Kaiser Permanente, DOJ Resolve Medicare Advantage Fraud Settlement
The U.S. Department of Justice (DOJ) has secured its largest settlement in a Medicare Advantage fraud case, reaching a $556 million agreement with Kaiser Permanente. This settlement addresses allegations that Kaiser, headquartered in Oakland, California, artificially inflated the severity of illnesses among its Medicare members through inaccurate diagnosis codes. Kaiser’s practices reportedly generated around $1 billion from Medicare claims between 2009 and 2018.
Kaiser Permanente and Medicare Advantage Fraud Allegations
The DOJ accused Kaiser of manipulating patient diagnoses to increase government reimbursements. This method of diagnosis coding affected the government’s compensation structure, which relies heavily on the reported health status of Medicare Advantage beneficiaries. As a result, health insurers frequently seek ways to enhance reported illnesses to secure higher payments.
Response from Kaiser Permanente
Kaiser stated that it opted for settlement to avoid the costs and delays associated with prolonged litigation. Importantly, the company emphasized that settling does not equate to an admission of wrongdoing, asserting that the case did not challenge the quality of care provided to patients.
Industry Context and Previous Settlements
- The $556 million settlement is the largest in Medicare Advantage history.
- Cigna previously settled for $172 million in 2023 for similar allegations.
- Independent Health paid $100 million in 2024 regarding its practices in the same domain.
- DaVita faced a $270 million settlement in 2018 for related issues.
- In 2024, Oak Street Health settled for $60 million for allegedly paying kickbacks to recruit members.
U.S. Attorney Craig Missakian highlighted the importance of maintaining integrity within the Medicare Advantage program, stating that fraudulent claims lead to significant losses for taxpayers and beneficiaries alike.
The Lawsuit Against Kaiser Permanente
The DOJ’s case against Kaiser originated in 2021, consolidating multiple whistleblower lawsuits from former employees. Allegations included the addition of approximately 500,000 dubious diagnoses to patients’ medical records—often recorded long after the patient visits. This practice, performed via addenda, allegedly pressured doctors to comply through performance tracking that had financial implications for those who fell short.
Wider Implications in the Health Insurance Industry
The investigation raises questions about practices across the Medicare Advantage sector. Other insurers, such as UnitedHealth Group, are under scrutiny for similar fraudulent activities. Examples include reports from former physicians alleging pressure to apply lucrative diagnosis codes, with incentives reaching $10,000 and performance rankings.
The DOJ continues to investigate these broader industry practices, aimed at ensuring that Medicare Advantage serves its intended purpose: supporting patient health rather than corporate profits.
