Since its launch in 1998, the Medicare Advantage (MA) program has grown rapidly, now enrolling more beneficiaries than traditional Medicare. Unlike traditional Medicare—which generally reimburses providers on a fee-for-service basis (meaning, for the services they perform)—Medicare Advantage operates through a managed care model, with private insurers receiving capitated payments based on the demographics and health status of the beneficiaries they cover. Insurers are paid more for older or sicker enrollees, creating incentives that have drawn significant government scrutiny.

Two critical federal laws apply equally to both traditional Medicare and Medicare Advantage: the Anti-Kickback Statute (AKS) and the False Claims Act (FCA).

• The AKS prohibits offering, paying, soliciting, or receiving anything of value to induce referrals for services covered by federal healthcare programs.
• The FCA allows private individuals (whistleblowers) to file lawsuits on behalf of the government when fraud is suspected, and share in any recovery. If a claim is tainted by a kickback, it is considered “false” under the FCA and subject to penalties.

While kickback enforcement has historically been common in traditional Medicare, Medicaid, and TRICARE, it has been relatively less prominent in Medicare Advantage—until recently. Government enforcement in MA has traditionally focused on insurers inflating risk scores by making beneficiaries appear sicker than they are (a trend that includes cases brought by our clients). However, over the past few years, there has been a noticeable shift, with more enforcement actions and regulatory guidance targeting kickbacks in the Medicare Advantage space.

A blockbuster lawsuit the Department of Justice filed last week is the latest sign of that trend. The government has sued three insurers and three insurance brokerage firms, alleging a widespread kickback scheme. Many Medicare Advantage beneficiaries rely on brokers to help choose their plans, making this sector particularly vulnerable to abuse.

The DOJ complaint outlines two major allegations:

1. Insurers paid illegal kickbacks to brokers to steer beneficiaries into their Medicare Advantage plans—rather than allowing brokers to act independently in the best interest of the beneficiaries.
2. Brokers were incentivized to avoid enrolling disabled individuals, who typically generate lower profits for insurers.

These allegations were brought forward by a whistleblower—an employee of one of the brokerage firms involved.

This case follows other recent enforcement actions targeting kickbacks in the Medicare Advantage space, including:

• • A $60 million settlement last fall with Oak Street Health, a doctor group that shared in premium revenues with insurers, allegedly paid kickbacks to brokers to ensure patients selected its doctors as primary care providers.
  • A $60 million settlement last fall with Oak Street Health, a doctor group that shared in premium revenues with insurers, allegedly paid kickbacks to brokers to ensure patients selected its doctors as primary care providers.
  • A 2022 settlement in which a Puerto Rican insurer agreed to pay $4.2 million to resolve allegations that it gave gift cards to administrative staff at provider offices in exchange for directing patients to the insurer’s MA plan.

If you are aware of Medicare Advantage fraud or fraud in other healthcare settings, contact Whistleblower Partners to learn more about how you can help stop it.