Study finds weak penalties for Medicare Advantage rule violations

A new study from health policy researchers at the Brown University School of Public Health suggests that while regulators have several tools at their disposal to penalize insurance plans that break the rules, they rely mostly on relatively small financial penalties that may do little to deter violations.

The study, published in JAMA Internal Medicine, raises questions about how effectively federal regulators - primarily the Centers for Medicare & Medicaid Services - are overseeing the fast-growing Medicare Advantage industry and protecting patients, according to researchers from Brown's Center for Advancing Health Policy through Research.

 "Nobody really knows how this regulatory authority has been imposing its different enforcement tools over the past decade," said lead study author Zihan Chen, a Brown doctoral student in health services research. "The study was to address this kind of gap and begin to really understand how the federal government is overseeing Medicare Advantage and using its enforcement actions as a tool to punish or deter kinds of violations."

The data for the study was obtained as through a Freedom of Information Act request and examines enforcement actions against Medicare Advantage insurers from 2010 through 2023 following violations such as inappropriately denying or delaying covered care.

Zihan said the research team was interested in examining CMS oversight because Medicare Advantage, the private alternative to traditional Medicare, now covers more than half of all Medicare beneficiaries in the U.S. and represents a major share of federal health spending. There have also been various formal complaints about Medicare Advantage insurers from beneficiaries, such as aggressive marketing and burdensome prior authorizations.

As the primary regulator, CMS has several enforcement tools, including the ability to terminate contracts, suspend plans from enrolling new members or marketing their products, and issue financial penalties.

The new analysis found that in practice, CMS rarely used its most severe tools and instead relied overwhelmingly on fines. Of 844 enforcement actions identified over the 13-year period, 87% were monetary penalties, while suspensions accounted for about 12%. Contract terminations made up less than 1%.

Even when fines were imposed by CMS, they were relatively small, peaking at about $6.50 per enrollee in 2019. Most other years they were under $3 per enrollee. While these figures could add up to millions of dollars overall, they are still small compared to the thousands of dollars insurers receive per patient each year. The researchers say it appears these amounts do little to change behavior.

"When fines are levied on plans, it almost means nothing compared to the profits the plans are making. This raises questions about meaningful consequences for violations," said David Meyers, an associate professor of health services, policy and practice at Brown. "It supports a narrative out there that the government is a little bit asleep at the wheel when it comes to actually regulating the program that they have responsibility for."

The findings also show that enforcement activity is uneven over time, often clustering around CMS audit cycles, suggesting that violations are more likely to be identified during scheduled reviews than during routine monitoring.

Other findings include differences in the types of plans facing enforcement. For example, contracts that were suspended or terminated tended to have lower quality ratings and served higher shares of low-income and minority beneficiaries, raising concerns that disruptions caused by enforcement may disproportionately affect vulnerable populations.

The research team makes clear in the study that enforcement actions by CMS were not rare. About 42% of Medicare Advantage contracts received at least one enforcement action during the study period and about one in five faced multiple actions, mainly the small fines.

Meyers says the reliance on smaller penalties reflects, in part, how CMS has designed its enforcement system.

"They have the authority to do more, but they're choosing not to," he said.

Other factors, such as limited resources, legal risks and resistance from insurers, may also shape how aggressively the agency enforces rules, Meyers added.

By assembling more than a decade of records, the new study is one of the first to examine long-term trends in Medicare Advantage enforcement.

"The Medicare Advantage program is so big and so important, but there's very little enforcement action that seems to be going on to address challenges that have been widely reported," Meyers said.