The Justice Department won its biggest Medicare Advantage fraud settlement yet on Wednesday, notching a $556 million deal with Kaiser Permanente.
The settlement resolves the government’s long-running allegations that Oakland, Calif.-based Kaiser, a roughly $116 billion company that runs dozens of hospitals and covers millions of people under its health plans, artificially beefed up its private Medicare members’ illnesses using inaccurate diagnosis codes that employees added to their charts after patients’ visits. The government pays Medicare Advantage insurers based on how sick their members are, and so companies have found myriad ways to tack on diagnoses.
“It sends the message that white-collar enforcement is still a priority for the administration and enforcement of health care fraud is clearly something the administration is putting resources into,” said Max Voldman, an attorney who represented one of the whistleblowers who originally sued Kaiser.
The DOJ accused Kaiser of drawing about $1 billion in taxpayer money from the practice between 2009 and 2018. Voldman said his team was hoping the final settlement amount would be closer to that amount. “And I’m sure Kaiser was hoping it’d be less,” he said.
In a press release, Kaiser said it chose to settle to avoid the delay and cost of prolonged litigation. The company underscored that the settlement is not an admission of wrongdoing and the case did not concern the quality of care its patients received.
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“Multiple major health plans have faced similar government scrutiny over Medicare Advantage risk adjustment standards and practices, reflecting industrywide challenges in applying these requirements,” Kaiser said.
The settlement is by far the largest the government has won against a Medicare Advantage insurer. The second largest is Cigna’s $172 million settlement to resolve similar claims in 2023. In 2024, Independent Health paid $100 million in a similar case.
The government has also won cases against providers involved in treating Medicare Advantage patients. In 2018, DaVita agreed to pay $270 million for allegedly submitting inaccurate diagnoses to inflate its Medicare Advantage payments. Oak Street settled for $60 million in 2024 for allegedly paying kickbacks to insurance agents for recruiting Medicare Advantage members into its clinics.
“Medicare Advantage is a vital program that must serve patients’ needs, not corporate profits,” U.S. Attorney Craig Missakian said in a news release about the Kaiser settlement. “Fraud on Medicare costs the public billions annually, so when a health plan knowingly submits false information to obtain higher payments, everyone — from beneficiaries to taxpayers — loses.”
Kaiser is a relatively small player in the Medicare Advantage industry, covering only 6% of members in 2024. The industry is dominated by powerhouse health insurers like UnitedHealthcare and Humana. And while Kaiser offers Medicare Advantage nationwide, this case only concerned its operations in California and Colorado.
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The government originally sued Kaiser in 2021 in a case that consolidated six whistleblower lawsuits filed by former Kaiser employees. The complaint accused Kaiser of altering patients’ medical records by adding roughly half a million diagnoses that either did not exist or were unrelated to the visit they were connected to. This was allegedly done months or even a year after the visits using what’s known as addenda.
The lawsuit accused Kaiser of pressuring its doctors to add diagnoses to Medicare Advantage patients’ charts, claiming that the company “meticulously tracked” their coding performance. Those who didn’t perform well faced financial and professional consequences, the government said.
Other health insurers are accused of doing the same. Several former UnitedHealth Group physicians told STAT that the company pressured them to apply lucrative diagnosis codes to their Medicare Advantage patients, plying them using bonuses up to $10,000 and emails ranking the top performers. The DOJ is also investigating UnitedHealth’s Medicare Advantage practices.
