Minor federal fines offer little deterrence to insurers for Medicare Advantage violations, study finds

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%.

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.

This study was funded by the U.S. National Institute on Aging. Other Brown University co-authors include Brown faculty Amal N. Trivedi and  Jeffery Marr and CAHPR senior fellow Hayden Rooke-Ley.