February 24, 2026
The U.S. Department of Health and Human Services Office of Inspector General (OIG) recently issued new Medicare Advantage Industry Segment‑Specific Compliance Program Guidance (Guidance) for Medicare Advantage organizations (MAOs), also known as Part C plans. The Guidance lays out key areas of compliance risk that could lead to False Claims Act (FCA) liability. As repeatedly noted by DOJ and HHS officials, we will continue to see that Medicare Advantage fraud drives FCA enforcement in the health care arena.
As we discussed in our forecast for 2026 FCA enforcement priorities, we predict that Medicare Advantage fraud will continue to be one of the top contenders. We recently delved into the area of Medicare Advantage fraud enforcement in another blog post you can read here. Our team has been battling Medicare Advantage and managed care fraud for years, both from within the government and as whistleblower counsel. But, as enrollment in Medicare Advantage plans continues to grow, the fight becomes even more important.
Below, we discuss how the behavior highlighted in the most recent OIG Guidance could lead to FCA liability for MAOs who fail to heed its warning.
The Center for Medicare and Medicaid Services (CMS) pays MAOs a set amount per insured beneficiary. This amount is called a capitated payment. Capitated payments are expected to cover the MAO’s cost of providing health care to its beneficiaries. The amount of money paid per covered beneficiary is dependent on multiple factors. They include the insured’s demographics (e.g., age, sex, geographic location) and medical diagnoses. Essentially, the sicker the insured, the more the MAO expects to pay to cover the cost of the insured’s medical care. To compensate for the expected higher per patient cost, CMS pays the MAO a higher capitated rate. Risk Adjustment is the process of analyzing these factors for the MAOs’ insured lives to determine the appropriate capitated payment amount.
FCA liability can arise when an MAO makes its insureds appear sicker on paper than they really are in order to increase the capitated rate it receives from the government. In this scheme, the beneficiaries are not really as sick as they appear on paper. As a result, the MAO’s cost of providing medical care for that beneficiary is less than the MAO led CMS to believe. The MAO then pockets the difference between the inflated capitated payment amount it received and the beneficiary’s actual cost of medical care. Because of the volume of diagnosis codes and beneficiaries within the system is astronomical, CMS cannot review each submission for accuracy. This creates a scenario that is ripe for fraud.
The OIG Guidance notes that FCA liability comes into play when MAOs: submit diagnoses codes for risk adjustment that are not supported by the beneficiary’s medical record, reflect ruled‑out medical conditions, lack clinical specificity, or are otherwise inaccurate. Some significant settlements in this area include:
Marketing violations can also lead to FCA claims. For example, when improper enrollment practices lead to an MAO being paid for beneficiaries who should not have been enrolled or when false statements are made to CMS as part of the enrollment process.
Some common examples of activities that could lead to FCA liability include:
We discussed suspect marketing arrangements in a prior blog post available here. These types of schemes are at the heart of a relatively new wave of FCA enforcement, including an action brought by WLC clients. Likewise, in 2025, the Unite States intervened in a case against three MAOs and three insurance brokers. The United States alleged that the insurers agreed to pay hundreds of millions of dollars in illegal kickbacks to the brokers in exchange for steering Medicare beneficiaries to enroll into the MAOs’ plans, regardless of the suitability of those plans for the beneficiaries.
MAOs are required to ensure its insureds can access all covered services. Therefore, MAOs must maintain adequate provider networks and keep provider directories accurate. Outdated or incorrect information can mislead members during enrollment, result in higher out‑of‑pocket costs, and expose plans to compliance issues if the information submitted to CMS is false or misleading. This has long been a concern of CMS, as reflected in this 2017 settlement with Freedom Health.
CMS requires plans to contract with enough providers—of the right types and within set travel‑time and distance limits—to ensure members can actually get care when they need it. Each MAO’s approach may vary depending on the size and type of the contracted medical groups, but the goal is the same: accurate information and real access to care for their beneficiaries.
Because Medicare Advantage payments are tied to quality performance, inaccurate or biased quality‑of‑care data can lead directly to FCA liability. MAOs receive quality bonus payments based on CMS’s Star Ratings. Star Ratings are a 1-to-5 scale (5 being highest) used to evaluate the quality and performance of MAOs. CMS relies on the accuracy of the data MAOs submit about health outcomes, member experience, complaints, and other performance measures. If a plan inflates, misrepresents, or fails to properly validate this information, the government may view those submissions as false claims. Misstating quality scores, benefits, or provider information that influences member enrollment decisions can also create FCA exposure.
As MAOs grow larger and more interconnected, the risk of fraud increases. Many different parts of the business—like insurance operations, medical groups, and contractors—must all follow the same Medicare rules. When these organizations share systems, staff, and financial goals, it becomes easier for mistakes to spread and harder to spot problems early. Bad data, poor record‑keeping, or weak oversight can lead to the submission of false claims to the government.
The same risk applies when MAOs outsource work to vendors. Even if a contractor handles marketing, claims, credentialing, or patient services, the plan is still responsible for making sure everything meets federal standards. If vendors make mistakes, cut corners, or ignore requirements, the government may hold the plan accountable. In short, the more complex and connected an MAO becomes, the more important it is to have strong oversight, clear accountability, and accurate reporting to avoid potential fraud issues.
The risks outlined in the OIG’s Guidance are not theoretical. As we relayed in our blog about DOJ’s False Claims Act recoveries in 2025, FCA enforcement centered around three critical healthcare areas including Medicare Advantage (Medicare Part C). Clearly, fighting Medicare Advantage fraud remains a government priority. It is, and will continue to be, an area ripe for whistleblower actions. If you have information about possible Medicare Advantage fraud, please contact us for a free consultation. We have the expertise and desire to help.