJ. The company has not been charged, and outcomes remain uncertain. However, the confirmation of criminal investigation indicates prosecutors believe they have evidence of intentional fraud, not merely technical violations.

The case represents the most significant challenge to Medicare Advantage fraud in the program’s history and could result in:

• Criminal charges against corporate executives
• Multi-billion dollar settlements or judgments
• Exclusion from Medicare programs
• Structural reforms to prevent future fraud

However, given the pharmaceutical and insurance industries’ regulatory capture and political power, the ultimate outcome may involve settlements that allow the fraud to continue with minimal penalties—demonstrating that systematic corruption has made large-scale healthcare fraud a standard business practice with limited consequences.