Medicare Advantage is also known as the Medicare Part C program. This Medicare program combines traditional Medicare Part A and B into a Part C plan where Medicare beneficiaries have the option of enrolling in and obtaining healthcare from Medicare Advantage Plans (MA Plans) that are owned and operated by private Medicare Advantage Organizations (MAOs) or insurers, often called “payers.”
Unlike traditional Medicare, where payments to health providers are based on the services they render to the patient, MA Plans are paid a fixed monthly amount to provide healthcare to beneficiaries who enroll in their plans, sometimes called “per-member-per-month” (PMPM).
To accommodate costs associated with patients who require more care than the average patient, Medicare payments to MA plans are “risk adjusted” to reflect, in part, the health status of the beneficiary. While demographics contribute to payment adjustment, reimbursement is largely driven by diagnosis codes.
This can result in MAO plans receiving higher payments for patients diagnosed — and appropriately documented by an acceptable provider within the medical record — with conditions requiring greater care. The documented diagnoses are then coded using ICD-10-CM and submitted as data for payment.
Keep in mind that Medicare Advantage risk adjustment payments to MAOs come from the federal government.
Understanding Medicare Advantage Risk Adjustment
Medicare Advantage reimbursement differs significantly from traditional fee-for-service Medicare.
Under the MA model:
- insurers receive fixed monthly payments
- payments are risk adjusted
- diagnosis documentation impacts reimbursement
- ICD-10-CM coding directly affects payment calculations
Risk adjustment is intended to ensure MAOs receive appropriate reimbursement for patients with more complex health conditions. However, because reimbursement is tied heavily to diagnosis reporting, coding accuracy and documentation integrity have become major compliance priorities.
Organizations must ensure:
- diagnoses are properly documented
- conditions are clinically supported
- coding complies with CMS requirements
- unsupported diagnoses are not submitted for payment
The False Claims Act and Healthcare Fraud Enforcement
The False Claims Act (FCA) is the federal government’s primary enforcement mechanism for addressing healthcare fraud, waste, and abuse.
Originally enacted in 1863 during the Civil War to combat fraud involving defense contractors supplying substandard goods to the Union Army, the FCA has since evolved into one of the government’s most significant healthcare enforcement tools.
Under the FCA, liability may apply to any person or organization that knowingly:
- submits false claims for government payment
- causes false claims to be submitted
- retains overpayments improperly
- submits unsupported reimbursement data
The FCA also includes:
- “Qui Tam” provisions
- whistleblower (“Relator”) protections
These provisions allow private individuals or organizations to file lawsuits on behalf of the federal government in U.S. District Courts.
Several agencies participate in FCA investigations, including:
- the Department of Justice (DOJ)
- the Office of Inspector General (OIG)
- the Federal Bureau of Investigation (FBI)
Cigna Group to Pay $172 Million to Resolve False Claims Act Allegations
The Department of Justice settlement involving Cigna totaled $172 million and revolved around allegations that Cigna violated the False Claims Act by submitting — and failing to withdraw — inaccurate and unsupported diagnosis codes for Medicare Advantage enrollees to increase payments received from Medicare.
According to the DOJ settlement documentation, from January 1, 2012 through December 31, 2019, Cigna allegedly submitted false and invalid medical diagnoses of serious and complex conditions that were based solely on home visits conducted by contracted healthcare providers.
This FCA matter involved a whistleblower (“Relator”).
Kaiser Permanente Affiliates Pay $556 Million to Resolve False Claims Act Allegations
In January 2026, Kaiser Permanente reached a $556 million FCA settlement — currently the largest Medicare Advantage risk adjustment settlement to date.
According to the DOJ, Kaiser allegedly submitted unsupported diagnosis codes to inflate CMS reimbursement payments. The government further alleged that Kaiser’s retrospective chart review and addenda processes added revenue-enhancing diagnosis codes without correcting or deleting unsupported diagnoses.
From 2009 through 2018, the government alleged Kaiser implemented processes encouraging providers to add diagnoses after patient visits through medical record addenda.
The DOJ further alleged that:
- providers received “queries” requesting diagnosis additions
- some diagnoses were added months after encounters
- certain diagnoses were unrelated to the original patient visit
- CMS documentation requirements were not met
This FCA case also involved a whistleblower (“Relator”).
Kaiser did not admit liability.
Aetna Agrees to Pay $117.7 Million to Resolve False Claims Act Allegations
The DOJ alleged that Aetna knowingly submitted — or failed to withdraw — inaccurate diagnosis codes tied to morbid obesity in order to increase Medicare Advantage payments.
According to the allegations:
- medical records typically included BMI documentation
- certain BMI values did not support morbid obesity diagnoses
- submitted ICD-10-CM codes increased CMS reimbursement improperly
The settlement covered payment years 2018 through 2023. In March 2026, Aetna agreed to pay $117.7 million to resolve the allegations.
Aetna did not admit or deny wrongdoing.
This FCA case also involved a whistleblower (“Relator”).
Growing Regulatory Scrutiny of Medicare Advantage Plans
Regulatory scrutiny surrounding Medicare Advantage risk adjustment continues to increase.
According to Assistant Attorney General Brett A. Shumate of the DOJ Civil Division:
“More than half of our nation’s Medicare beneficiaries are enrolled in Medicare Advantage plans, and the government expects those who participate in the program to provide truthful and accurate information.”
The DOJ further emphasized that healthcare organizations and MA plans will be held accountable when knowingly submitting false information to CMS that results in inflated Medicare payments.
The federal government currently pays private insurers more than $530 billion annually to care for Medicare Advantage beneficiaries.
As scrutiny increases, healthcare leadership teams should pay close attention to:
- diagnosis documentation practices
- coding compliance processes
- retrospective review programs
- addenda workflows
- EHR functionality
- auditing procedures
- provider query practices
- automated coding technologies
Compliance Risks for Healthcare Organizations
Healthcare organizations, physicians, hospitals, and MAOs face significant compliance exposure when reimbursement-related activities are not properly monitored.
Potential compliance vulnerabilities may include:
- unsupported diagnoses
- improper addenda usage
- automated coding triggers
- insufficient documentation validation
- retrospective diagnosis additions
- inaccurate risk adjustment reporting
Organizations should proactively evaluate:
- internal controls
- compliance programs
- coding audits
- documentation integrity
- EHR workflows
- physician education initiatives
Being passive or complacent regarding unsupported reimbursement activity creates substantial legal and financial risk.
Healthcare organizations should prioritize:
- professional accountability
- compliance oversight
- internal auditing
- education
- policy enforcement
- proactive monitoring
A proactive compliance strategy is significantly more effective than reacting to government investigations or FCA allegations after problems emerge.
Key Takeaways for Healthcare Leaders
1. Diagnosis Documentation Directly Impacts Medicare Advantage Payments
Risk adjustment reimbursement depends heavily on accurate diagnosis reporting and ICD-10-CM coding.
2. Unsupported Diagnoses Create Significant FCA Exposure
The DOJ continues targeting unsupported diagnosis submissions tied to inflated CMS reimbursement.
3. Retrospective Addenda Processes Require Careful Oversight
Late diagnosis additions and unsupported addenda remain major enforcement concerns.
4. Compliance Programs Must Remain Active and Proactive
Healthcare organizations should continuously audit coding, documentation, and reimbursement workflows.
5. Automated Technology Still Requires Human Oversight
EHR functionality and coding technology should be carefully monitored to prevent unsupported reimbursement activity.
Final Thoughts
The increasing number of False Claims Act settlements tied to Medicare Advantage risk adjustment demonstrates that regulatory scrutiny surrounding diagnosis documentation and coding practices is intensifying.
Healthcare organizations, providers, and Medicare Advantage plans should closely evaluate:
- coding integrity
- diagnosis support
- retrospective review processes
- compliance oversight
- internal auditing practices
Accurate documentation and compliant coding practices are no longer simply operational priorities — they are essential legal and financial safeguards.
References
- Office of Public Affairs | Cigna Group to Pay $172 Million to Resolve False Claims Act Allegations | United States Department of Justice
- Office of Public Affairs | Kaiser Permanente Affiliates Pay $556M to Resolve False Claims Act Allegations | United States Department of Justice
- Office of Public Affairs | Aetna Agrees to Pay $117.7 Million to Resolve False Claims Act Allegations | United States Department of Justice
By: Gloryanne Bryant, RHIA, CDIP, CCS, CCDS | HIP Coding and CDI Consultant