Kaiser Permanente To Pay $556 Million in Record Medicare Advantage Fraud Settlement

In a landmark case, Kaiser Permanente has agreed to pay $556 million to settle allegations from the Justice Department regarding fraudulent billing practices. This settlement marks the largest Medicare Advantage fraud resolution to date, addressing claims that the health insurer billed the government for medical conditions that patients did not actually have.

The settlement, announced on January 14, resolves whistleblower lawsuits that accused Kaiser of engaging in a prolonged scheme to exaggerate the severity of patients’ health conditions to illegally increase revenue.

U.S. Attorney Craig Missakian for the Northern District of California emphasized the importance of Medicare Advantage, stating, “This program must serve patients’ needs, not corporate profits.” He further noted that “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 provide seniors with a private alternative to original Medicare. These plans have seen significant growth in recent years, now enrolling about 34 million members, which is more than half of the eligible Medicare population. Approximately 2 million Medicare members are enrolled in Kaiser Permanente plans.

Attorney Max Voldman, representing whistleblower James Taylor, highlighted the case as a crucial reminder of the ongoing need to combat fraud in healthcare. “It’s important to send a signal to the industry, and this number hopefully does that,” he remarked.

Taylor, a former physician at Kaiser Permanente, initiated his lawsuit in October 2014. Voldman described the legal battle as “long and hard-fought.”

The Justice Department took over Taylor’s case in July 2021, consolidating it with others. Court documents revealed that the government alleged Kaiser pressured doctors in Colorado and California to add diagnoses “regardless of whether these conditions were actually considered or addressed by the physician during the patient visits,” violating Medicare requirements.

Between 2009 and 2018, Kaiser Permanente reportedly added around half a million diagnoses, resulting in approximately $1 billion in improper payments to the health plan, according to the complaint.

Medicare Advantage plans receive higher payments for covering sicker patients. However, numerous whistleblower lawsuits, government audits, and investigations have revealed that some health plans exaggerate patient illnesses to secure undeserved payments, a practice known as “upcoding.”

The Justice Department claimed that Kaiser officials were aware of the “widespread and unlawful” practices but chose to ignore multiple warnings about their violations of Medicare rules. Notably, Kaiser did not admit any wrongdoing as part of the settlement.

In a statement on its website, Kaiser explained that it settled to avoid the costs and uncertainties associated with prolonged litigation. The company also noted that other health plans have faced similar scrutiny regarding Medicare Advantage billing practices, asserting that the whistleblower cases revolved around differing interpretations of Medicare’s billing requirements.

Six whistleblowers filed cases against Kaiser Permanente, which were consolidated into two main lawsuits in June 2021. One case was led by Taylor, while the other was brought by Ronda Osinek, a former KP employee who trained physicians on medical coding guidelines. Osinek’s suit, filed in August 2013, alleged that Kaiser inflated claims by having doctors amend medical files months after patient visits to include diagnoses that were either untreated or nonexistent.

Under the settlement, the whistleblowers, referred to as “relators,” are set to receive a combined $95 million, as confirmed by the Justice Department.

This settlement follows a recent Senate report accusing UnitedHealth Group of manipulating the Medicare Advantage payment system, known as “risk adjustment.” Senator Chuck Grassley (R-Iowa) stated that his investigation revealed evidence of UnitedHealth Group “gaming the system” for profit, based on a review of over 50,000 pages of internal documents. UnitedHealth Group has denied these allegations.

The Senate report also highlighted specific medical conditions frequently linked to overbilling by Medicare Advantage plans, including inappropriate coding for opioid dependence disorder and improper dementia diagnoses. Following concerns over upcoding, Medicare removed dementia from its list of codes in 2014, but after reintroducing it in 2020, researchers noted an 11.5% increase in annual incident dementia diagnosis rates in Medicare Advantage compared to traditional Medicare.

Senator Grassley emphasized the need for Congress to conduct rigorous oversight of the Medicare Advantage program, stating, “As the program adds more patients and spends billions in taxpayer dollars, it’s crucial to ensure accountability.”

In a landmark case, Kaiser Permanente has agreed to pay $556 million to settle allegations from the Justice Department regarding fraudulent billing practices. This settlement marks the largest Medicare Advantage fraud resolution to date, addressing claims that the health insurer billed the government for medical conditions that patients did not actually have.

The settlement, announced on January 14, resolves whistleblower lawsuits that accused Kaiser of engaging in a prolonged scheme to exaggerate the severity of patients’ health conditions to illegally increase revenue.

U.S. Attorney Craig Missakian for the Northern District of California emphasized the importance of Medicare Advantage, stating, “This program must serve patients’ needs, not corporate profits.” He further noted that “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 provide seniors with a private alternative to original Medicare. These plans have seen significant growth in recent years, now enrolling about 34 million members, which is more than half of the eligible Medicare population. Approximately 2 million Medicare members are enrolled in Kaiser Permanente plans.

Attorney Max Voldman, representing whistleblower James Taylor, highlighted the case as a crucial reminder of the ongoing need to combat fraud in healthcare. “It’s important to send a signal to the industry, and this number hopefully does that,” he remarked.

Taylor, a former physician at Kaiser Permanente, initiated his lawsuit in October 2014. Voldman described the legal battle as “long and hard-fought.”

The Justice Department took over Taylor’s case in July 2021, consolidating it with others. Court documents revealed that the government alleged Kaiser pressured doctors in Colorado and California to add diagnoses “regardless of whether these conditions were actually considered or addressed by the physician during the patient visits,” violating Medicare requirements.

Between 2009 and 2018, Kaiser Permanente reportedly added around half a million diagnoses, resulting in approximately $1 billion in improper payments to the health plan, according to the complaint.

Medicare Advantage plans receive higher payments for covering sicker patients. However, numerous whistleblower lawsuits, government audits, and investigations have revealed that some health plans exaggerate patient illnesses to secure undeserved payments, a practice known as “upcoding.”

The Justice Department claimed that Kaiser officials were aware of the “widespread and unlawful” practices but chose to ignore multiple warnings about their violations of Medicare rules. Notably, Kaiser did not admit any wrongdoing as part of the settlement.

In a statement on its website, Kaiser explained that it settled to avoid the costs and uncertainties associated with prolonged litigation. The company also noted that other health plans have faced similar scrutiny regarding Medicare Advantage billing practices, asserting that the whistleblower cases revolved around differing interpretations of Medicare’s billing requirements.

Six whistleblowers filed cases against Kaiser Permanente, which were consolidated into two main lawsuits in June 2021. One case was led by Taylor, while the other was brought by Ronda Osinek, a former KP employee who trained physicians on medical coding guidelines. Osinek’s suit, filed in August 2013, alleged that Kaiser inflated claims by having doctors amend medical files months after patient visits to include diagnoses that were either untreated or nonexistent.

Under the settlement, the whistleblowers, referred to as “relators,” are set to receive a combined $95 million, as confirmed by the Justice Department.

This settlement follows a recent Senate report accusing UnitedHealth Group of manipulating the Medicare Advantage payment system, known as “risk adjustment.” Senator Chuck Grassley (R-Iowa) stated that his investigation revealed evidence of UnitedHealth Group “gaming the system” for profit, based on a review of over 50,000 pages of internal documents. UnitedHealth Group has denied these allegations.

The Senate report also highlighted specific medical conditions frequently linked to overbilling by Medicare Advantage plans, including inappropriate coding for opioid dependence disorder and improper dementia diagnoses. Following concerns over upcoding, Medicare removed dementia from its list of codes in 2014, but after reintroducing it in 2020, researchers noted an 11.5% increase in annual incident dementia diagnosis rates in Medicare Advantage compared to traditional Medicare.

Senator Grassley emphasized the need for Congress to conduct rigorous oversight of the Medicare Advantage program, stating, “As the program adds more patients and spends billions in taxpayer dollars, it’s crucial to ensure accountability.”