Kickbacks: A New Enforcement Priority in Medicare Advantage
This post is a combination of two oft-covered topics: kickbacks and the Medicare Advantage program.
Kickbacks, in all shapes and sizes, have been an enforcement priority for years. But most Medicare kickback cases have involved either the traditional Medicare program (also known as Parts A and B), or Medicare’s prescription drug program (Part D). In the past year, there were more, and bigger, kickback cases involving the Medicare Advantage (“MA”) program also known as Part C, a managed care alternative to traditional Medicare that now enrolls more than half of all Medicare beneficiaries.
The MA program involves the government paying private insurers to cover Medicare-eligible beneficiaries based on a mathematical model that assigns relative values to variables like patient demographics and certain health conditions (like stroke or cancer). Generally, the government pays insurers more to cover older and sicker beneficiaries than younger or healthier ones.
This payment system stands in contrast to traditional Medicare’s fee-for-service model. In MA, which, or how many, services a beneficiary consumes usually does not directly affect how much the government pays for that person’s coverage. Until recently, most False Claims Act cases in the MA program focused on falsely exaggerating the severity of beneficiaries’ health conditions to obtain higher government payments. That seems to be shifting as more, and larger, kickback cases come into view.
Early kickback cases involving the MA program had mixed success. In 2018 and 2020, district courts in Illinois and Missouri sided with insurers and held that kickbacks in the MA program might not matter because unnecessary services do not directly result in additional payments by the government.[1] There were also two settlements by the Department of Justice (“DOJ”) that resolved allegations that two insurers in Puerto Rico provided gift cards to staff members at doctors’ offices to steer patients towards their MA plans. One settled for $15 million, and the other settled for just over $4 million.
In the past year, however, four key developments have shown an increased focus on kickbacks and how they affect the MA program:
1. In September 2024, a Florida district court rejected the logic from the Gray and Rasmussen decisions and allowed a whistleblower case alleging kickbacks in the MA program to move forward.[2] Summary judgment motions were largely denied in August 2024, and the case now heads towards trial.
2. Also last September, DOJ announced a $60 million settlement with Oak Street Health, a provider group that primarily treats MA beneficiaries, to resolve allegations that Oak Street paid kickbacks to brokers – in the form of a per capita fee – to sign MA beneficiaries up.
3. In December 2024, the Office of the Inspector General (“OIG”) released a Special Fraud Alert warning insurers, providers, and brokers that certain payments in exchange for referrals are, in the OIG’s opinion, illegal, continuing to signal a focus in the area.
4. This May, DOJ joined a whistleblower lawsuit against three insurers and three brokerage companies alleging that insurers paid illegal kickbacks to brokers to steer beneficiaries into their plans.
This activity clearly signals a new priority enforcement area for the Department in the MA arena, and one that is likely to continue to grow. Tellingly, this July, the DOJ and Department of Health and Human Services launched a working group to better coordinate fraud cases. Its top priority: Medicare Advantage.
[1] US ex rel. Rasmussen v. Essence Group Holdings Corp., 2020 WL 4381771 (W.D. Mo.); US ex rel. Gray v. UnitedHealthcare Insurance Comp., 2018 WL 2933674 (N.D. Ill.).
[2] US ex rel. Butler & Philipp v. Shikara, et al., 2024 WL 4354807 (S.D. Fla.)
This piece was written by Max Voldman, a partner with Whistleblower Partners LLP..
