Federal scrutiny of Medicare Advantage risk adjustment is increasing, with two major settlements totaling nearly $1.1 billion putting diagnosis coding practices back in the spotlight.
According to Becker’s Hospital Review, the Department of Justice has recently focused on allegations involving unsupported diagnosis codes that increased Medicare Advantage payments. The cases involved Kaiser Permanente and The Villages Health System.
While independent insurance agents are generally not involved in medical coding or risk-adjustment submissions, the enforcement trend is still important to understand.
Medicare Advantage organizations receive monthly payments from CMS for each enrolled beneficiary. Those payments are risk-adjusted based partly on documented health conditions, meaning plans generally receive higher payments for beneficiaries expected to require more healthcare services.
The DOJ alleges that certain diagnoses in the recent cases were added or submitted without adequate support in the patients’ medical records.
In January 2026, Kaiser Permanente affiliates agreed to pay $556 million to resolve False Claims Act allegations involving invalid diagnosis codes. In August, The Villages Health System agreed to a $541.5 million settlement involving allegations of unsupported or improperly documented diagnoses submitted to Medicare Advantage organizations.
The settlements resolve allegations; they should not be interpreted as findings of liability beyond the terms of the respective agreements.
Agents are not responsible for how physicians document diagnoses or how Medicare Advantage organizations submit risk-adjustment data.
But agents operate downstream from the financial and regulatory environment surrounding these plans.
CMS, HHS-OIG and the DOJ continue to scrutinize how federal Medicare dollars are spent. Risk adjustment is becoming another highly visible area of enforcement.
Agents should expect compliance, documentation and oversight to remain major themes across Medicare Advantage.
For a broader look at current CMS requirements, review PSM’s 2027 Medicare Advantage and Part D Final Rule. Read the 2027 CMS Final Rule breakdown
Medicare Advantage economics depend on much more than premiums and benefits. Provider contracts, utilization, quality performance and risk-adjustment payments all influence the economics behind a plan.
More aggressive auditing and enforcement could place additional pressure on carriers and provider organizations to validate diagnoses and strengthen documentation practices.
That is another reason agents should evaluate the overall strength and stability of their Medicare portfolio, rather than focusing solely on headline benefits.
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A client may see headlines about “Medicare Advantage fraud” or billion-dollar settlements and ask what they mean.
Keep the conversation factual.
Explain that these cases involve risk-adjustment and medical coding practices between healthcare organizations, Medicare Advantage plans and CMS. They do not mean that Medicare Advantage itself is disappearing or that a particular client’s coverage has suddenly changed.
If a carrier makes an actual plan, network or benefit change, communicate the confirmed information rather than trying to predict what regulatory action might eventually mean.
The lesson extends beyond risk adjustment: Medicare is an increasingly scrutinized marketplace.
Accurate plan representations, compliant marketing, proper documentation and clear beneficiary communications all matter.
PSM agents can use the PSM Agent Academy for training designed specifically around building and operating an independent insurance business.
You do not need to become a Medicare risk-adjustment expert.
You do need to understand the environment your carriers operate in.
The DOJ’s latest actions reinforce a larger trend: Medicare Advantage organizations, providers and other participants should expect continued pressure around accuracy, documentation and compliance.
For agents, the best response is straightforward:
As Medicare Advantage evolves, knowledgeable agents who understand both the products and the forces shaping the market will be better positioned to guide their clients.
Becker’s Hospital Review:
DOJ Steps Up Crackdown on Medicare Advantage Upcoding
U.S. Department of Justice:
The Villages Health System $541.5 Million Settlement