NON-PROFIT THAT CONNECTS MIGRANT FARMERS WITH LAND, AND WE WILL FILL THE COUCH WITH POLITICOS.

>> Cathy: INDEED WE WILL, BUT FIRST WE'RE GOING TO START WITH THE FEDERAL INVESTIGATION INTO MEDICARE FRAUD AT EDEN PRAIRIE BASED UNITEDHEALTH GROUP.

ON THURSDAY THE COMPANY DISCLOSED IT IS COOPERATING WITH A U.S. DEPARTMENT OF JUSTICE INVESTIGATION.

THE WALL STREET JOURNAL FIRST REPORTED THE DOJ INVESTIGATION IN MAY.

CHRISTOPHER SNOWBECK COVERS HEALTH INSURANCE AND THE HEALTHCARE INDUSTRY FOR THE MINNESOTA "STAR TRIBUNE."

SO IT'S GOOD TO SEE YOU.

>> THANKS FOR HAVING ME.

>> Cathy: WE'RE TALKING ABOUT ALLEGED MEDICARE FRAUD SPECIFICALLY WITH THE MEDICARE ADVANTAGE PROGRAMS.

FOR FOLKS NOT FAMILIAR, WHAT IS THAT?

>> SURE, YEAH, MEDICARE ADVANTAGE GOES BACK TO THE '90s.

REALLY GOT GOING IN THE MID-2000s A LOT MORE.

THIS IS A PRIVATIZED VERSION OF MEDICARE.

IF YOU'RE A SENIOR YOU HAVE A CHOICE, YOU CAN STAY WITH THE ORIGINAL GOVERNMENT PROGRAM OR YOU CAN GET THOSE BENEFITS THROUGH A PRIVATE PLAN.

THAT'S MEDICARE ADVANTAGE.

IT'S A LITTLE MORE THAN HALF OF ALL SENIORS NOW WHO ARE IN MEDICARE ADVANTAGE.

SO THESE PLANS HAVE BECOME A LOT MORE POPULAR.

THEY OFFER EXTRA BENEFITS THAT ARE KIND OF ATTRACTIVE TO FOLKS.

THEY SOMETIMES CAN BE MORE AFFORDABLE, IF YOU'RE IN ORIGINAL MEDICARE YOU GET A MEDIGAP SUPPLEMENT USUALLY, THERE'S A PRICE DIFFERENCE.

MEDIGAPS CAN BE A LITTLE PRICEY, SO, YEAH.

>> Eric: AND THE ALLEGATION IS THAT THEY INFLATED THE DIAGNOSIS TO GET MORE, MAKE IT MORE SERIOUS SO THEY GET MORE REIMBURSEMENT, IS THAT A SIMPLE WAY TO SAY IT >> WERE YEP, THAT'S THE ESSENCE OF IT.

THE ISSUE ITH INSURANCE, YOU DON'T WANT INSURERS TO AVOID PEOPLE WHO ARE SICK, YOU WANT THEM TO COVER EVERYBODY.

BUT TO DO THAT, TO MAKE THAT WORK YOU DO RISK ADJUSTMENT, IN OTHER WORDS YOU PROVIDE EXTRA FUNDING TO INSURERS THAT HAVE PEOPLE WITH MORE HEALTH PROBLEMS.

AND SO THERE'S LIKE A FAIRNESS KIND OF THING THERE.

BUT IN ORDER TO DO THAT YOU NEED DATA ON THE PEOPLE YOU'RE COVERING.

AND THE ALLEGATION IS THAT UNITED HAS USED SOME ADMINISTRATIVE TACTICS BASICALLY TO KIND OF PUMP UP THESE RISK SCORES.

>> Cathy: IN THE PAST UNITED HEALTH HAS BEEN QUITE AGGRESSIVE AGAINST THOSE WHO ARE INVESTIGATING THEM, THEY'VE BEEN AGGRESSIVE AGAINST LAWSUITS.

SO WAS THIS KIND OF A BIG DEAL TO SAY, YES, ACTUALLY, WE ARE BEING INVESTIGATED AND WE ARE COOPERATING.

>> YEAH, IT WAS A -- TO ME IT WAS A NOTABLE SHIFT IN THE TONE BECAUSE THE WALL STREET JOURNAL REALLY HAS LED STORY FOR ABOUT A YEAR OW.

AND PARTICULARLY SINCE THE WINTER, YOU KNOW, I'VE KIND OF NOTED THE COMPANY'S RESPONSES HAVE GOTTEN STRONGER AND STRONGER IN SORT OF VERY DISMISSIVE.

AND SO TO ME IT WAS A NOTABLE SHIFT AND KIND OF MORE LIKE, YOU KNOW, I CAN'T REMEMBER OFFHAND THE EXACT WORDING BUT I MEAN IT'S BEEN STRONG DENIALS, AND NOW ACKNOWLEDGMENT.

>> Eric: THIS HAS BEEN A REALLY WEIRD TIME FOR UNITED.

THEY HAD THE EXECUTIVE SHOT AND KILLED IN NEW YORK, STOCK WENT DOWN, I DON'T KNOW, WAS IT 40 POINTS OR SOMETHING, THERE'S A NEW CEO.

KIND OF SHAKING THE FOUNDATIONS OUT THERE, OR?

>> YEAH, IT'S A TOUGH TIME TO BE SURE.

AND, YOU KNOW, THE MEDICARE BUSINESS IS PART OF THE PROBLEM.

I MEAN, THAT'S PART OF WHY THE STOCK FELL SO MUCH IN THE SPRING.

THEY MISSED THEIR FINANCIAL GUIDANCE IN LARGE MEASURE BECAUSE OF THE MEDICARE BUSINESS NOT BEING WHAT THEY THOUGHT IT WAS GOING TO BE.

COUPLE OF WEEKS LATER AS THE CEO WAS OUT THE OLD CEO WAS COMING BACK IN.

SO THERE'S AN EARNINGS CONFERENCE ON TUESDAY, EVERYBODY SHOULD TUNE IN FOR.

BUT I MEAN, THE INVESTORS ARE SUPER INTERESTED BECAUSE THE OLD CEO STEVE HEMSLY HAD TREMENDOUS GROWTH AND SO THERE'S INTEREST TO SEE LIKE WHAT'S HIS PRESCRIPTION ON THIS.

>> Cathy: HOW MUCH OF A SURPRISE IS THIS INVESTIGATION IN THAT, WAS THE SYSTEM SET UP FOR THIS KIND OF A PROBLEM?

>> WELL, HMM.

I WOULD SAY RISK ADJUSTMENT IS ONE OF THE BIG CHALLENGES WHEN YOU'RE TALKING ABOUT HOW TO LIKE MAKE THE SYSTEM FAIR BOTH IN TERMS OF EVALUATING LIKE HOW MUCH PROVIDERS SHOULD MAKE AND HOW WE SHOULD ASSESS LIKE THE QUALITY OF PROVIDERS TOO.

LIKE IN ALL CASES, IF YOU WANT TO FAIRLY EVALUATE PROVIDERS AND THEN COMPENSATE THEM ACCORDINGLY, YOU NEED TO ADJUST FOR THE ISK OF PATIENTS, RIGHT.

BECAUSE WE'RE ALL DIFFERENT.

AND SO IT'S ONE OF THE REAL CHALLENGES IN THE INDUSTRY.

>> Cathy: SAY, FINAL QUESTION, AND IT WOULD BE THIS.

AS THIS INVESTIGATION GOES FORWARD, I'M WONDERING, IS UNITEDHEALTH KIND OF TOO BIG TO FAIL?

ARE THEY ABLE TO WEATHER SOMETHING LIKE THIS?

>> FINANCIALLY I WOULD THINK YES.

I MEAN, THE STOCK ANALYSTS, YOU KNOW, THE ESTIMATES ON WHAT KIND OF FINES THEY COULD PAY WITH THIS, I MEAN, I DON'T -- IT'S A HUGE COMPANY.

I THINK THERE'S A MORE FUNDAMENTAL QUESTION GOING FORWARD ABOUT, YOU KNOW, THEY'RE VERTICALLY INTEGRATED, THEY'RE IN A LOT OF DIFFERENT PARTS OF HEALTH CARE AND THEY ARE GETTING CRITICISM ON THA