Medicare Advantage: Alleged Kickbacks Further Expose Corruption

CEPR’s Brandon Novick wrote a piece on Medicare Advantage plans. It is brief enough to make for easy reading, It also gets to the point of Medicare Advantage plans.

As it was commercial Medicare Advantage plans were overcharging for the same care Traditional Medicare would charge. In many cases the plans would not approve the care patients would need or delay payment to care providers, For 2025, MedPAC estimates insurers will reap $84 billion in overpayments. I believe if you read Chapter 12 of the MedPAC report, you will find it is more. I do have to finish a piece which will detail those payments.

And people may wonder why others get angry about healthcare and its limitations.

“Medicare Advantage: Alleged Kickbacks Further Expose Corruption,” CEPR

Around the same time as the Trump Administration decided to more than double the increase in the payment rate to health insurance companies in Medicare Advantage (MA) compared to what the Biden Administration had proposed, the Department of Justice (DOJ) has taken legal action against some of the largest actors in the program. An alleged scheme of illegal kickbacks and discrimination against people with disabilities highlights the failure of privatized Medicare to introduce an efficient market that benefits patients. It has, however, enabled corporate manipulation and profiteering to succeed at the expense of taxpayer money.

Earlier this month, the DOJ) filed a complaint accusing three of the largest insurance companies within the MA program along with three of the largest insurance brokers of violating the False Claims Act. Allegedly, Humana, Elevance Health (formerly known as Anthem), and Aetna (owned by CVS) paid illegal kickbacks to three insurance brokers – eHealth and its affiliate GoHealth along with SelectQuote – in exchange for directing seniors to enroll in their plans.

Health insurance is often very complex; therefore, many people who have to purchase individual plans on the private market request help from insurance broker organizations. As Medicare Advantage is privatized Medicare, where different companies offer thousands of different plans, many seniors look to brokers for help. There are many details people have to consider when looking at plans that brokers supposedly help analyze: are certain doctors and providers in a plan’s network, does a plan cover specific prescription medication, what are the various costs (deductibles, coinsurance, copayments, out-of-pocket limits)?

Yet, insurance brokers predominantly make money from the sales they deliver to insurance companies (i.e. getting people to enroll in their plans). To prevent kickbacks prohibited under the federal Anti-Kickback Statute, the Centers for Medicare and Medicaid Services (CMS) requires brokers to act in the best interest of patients and limits the compensation MA insurers can provide to brokers.

However, stating the law and enforcing it are different, and the DOJ complaint documents how Humana, Elevance Health, and Aetna allegedly hid illegal kickbacks to brokers by disguising them as administrative fees. The DOJ quotes meeting notes and discovered statements from insurance company and broker employees alike. For example, one employee of eHealth wrote that Aetna’s payment method was “not even a little compliant. . . . I’m pretty sure if Aetna got audited by cms, they’d be fuc[**]ed.” In sworn testimony, Aetna’s executive director of the Strategic Sales Channel John Sowell said:

“[T]he partners [i.e., brokers] put us in a pay for performance mindset. The cost of securing business, therefore supporting business, went up year over year. Other carriers were paying them earlier. And the only way to participate and to have a seat at the table was to support them with marketing funds.”

Seniors already have to navigate the complexities between thousands of different plans from various insurers. The integrity of brokers is also in question with the corrupting influence of alleged insurance company kickbacks.

What We Already Knew About Medicare Advantage

The DOJ lawsuit follows previous actions in Congress, such as a November 2022 report by the Senate Finance Committee documenting deceptive marketing practices by brokers, such as overselling benefits in MA plans and targeting vulnerable consumers such as those with cognitive impairments. In October 2023, the Committee held a hearing on the same topic.

In March 2025, ranking member Senator Ron Wyden (D-OR) released a report finding that MA plans increased spending on “agents and brokers fees and commissions” from $2.4 billion to $6.9 billion from 2018 to 2023. The report complements the DOJ’s lawsuit, by noting how insurance companies have found loopholes around CMS’s cap on payments to brokers for enrollment services through inflated administrative costs.

Kickbacks to insurance brokers further debunk the idea that Medicare Advantage unleashes the benefits of a free market to Medicare. Rather than seniors choosing the best plans in a transparent, competitive marketplace, large insurance companies use their economic power to push their plans on seniors regardless of whether they are actually the most beneficial. This obstacle adds to the existing barriers for beneficiaries that brokers are supposedly here to help navigate: choosing from thousands of plans with complex differences between them.

Patient Discrimination

Medicare Advantage insurers do not just get more taxpayer money by enrolling more people; they profit from inflating how sick seniors in their plans are, and then spending as little as possible on covering health care. Indeed, the Medicare Payment Advisory Commission (MedPAC) has found that the MA program has not only never saved taxpayers money compared to traditional Medicare, but taxpayers have overpaid hundreds of billions of dollars to insurers. For 2025, MedPAC estimates that insurers will reap $84 billion in overpayments. Building on this estimate, the Committee for a Responsible Federal Budget estimates $1.2 trillion in overpayments from 2025-2034. For reference, $1.2 trillion is over $300 billion more than the government would save if congressional Republicans succeed in their plan to cut Medicaid spending by up to $880 billion

The two dominant ways that Medicare Advantage companies steal taxpayer money are upcoding and favorable selection. CMS pays insurers through capitation, or per-person payments based on how sick they supposedly are. Upcoding refers to when insurers use false or irrelevant diagnoses to make their enrollees seem sicker, inflate their risk score, and ultimately increase the amount of money CMS pays to cover them. Favorable selection is simply the process of insurance companies seeking to enroll healthier patients so that they don’t actually have to spend as much covering their health care costs. The less insurers spend, the more taxpayer dollars they keep.

While Medicare Advantage companies publicly deny any wrongdoing, the DOJ complaint reveals alleged behavior that clearly reflects favorable selection. More specifically, Aetna and Humana used their illegal kickback arrangements to pressure brokers to enroll fewer disabled people in their plans, viewing them as more costly to cover. For example, the DOJ alleges that Humana filtered out calls, rejected leads, and strategically altered “the broker’s marketing methods to avoid enrolling beneficiaries with disabilities.”

Aside from the fact that discriminating against beneficiaries with disabilities is illegal, it shines a bright light on the real motivations of health insurance companies. All the advertising and statements by corporate officials claiming to care about making people healthy are pure public relations. These companies want to spend as little as possible on fulfilling their purpose – covering health care – so they can keep more as profits, and they have been very successful. Insurance companies reap significantly higher profits in Medicare Advantage than other types of health coverage. For example, gross margins in MA were $1,982 per enrollee in 2023 compared to $1,048 in the individual market, $910 in the group market, and $753 in Medicaid managed care.

Taxpayers fund Medicare Advantage because Congress decided – especially since the 1982 Tax Equity and Fiscal Responsibility Act – to funnel money from the traditional Medicare program to private insurance companies as part of an effort to introduce competitive markets and lower spending. The Medicare program covers people under the age of 65 with qualifying disabilities along with many seniors with disabilities. Avoiding coverage of this key population for the sake of profit demonstrates a clear break between the purpose of Medicare and the goals of health insurance companies.