The Justice Department achieved a significant victory on Wednesday by securing a $556 million settlement with Kaiser Permanente, marking its largest Medicare Advantage fraud settlement to date.
The settlement brings an end to the government’s allegations against Kaiser, a massive healthcare company based in Oakland, California, that operates numerous hospitals and serves millions of individuals through its health plans. The accusations revolved around Kaiser artificially inflating the illnesses of its private Medicare members by adding inaccurate diagnosis codes to their medical charts post-visit. Medicare Advantage insurers receive payments based on the health status of their members, leading companies to employ various tactics to boost diagnoses.
Max Voldman, an attorney representing one of the whistleblowers in the case against Kaiser, emphasized that the settlement underscores the government’s commitment to combatting white-collar crimes and healthcare fraud. The DOJ claimed that Kaiser improperly obtained approximately $1 billion in taxpayer funds through this practice between 2009 and 2018, though Voldman’s team had hoped for a larger settlement amount closer to that figure.
Kaiser, in a press release, stated that it opted to settle to avoid protracted litigation costs and delays. The company maintained that the settlement does not imply any admission of wrongdoing and that the case did not pertain to the quality of care provided to patients. Kaiser also highlighted that various major health plans have faced similar scrutiny over Medicare Advantage risk adjustment practices, indicating broader challenges within the industry.
This settlement stands out as the largest ever secured by the government against a Medicare Advantage insurer, surpassing previous settlements with companies like Cigna and Independent Health. Notably, other providers involved in treating Medicare Advantage patients, such as DaVita and Oak Street, have faced significant penalties for alleged misconduct in recent years.
U.S. Attorney Craig Missakian emphasized the importance of maintaining the integrity of the Medicare Advantage program, stating that fraudulent activities harm beneficiaries and taxpayers alike. While Kaiser’s presence in the Medicare Advantage sector is relatively modest, covering only 6% of members in 2024, the industry is predominantly led by major insurers like UnitedHealthcare and Humana.
The case against Kaiser originated from a lawsuit filed in 2021 by former employees, alleging that the company tampered with patients’ medical records by adding hundreds of thousands of inaccurate diagnoses using addenda long after the initial visits. The lawsuit further accused Kaiser of pressuring physicians to embellish diagnoses for financial gain, with underperforming doctors facing repercussions.
Similar allegations have been made against other insurers, with former UnitedHealth Group physicians disclosing pressure to assign profitable diagnosis codes to Medicare Advantage patients. The DOJ is actively investigating UnitedHealth’s practices in this regard, highlighting the ongoing scrutiny faced by major players in the Medicare Advantage market.
