Earlier this week, the District of Massachusetts held a hearing on defendants’ motion to dismiss in United States ex rel. Shea v. eHealth, Inc., et al. (No. 21-cv-11777-DJC), a notable False Claims Act (FCA) case examining the intersection of Medicare Advantage marketing, broker compensation, and FCA and Anti-Kickback Statute (AKS) compliance. The government and relator alleged that... Continue Reading
Earlier this week, the District of Massachusetts held a hearing on defendants’ motion to dismiss in United States ex rel. Shea v. eHealth, Inc., et al. (No. 21-cv-11777-DJC), a notable False Claims Act (FCA) case examining the intersection of Medicare Advantage marketing, broker compensation, and FCA and Anti-Kickback Statute (AKS) compliance.
The government and relator alleged that leading Medicare Advantage Organizations (MAOs) and e-brokers engaged in improper administrative and marketing payment practices designed to steer beneficiaries to certain Medicare Advantage plans, while also discriminating against disabled beneficiaries to prevent their enrollment in those plans—practices the government claimed amounted to industry-wide kickbacks in violation of the FCA and AKS. In their motions to dismiss, the defendants argued that the government’s novel theories reach well outside the bounds of both statutes, as the Centers for Medicare & Medicaid Services (CMS) has long governed the broker marketing and compensation structure; the payments neither exceeded fair market value nor induced fraud; and the government did not adequately plead causation or identify a claim submitted for payment under its discrimination theory.
The relator originally filed this lawsuit in 2021 under seal, and the government partially intervened in May 2025. During this period and continuing today, broker compensation in the Medicare Advantage space has faced increased scrutiny from both Congress and CMS. At oral argument, each side advanced their key arguments, which are summarized below, with Chief Judge Denise Casper weighing in as well.
Longstanding Regulatory Regime
The defense opened by reminding the court that marketing payments are expressly permitted and regulated by CMS and have been for decades. That fact alone—that there is an extensive regulatory regime in place—differentiates this case from typical AKS cases. The government is also unable to differentiate marketing payments “based on” enrollments (which are allowed) from marketing payments based on “payments for” enrollments (which are not allowed), and that is a fatal flaw. CMS itself said this distinction is vague, and even tried to change the broker compensation rule in 2024. If CMS cannot state the distinction, the government cannot plead an FCA case, according to the defense.
Judge Casper’s first question to the defendants was if the regulations address administrative fees and the forms of barred compensation, to which defense counsel responded they do, as payments are either capped at a specific dollar amount set by CMS or must be fair market value (FMV).
The government opened by addressing the very same question, stating that the complaint pled that these payments were not actually for marketing. While they were disguised as marketing expenses, the defendants’ alleged intent was to create “sham contracts” as pretext to pay for enrollments, and defendants knew this conduct was wrongful (referencing numerous emails between employees of the defendants). There was no “good faith confusion about a complicated regime,” according to the government. Furthermore, defendants missed a clear distinction between the legal definition of marketing and what is at play here, which involves services other than compensation. The government also recognized that while not all advertising implicates the AKS, if payment is in fact dependent on the value of referrals to federal health care programs, that violates the AKS and is in no way a novel or grand legal theory.
Fair Market Value
Defense counsel argued that these payments did not exceed FMV—the very guardrail CMS put in place through regulation—and the government did not allege to the contrary. Therefore, this was an “unambiguous, legal transaction” and the government’s failure to plead that payments exceeded FMV undercuts any AKS or FCA claim.
Judge Casper was actively engaged in the FMV discussion, first asking defense counsel, “fair market value of what? Of the marketing?” Defense counsel responded in the affirmative, stating that the MAOs are sophisticated actors that hired brokers to do a job they could not do themselves, which establishes FMV.
Judge Casper later asked the government if it was its view that FMV does not need to be shown here because the payments were not for marketing, noting that she is asking because defendants suggest certain parts of the government’s argument would be novel. The government stated that FMV does not need to be shown when dealing with payments of “dubious value” (i.e., payments not actually used for marketing, but for enrollments or other benefits), citing U.S. v. Bay State Ambulance & Hosp. Rental Serv., Inc..
On rebuttal, defendants argued that Bay State is inapposite, as it pertains to the provision of medical services, relates to an ambulance contract, and does not involve a longstanding regulatory regime.
But For Causation
Defense counsel contended that a large defect in the government’s case is the absence of allegations relating to causation. The government did not plead but for causation pursuant to recent First Circuit precedent, as there is no allegation that any beneficiary saw any marketing at issue and would not have enrolled but for the marketing. Therefore, the beneficiary’s consent to enroll in the MA plan breaks the causation chain, according to defendants. Additionally, the government failed to tie any broker conduct to the actual submission of a false claim. Brokers are non-submitting entities and have no relationship with CMS; case law requires specific allegations showing the brokers’ actions caused submission of claims and the government’s attenuated theory was therefore insufficient.
The government responded that beneficiaries do not have “true consent,” as brokers hold themselves out as unbiased, but in reality, they were “bribed” to steer a patient to the MA plan paying the most. Additionally, government counsel asserted that but for causation “is not super difficult to prove,” and does not require the individualized “beneficiary by beneficiary analysis” defendants claim. Aggregate data as alleged in the complaint is sufficient, the government argued. Furthermore, the government asserted that even as non-submitting entities, the brokers caused submission of the false claims because of the misrepresentation of statutory compliance and contracts fraudulently induced.
On the government’s non-submitting entities point, Judge Casper asked for the government’s best case law for that proposition. The government paused, then pointed the court to U.S. ex rel. Hutcheson v. Blackstone Med., Inc. and U.S. ex rel. Marcus v. Hess, claiming that both apply this theory.
Materiality and Falsity Under the FCA (False Certification)
Defense counsel argued that materiality is a demanding standard, and the government failed to allege that CMS ever withheld payment based on a marketing violation or that had it known the truth, CMS would have denied payment (i.e., CMS simply kept paying). As to falsity, the government did not make any allegations connecting the alleged false certification to a particular claim.
Judge Casper interjected, asking if the defendants meant the MAOs’ certificates of compliance. Defense counsel noted that was a good question, as it is difficult to identify which certification the government is claiming is false, which is a failure on Rule 9(b) grounds.
Later on in the context of the discrimination theory, defense counsel stated that alleged facts about defendants’ discriminatory conduct are insufficient under the FCA. Judge Casper stated her understanding was that the government alleged that defendants made false statements about complying with prohibitions against discrimination. Defense counsel conceded this is part of the false certification theory, but general certifications are what are alleged, and that is not enough.
The government did not provide greater detail about a specific false certification, but pointed the court to numerous allegations in the complaint that address materiality (e.g., the request for payments directly affecting certifications, the centrality of the AKS to the government payment decision, the condition of payment, etc.). The defendants’ misrepresentation of compliance with statutory, regulatory, or contractual requirements is squarely material, per the government. And applied here, the defendants signed contracts every year about providing MA plans to the public, which included promises made to the federal government not to violate the AKS.
Discrimination
Defense counsel argued that while the government alleged that defendants used marketing practices to exclude disabled beneficiaries from enrolling in select MA plans, the government conceded that no claims were submitted for payment, and FCA liability cannot attach without a false claim for payment. Even if marketing was discriminatory, the government did not plead such conduct with particularity, failed to adequately plead a fraudulent inducement theory, and did not seek administrative remedies or sanctions to investigate the alleged conduct.
The government referred the Court to its opposition brief and argued that defendants caused the submission of the false claims through the false certification of compliance with anti-discrimination laws where brokers, at the MAOs’ direction, steered disabled beneficiaries away from the plans.
Definition of “Item” or “Service” Under the AKS
Defense counsel argued that the government’s AKS theory fails because MA plans are not an “item” or “service” under the AKS and the government did not cite any case law to the contrary. The statute is intended to target corruption and while patient care fits into the statute, MA plan sales do not, per the defense.
Judge Casper asked defense counsel why the statute would exclude MA plans if targeting corruption was its purpose. In response, the defense argued that Medicare Advantage did not exist when the AKS was enacted. The government is trying to fit a square peg in a round hole, as the legal theory does not fit the facts.
While the government’s opposition brief argued that “item” or “service” under the AKS includes MA plan enrollments, the government did not address this issue during oral argument.
eHealth’s Motion for Leave to Conduct Limited Discovery
Oral argument concluded with a brief discussion of eHealth’s motion requesting leave to conduct limited discovery (i.e., a limited deposition of the relator and production of the written disclosure the relator provided to the government). eHealth alleged that the relator possessed unauthorized privileged information that potentially informed both the relator’s and the government’s legal strategy, possibly tainting the case. Counsel for both the relator and the government objected, citing lack of good cause, no showing of irreparable harm, and failure to provide a privilege log. eHealth argued that even if privileged information was not cited in the relator’s complaint (which eHealth claimed it was), lack of a citation would not obviate the need to assess how such information impacted both the relator’s and government’s legal strategy.
Judge Casper took both motions under advisement.
Next Steps
The Court will decide whether the government’s legal theories, as pleaded, suffice under Rule 9(b) and recent First Circuit precedent. The outcome will impact industry understanding of Medicare Advantage marketing, broker compensation structure, and future FCA and AKS enforcement actions.
