Fraud against the Medicare Advantage (MA) program, a privately-run alternative to traditional Medicare, has been in the news a lot recently. In January, Kaiser Permanente agreed to pay over $500 million to resolve allegations that it was defrauding the program, in a whistleblower case partially launched by our client, James Taylor. In February, HHS-OIG released a comprehensive report enumerating compliance risk areas for working with the program. And the Department of Justice repeatedly announces that the MA program remains an enforcement priority—which makes sense—over half the money in all of Medicare now goes to MA plans.

CMS recently took on a new type of enforcement mechanism to fight, prevent, and deter fraud on the program. It sent MA insurer Elevance, formerly known as Anthem, a letter saying CMS will suspend Elevance Health’s enrollment and marketing activities beginning in April if the company doesn’t take immediate steps to comply with CMS data submission requirements.

In the MA program, which, or how many, services a beneficiary consumes generally does not directly affect how much CMS pays for that person’s coverage. Instead, payments are based on a mathematical model that assigns relative values to variables like patient demographics and certain health conditions (like stroke or cancer). Overall, the government pays insurers more to cover older and sicker beneficiaries than younger or healthier ones. Health conditions must be documented in patient medical records to substantiate the adjustments to government payments. It’s worth noting that the company is also involved in litigation with the Department of Justice over the accuracy of its diagnosis data, upon which CMS payments to it are based.

According to CMS, Elevance has repeatedly failed to remove unsupported diagnoses from CMS databases via the method CMS proscribes (directly through database interfaces) and instead has been sending CMS hard drives documenting which diagnoses to remove, a method CMS has explicitly rejected. CMS also used this document to vigorously reinforce that all diagnoses submitted for payment must be supported in the medical record.

What’s notable here is not the nature of the violation—it’s the relative immediacy and scope of the proposed sanction. A ban on marketing and enrollment is harsh punishment in a very competitive marketplace and shows CMS’s willingness to develop new methods to try and combat noncompliance in the MA program. Elevance has the right to rebut the letter, as well as to a hearing. This will be an area to watch going forward for anyone interested in fraud affecting Medicare Advantage.