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Amerigroup Settles Medicaid Fraud Charges, Whistleblower Awarded $56.3 Million

Aug 15, 2008 | Parker Waichman Alonso LLP

Amerigroup will pay $225 million to settle charges of Medicaid fraud, the U.S. Justice Department said on Thursday. A former Amerigroup employee, Cleveland Tyson, who filed the original lawsuit against the company, will receive $56.3 million of the settlement under federal whistleblower law.

The agreement reached with both the Justice Department and Illinois state officials settles allegations that the Amerigroup's health plans illegally excluded pregnant women and unhealthy patients in the Illinois Medicaid plan. Medicaid is the state-federal health plan for the poor.

In 2002, Tyson filed a lawsuit against Amerigroup, revealing the insurer was overcharging the government tens of millions of dollars by turning away pregnant women and unhealthy patients who wanted to enroll in the company's Illinois Medicaid plan.  That practice is illegal because Amerigroup was already being paid by both the federal government and the state of Illinois to insure anyone seeking to join its Medicaid plan, no matter how sick they were.

Tyson was able to provide key names of employees at Amerigroup who condoned the redlining of patients who cost too much to insure.  Seeing the kind of proof Tyson had, the Department of Justices eventually signed on to the lawsuit.   

In 2006, a jury agreed that Amerigroup had committed fraud.  Amerigroup was slapped with a $334 million judgment.  The company appealed the ruling, but says that now that a settlement has been reached, it will ask that the appeal be dismissed.  In addition to the financial settlement, Amerigroup has also entered into a corporate integrity agreement with regulators, requiring it to implement new policies to prevent discrimination.

"A settlement of this magnitude sends the clear message that this office takes health care fraud very seriously," said Patrick Fitzgerald, the U.S. attorney for the northern district of Illinois, in a statement. "This case also illustrated the perils a defendant faces in taking a case such as this to trial."

Under federal whistleblower laws, Tyson was eligible for 15 percent to 25 percent of the total settlement. He was awarded the maximum amount because he was so crucial to the case, a federal prosecutor said.