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Legal Battle Over Medicare Advantage Marketing Practices Unfolds in Massachusetts
BOSTON, May 28, 2025
A legal battle over how Medicare Advantage plans are marketed and compensated is unfolding in Massachusetts, potentially reshaping the industry. This week, the District of Massachusetts heard arguments in United States ex rel. Shea v. eHealth, Inc., et al. (No. 21-cv-11777-DJC),a False Claims act (FCA) case alleging widespread kickbacks and discriminatory practices.
Medicare advantage marketing practices are under scrutiny as a lawsuit alleges improper payments steered beneficiaries to certain plans while potentially excluding disabled individuals.
The core of the dispute centers on whether payments to brokers are legitimate marketing expenses or illegal inducements to enroll patients in specific Medicare Advantage plans. The government and the relator-the individual who brought the case-allege that leading Medicare Advantage Organizations (MAOs) and e-brokers engaged in improper administrative and marketing payment practices, and even discriminated against disabled beneficiaries to prevent their enrollment.
Defense attorneys emphasized that CMS has long regulated broker marketing and compensation. They argued that the government’s theories stretch beyond the scope of both the FCA and the Anti-Kickback Statute (AKS), and that payments were within fair market value. “CMS itself said this distinction is vague, and even tried to change the broker compensation rule in 2024,” a defense attorney stated. “If CMS cannot state the distinction, the government cannot plead an FCA case.”
Judge Denise Casper questioned whether current regulations adequately address administrative fees and prohibited forms of compensation. Defense counsel responded that payments are either capped by CMS or must meet FMV standards.
The government cited U.S. ex rel. Hutcheson v. Blackstone Med., inc. and U.S. ex rel. Marcus v.Hess as supporting case law.
The defense also challenged the government’s claims regarding materiality and falsity under the FCA, arguing that CMS never withheld payment due to marketing violations and that the government failed to identify a specific false certification. Judge Casper questioned whether the defendants were referring to the MAOs’ certificates of compliance.
The government maintained that the defendants’ misrepresentation of compliance with regulations is material, pointing to annual contracts signed with promises not to violate the AKS.
The defense argued that the government’s discrimination theory lacked sufficient evidence,as no claims were submitted for payment related to the alleged exclusion of disabled beneficiaries.They also claimed the government didn’t adequately plead fraudulent inducement or pursue administrative remedies.
The government countered that the defendants caused the submission of false claims by falsely certifying compliance with anti-discrimination laws, directing brokers to steer disabled beneficiaries away from certain plans.
the defense argued that Medicare Advantage plans aren’t considered an “item” or “service” under the AKS, as the statute was intended to address corruption in patient care. Judge Casper questioned why the statute would exclude MA plans if it’s purpose was to combat corruption. The defense responded that Medicare Advantage didn’t exist when the AKS was enacted.
The hearing concluded with a discussion of eHealth’s motion for limited revelation, seeking depositions and documents related to potential privileged details held by the relator.Objections were raised by both the relator and the government. Judge Casper took both motions under advisement.
The court’s decision will determine whether the government’s legal theories are sufficient under Rule 9(b) and recent First Circuit precedent, with potential implications for the future of Medicare Advantage marketing and enforcement actions.
