Kaiser Permanente has agreed to pay $556 million to settle allegations by the U.S. Department of Justice that it submitted false claims for Medicare Advantage payments. The settlement, announced on January 14, is the largest of its kind involving Medicare Advantage fraud.
The Justice Department accused Kaiser Permanente of overstating patients' illnesses in order to receive higher payments from the government. Whistleblower lawsuits claimed that the company encouraged doctors in Colorado and California to add diagnoses that were not considered or addressed during patient visits, violating Medicare rules.
"Medicare Advantage is a vital program that must serve patients' needs, not corporate profits," said U.S. Attorney Craig Missakian for the Northern District of California. "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."
Medicare Advantage plans are private insurance options for seniors and have grown significantly in recent years, now enrolling about 34 million people nationwide. Approximately 2 million people are enrolled in Kaiser Permanente's plans.
Attorney Max Voldman, representing whistleblower James Taylor, stated: "It's important to send a signal to the industry, and this number hopefully does that." Taylor filed his lawsuit against Kaiser Permanente in October 2014 after working as a physician at the company.
The government took over Taylor's case and combined it with others in July 2021. According to court documents, from 2009 through 2018 Kaiser Permanente added about half a million diagnoses that led to roughly $1 billion in improper payments.
The Justice Department alleged that company officials were aware their practices were unlawful but ignored warnings and continued submitting false information. Kaiser Permanente settled without admitting wrongdoing and said it did so "to avoid the delay, uncertainty, and cost of prolonged litigation." The company also noted other insurers have faced similar scrutiny over billing practices.
Six whistleblowers filed cases under the False Claims Act; these were consolidated into two main lawsuits by former employees James Taylor and Ronda Osinek. Osinek alleged doctors amended medical records months after visits to add diagnoses not treated or existing at the time.
Under terms of the settlement, whistleblowers will receive $95 million collectively.
This settlement follows a Senate report earlier this month alleging UnitedHealth Group manipulated risk adjustment processes for profit. Senator Chuck Grassley (R-Iowa) commented: "My investigation has shown UnitedHealth Group appears to be gaming the system and abusing the risk adjustment process to turn a steep profit." The report also discussed concerns over improper coding for conditions like dementia within Medicare Advantage plans.
Grassley emphasized congressional oversight is needed as federal spending on these programs grows: "Bloated federal spending to UnitedHealth Group is not only hurting the Medicare Advantage program, it's harming the American taxpayer."
