As privately run Medicare health plans for seniors scramble to stave off proposed funding cuts, federal prosecutors in Florida are pursuing an unusual criminal fraud case that's likely to raise new concerns that some plans may be overcharging the government.

The criminal case is believed to be among the first to take aim at billing practices of Medicare Advantage plans, which are popular with seniors because out-of-pocket costs are lower and they provide more benefits than traditional Medicare.

The case centers on a South Florida doctor affiliated with Humana Inc., one of the industry's biggest players.

A federal grand jury in West Palm Beach, Fla., indicted the doctor, Isaac Kojo Anakwah Thompson, on eight counts of health care fraud on Feb. 4. He's accused of cheating Medicare out of about $2.1 million by claiming his Humana-enrolled patients were sicker than they actually were. Thompson, 55, was arrested and is free on a $1 million bond. Through his lawyer, he declined comment.

The indictment does not accuse Humana of wrongdoing. Company spokesman Tom Noland said in an email that the Louisville, Kentucky-based insurer is "cooperating fully with the authorities." He said Thompson was never employed by the company and is "no longer a participating physician with Humana."

Noland said Humana has repaid the government, but declined to say how much.

Still, the case is likely to draw heightened scrutiny to potential billing fraud and abuse in Medicare Advantage as well as questions about the effectiveness of government oversight of the fast-growing industry, which costs taxpayers more than $150 billion a year.

"Every criminal indictment raises the stakes on Medicare Advantage fraud," said Patrick Burns, co-director of Taxpayers Against Fraud in Washington. "It's clear that the noose is tightening, and the risk equation is shifting."

Medicare Advantage plans are paid a set fee monthly for each patient based on a complex formula known as a risk score . Essentially, the government pays higher rates for sicker patients and less for those in good health.

But overcharges, intentional or not, have cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series published last year.

The Florida indictment comes as the industry mounts a major advocacy and public relations offensive in Washington to stave off proposed budget cuts.

The Centers for Medicare and Medicaid Services, or CMS, is set to propose rates that the health plans will be paid next year, on Feb. 20. The Obama administration's 2016 budget seeks to cut some $36 billion from Medicare Advantage plans over the next decade related to risk scores.

Two groups are leading the charge to nullify any cuts, including the Better Medicare Alliance, which calls itself "the leading advocacy organization" for Medicare Advantage. Its sponsors include Humana and UnitedHealth Group, which together cover about 40 per cent of the 16 million people on Medicare Advantage.

Interim executive director Krista Drobac said the alliance "was launched to focus on the value proposition of Medicare Advantage and to build support for protecting and strengthening the program."

A second group called the Coalition for Medicare Choices , which was set up by the insurance industry trade association America's Health Insurance Plans and boasts 1.8 million members, also is "mobilizing" to pressure Congress and the White House to back off. It pleads its case in a video ad .

CMS officials concede that billions of tax dollars are misspent every year when Medicare Advantage plans exaggerate how sick their patients are, a practice known as "upcoding." The Government Accountability Office , the watchdog arm of Congress, also is auditing Medicare Advantage billing practices. Results are due later this year.

And some members of the Medicare Payment Advisory Commission or MedPac, which advises Congress on eldercare issues, have suggested the Medicare Advantage risk scoring system triggers overcharges. At a December 2014 meeting MedPac chairman Glenn M. Hackbarth said the group had seen "empirical evidence" of upcoding.

The Center for Public Integrity has previously reported on several whistleblower lawsuits, including one filed by a Miami doctor against Humana, that allege upcoding. In that case, Olivia Graves alleges that a Humana medical center had diagnosed abnormally high numbers of patients with diseases such as diabetes with complications that boosted Medicare payments — diagnoses that "were not supported by medical records." Graves alleges that Humana knew about the overcharges but took no action to stop them, which Humana denies.

These civil cases, even if they result in large judgments, may have minimal impact. Bringing criminal charges, as prosecutors in Miami have done for the first time, raises the stakes dramatically because convictions could bring prison terms of up to ten years.

According to the grand jury, Humana paid Thompson, who ran medical centers in Delray Beach and Boynton Beach, about 80 percent of the money it received from CMS for treating patients. In exchange, the medical center was responsible for paying for all of the members' medical care.

Thompson allegedly reported "false and fraudulent" diagnoses to Humana, which then passed them on to Medicare for payment. The indictment cites eight patients with three medical conditions, including four people said to have "ankylosing spondylitis," a disease of the spine that can cause abnormal bone growth.

According to the grand jury, other phony diagnoses included "inflammatory polyarthropathy," in which five or more joints in the body are inflamed or swollen, and "major depressive affective disorder." That's a severe form of depression that involves a "loss of contact with reality," according to the indictment.

The indictment states that as a result of the inflated risk scores Medicare made "excessive payments" of more than $2.1 million. Humana passed about 80 percent of that amount to Thompson's medical center. The grand jury did not say what happened to the remaining money.

But Humana spokesman Noland wrote in an email: "Humana has reimbursed the government to ensure that both the 20 percent and the 80 percent were paid back in full, thus making the government whole."

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