Medicare Advantage
Federal Appeals Court Judges Question Government's Defense of Medicare Advantage Audit Rule
A Fifth Circuit panel heard oral arguments Monday in Humana's lawsuit over a 2023 CMS rule that changed how Medicare recovers overpayments from Medicare Advantage plans, with judges appearing unreceptive to the administration's position.
By the Goodsurance editorial teamOctober 6, 2026
A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit heard oral arguments on October 5, 2026 in Humana v. Kennedy, a lawsuit challenging a federal rule that changed how Medicare recovers overpayments from Medicare Advantage plans.
The rule in question, CMS-4185-F2, was finalized by the Centers for Medicare and Medicaid Services in January 2023. It made two significant changes to the agency's risk adjustment data validation, or RADV, audit program: it added statistical extrapolation to audit findings beginning with payment year 2018, and it eliminated a prior methodology called the fee-for-service adjuster that had compared error rates between Medicare Advantage and traditional Medicare. CMS said the changes would help ensure Medicare Advantage payments reflect actual medical diagnoses.
A federal appeals court appeared skeptical of the government's defense of its Medicare Advantage audit rule, leaving the overpayment-recovery framework in legal uncertainty.
Humana, one of the country's largest Medicare Advantage insurers, filed suit against the Department of Health and Human Services in 2023, arguing the final rule diverged substantially from the version that was proposed for public notice and comment, violating the Administrative Procedure Act. A federal district court agreed and vacated the rule in September 2025. The government appealed the following November.
During Monday's hearing, the Fifth Circuit panel questioned the government's rationale for keeping the rule in force. According to STAT News, the judges appeared unreceptive to the administration's arguments. No ruling has been issued.
The case could determine how aggressively CMS can audit Medicare Advantage plans for unsupported diagnosis codes, a topic that has received sustained attention from federal oversight bodies in recent years.
In plain words
Medicare Advantage plans are run by private insurance companies. The government has rules for checking whether those companies received the right payment amounts. This checking process is called a RADV audit. In 2023, the government changed those rules to allow it to request larger repayments from insurers. A company called Humana said the government changed the rules in a way that was not allowed by law. A court agreed with Humana in 2025 and threw out the new rules. The government asked a higher court to bring the rules back. On October 5, three judges heard both sides. The judges did not appear to agree with the government's arguments. No final decision has been made yet.
Understand the basics first
Source: STAT News
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