Department of Justice Seal Department of Justice
TUESDAY, JUNE 25, 2002
TDD (202) 514-1888


WASHINGTON, D.C. The Justice Department announced today that the United States settled a lawsuit filed in the United States District Court for the Eastern District of Missouri against General American Life Insurance Company, Inc., which acted as the Medicare Part B carrier in Missouri until December 31, 1998. Under the terms of the settlement, General American will pay the United States $76 million and will refrain from seeking business with Medicare for a five-year period.

The lawsuit alleges that General American knowingly provided false information to the Centers for Medicare and Medicaid Services (formerly known as the Health Care Financing Administration), the agency responsible for administering the Medicare program. The allegations were originally brought in a whistleblower case under provisions of the False Claims Act by two former employees of General American, Harry and Nancy Riggs.

Under the Act, the plaintiff, also known as a "relator," can recover 15 to 25 percent of the damages paid to the United States, if the government intervenes in the action. As part of the settlement of this case, the relators will receive 19 percent or $14.4 million of the $76 million settlement. The case was brought in 1999 but remained under seal while the government conducted an investigation into the allegations.

"This settlement demonstrates the government's determination to combat health care fraud not only by providers but also by health care insurers who submit false claims to Medicare," said Robert D. McCallum, Assistant Attorney General for the Justice Department's Civil Division.

As a Medicare Part B carrier, General American acted under contract with the Centers for Medicare and Medicaid Services to process claims submitted by Medicare beneficiaries and their doctors or other health care providers in accordance with Medicare coverage and payment rules. Under its contract, General American was responsible not only for making individual determinations regarding eligibility and coverage but also for processing approved claims for payment from the Medicare trust fund. The Centers for Medicare and Medicaid Services evaluated the adequacy of General American's claims processing and related services through periodic performance audits.

This settlement resolves the whistleblowers' allegations that General American failed to process claims properly and then submitted false information to the Centers for Medicare and Medicaid Services regarding both the accuracy and the timeliness with which it handled those claims. The lawsuit and the government alleged that General American breached its contractual obligations by failing to report errors which they had identified in the quality assurance process and further concealed its true error rate by deleting claims selected for review by the Centers for Medicare and Medicaid Service's Kansas City Regional Office.

General American employees deleted those quality assurance claims which they believed would adversely affect their error rate and replaced the deleted claim files with claim files which they believed to be satisfactory, i.e. ones which would not significantly affect their error rate and ultimately their standing within the carrier rankings in terms of performance. Additionally, General American hid documents, altered other documents and falsified numerous reports mandated by the Centers for Medicare and Medicaid Services.

General American manipulated its quality assurance data in order to maintain a high carrier ranking. In 1984, prior to the implementation of the scheme, General American was the 38th ranked Medicare carrier. Subsequent to implementation of the scheme, General American rose, in 1986, to a ranking of number two. This favorable ranking assisted General American in retaining its Medicare contract and competing for additional contracts throughout the country.

"When allegations are made that false claims are being submitted for payment by Medicare, they will be fully investigated, and all parties responsible will be aggressively pursued," added Ray Gruender, United States Attorney for the Eastern District of Missouri. "Our primary objective in this case was two-fold: first, to protect the Medicare trust fund by recovering all losses caused by General American's improper reporting of its error rates; and second, to send a message to government contractors that they will play a stiff price if we catch them deceiving a government program."

"As today's $76 million settlement illustrates, the government expects absolute integrity on the part of both Government contractors and health care providers, " said Health and Human Services Inspector General Janet Rehnquist. "Wrong doers should expect that, taxpayers should demand that and beneficiaries should settle for nothing less."

"The FBI will devote the resources necessary to uncover health care fraud in all its forms, including when contractors who are responsible for safeguarding the Medicare trust fund abuse this trust," said William G. Eubanks, Special Agent in Charge of the St. Louis Office of the Federal Bureau of Investigation.

General American, headquartered in St. Louis, Mo., is a wholly owned subsidiary of GenAmerica Corporation. General American acted under contract with the Centers for Medicare and Medicaid Services from 1966 through December 31, 1998. General American withdrew from the Medicare program on December 31, 1998, prior to the filing of the whistleblower lawsuit. On January 6, 2000, Metropolitan Life Insurance Company, headquartered in New York City, acquired GenAmerica Corporation, the parent company of General American.