UNH Denies Medicare Fraud Allegations, Stock Plunges

UnitedHealth Group (UNH), the nation's largest health insurer, has forcefully rejected allegations of fraudulent practices in its Medicare Advantage plans, following a report by The Wall Street Journal (WSJ) that the U.S. Department of Justice (DOJ) has launched an investigation into the company's billing practices. The WSJ reported that the DOJ is probing whether UNH tends to over-diagnose conditions to earn larger Medicare Advantage payouts. UNH's stock price tumbled more than 10% in pre-market trading on Friday, February 22, 2025, following the report.



UNH issued a strong rebuttal to the WSJ's reporting, stating that the newspaper has been publishing misinformation and denying awareness of any "new" review activity as reported by the publication. The company emphasized that it consistently performs at the industry's highest levels during regular government compliance reviews of MA plans and firmly rejects any allegations of fraudulent practices, describing such suggestions as "outrageous and false."

The Medicare Advantage program represents approximately 28% of UNH's total revenue, making any regulatory scrutiny or compliance concerns material to investor consideration. The company's emphasis on "consistently perform[ing] at the industry's highest levels" on government reviews appears designed to preempt potential regulatory action and maintain stakeholder confidence.

The statement's reference to "volume over keeping patients healthy" highlights the ongoing industry transition from fee-for-service to value-based care models. This transformation has profound implications for profitability metrics and operational strategies across the healthcare sector. UNH's position as the largest Medicare Advantage provider makes it particularly sensitive to any shifts in program oversight or payment methodologies.

Three key aspects deserve investor attention:

1. Regulatory Risk: The emphatic denial of fraudulent practices suggests heightened sensitivity to compliance oversight, particularly as Medicare Advantage has grown to cover over 50% of eligible beneficiaries.
2. Operational Impact: The company's defense of its review performance indicates robust internal controls, but any intensified scrutiny could increase administrative costs and compliance burdens.
3. Market Perception: Media investigations can influence policy discussions and regulatory approaches, potentially affecting investor sentiment and valuation multiples in the healthcare insurance sector.



The broader context involves intensifying scrutiny of Medicare Advantage risk-adjustment practices and payment accuracy. Historical precedents show that regulatory investigations in this space, even when unfounded, can create significant market uncertainty and compliance costs for industry participants.

In conclusion, UNH's strong rebuttal to the WSJ's reporting carries significant implications for investors in the $470 billion market cap healthcare giant. The statement's defensive posture and timing warrant careful analysis of several critical factors, including regulatory risk, operational impact, and market perception. As the investigation unfolds, investors should monitor developments closely to assess the potential impact on UNH's financial performance and market position.