Maryland Sues UnitedHealth Over Alleged $126M Medicaid Fraud

Maryland’s attorney general has sued Optum and its parent, UnitedHealth Group, over a catastrophic failure of the state's behavioral health Medicaid claims system. The complaint alleges the state paid Optum more than $126 million for a system that never became fully functional after the company secretly substituted an untested software platform for the robust system promised in its contract. The system crashed upon its 2020 launch, forcing the state to issue $1.6 billion in emergency estimated payments to providers to prevent a total collapse of the payment infrastructure.

Counsel for healthcare systems and government contractors should note the significant downstream consequences. The state’s emergency measures led to an estimated $220 million in overpayments, triggering years of disruptive audits and recoupment demands against providers for billing errors they did not cause. The suit, which seeks treble damages, highlights the immense operational and legal risks of failed government IT modernization projects and the resulting enforcement actions that can ensnare blameless downstream commercial partners. Providers in Maryland should anticipate continued scrutiny of claims processed between 2020 and 2024.