Fifth Circuit Panel Signals Invalidation of HHS RADV Final Rule in Humana Appeal

Three-judge panel repeatedly pressed government counsel on whether the final RADV rule's extrapolation methodology and payment-year adjustments represented a logical outgrowth of the proposed rule, noting Humana's 2023 complaint that stakeholders lacked notice of the shift from contract-level to beneficiary-level error-rate calculations. The September 2025 district ruling had already found the change violated APA notice-and-comment requirements, blocking application of the rule to audits of 2018 and later years.

Medicare Advantage enrollment exceeds 30 million beneficiaries, with RADV audits determining billions in annual risk-adjustment recoveries; Humana's suit highlighted how the final rule's 2023 changes would have retroactively expanded audit scope without opportunity for comment on the extrapolation formula. Related CMS data show RADV recoveries averaged $650 million annually pre-2023, with potential doubling under the revised methodology if upheld.

The hearing outcome connects to broader patterns in MA litigation where courts have scrutinized CMS payment policies for procedural compliance, including prior challenges to risk-adjustment models. If the Fifth Circuit affirms, it would constrain HHS audit authority and force renegotiation of overpayment recovery terms, potentially reducing insurer liability by hundreds of millions while delaying repayment timelines for plans under active audits.

Next steps include a written opinion expected within 60-90 days; either party may seek en banc review or Supreme Court certiorari, with CMS likely to issue revised proposed rules incorporating prior comments if the current version is struck down.