Appeals court judges pressed sharp questions Monday as they considered Humana‘s challenge to the federal government’s audit regulations for Medicare Advantage plans. The oral argument, held before a three-judge panel, focused on whether the final audit rule departed from what was proposed and whether insurers had adequate notice and opportunity to comment on the changes.
In its 2023 lawsuit, Humana argued that the rule governing Medicare Advantage audits altered key procedures in ways that would disadvantage insurers and that the administration failed to follow proper notice-and-comment procedures. The disputed regulation, commonly known as risk adjustment data validation, or RADV, governs how the government verifies diagnoses used to set Medicare Advantage payments. The Health and Human Services defended the rule, saying its approach was lawful and within the agency’s authority.
A federal judge vacated the RADV rule in September 2025, concluding that legal defects warranted invalidation, and the department appealed that decision in November. During Monday’s argument before the U.S. Court of Appeals for the Fifth Circuit, several judges expressed skepticism about the government’s procedural and substantive defenses, signaling a possible willingness to affirm the lower court’s ruling. The panel’s exchanges highlighted tensions over administrative procedure and the scope of agency discretion in altering final rules from their proposed forms.
The outcome of the appeal will determine whether the RADV rule can be enforced as written or whether the earlier vacatur will stand, with direct implications for how audits of Medicare Advantage plans are conducted going forward. Parties now await the court’s written decision, which will clarify the legal standards that apply to agency rulemaking and to future challenges to Medicare Advantage oversight.
