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By Brian Hews
Publisher | Follow X
February 5, 2026
Affiliates of Kaiser Permanente have agreed to pay $556 million to resolve federal allegations that they submitted improper diagnosis information to inflate payments from the Medicare Advantage program, according to the U.S. Department of Justice. Announced January 14, 2026, the settlement is the largest Medicare Advantage fraud settlement reached to date under the False Claims Act.
Federal prosecutors alleged that from 2009 through 2018, Kaiser entities encouraged the addition of unsupported diagnoses to patient medical records, often through addenda entered months or even years after office visits. Those diagnoses increased patients’ risk scores, which directly determine how much Medicare pays private insurers for each enrollee under the Medicare Advantage system administered by the Centers for Medicare and Medicaid Services.
The Justice Department said the practices resulted in hundreds of thousands of questionable diagnoses and generated hundreds of millions of dollars in overpayments. The settlement resolves civil allegations involving Kaiser Foundation Health Plan Inc., Kaiser Foundation Health Plan of Colorado, The Permanente Medical Group Inc., Southern California Permanente Medical Group, and Colorado Permanente Medical Group.
Officials emphasized the importance of accurate reporting in the Medicare Advantage program. “Medicare Advantage is a vital program that must serve patients’ needs, not corporate profits,” said U.S. Attorney Craig H. 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.”
Kaiser Permanente said it did not admit liability or wrongdoing as part of the settlement and agreed to resolve the matter to avoid prolonged litigation. The organization characterized the dispute as involving documentation standards rather than patient care and noted that Medicare Advantage risk adjustment practices across the industry are under increased regulatory scrutiny.
Before this settlement was announced, Los Cerritos Community News ran an opinion column, based on a report from John Oliver’s This Week Tonight, warning that Medicare Advantage’s risk-adjustment system rewards overbilling, distorts medical records, and creates powerful incentives to inflate diagnoses at taxpayer expense.
LCCN also pointed out that for many seniors, traditional Medicare — Part A and Part B paired with a standalone Part D prescription drug plan — is often a safer and more transparent choice than Medicare Advantage. Unlike Advantage plans, traditional Medicare does not rely on private insurers gaming risk scores to increase federal payments. Coverage decisions are clearer, provider choice is broader, and patients are not locked into narrow networks or forced to navigate prior authorization roadblocks that delay or deny care. While Medicare Advantage aggressively markets “extra benefits,” those perks often come at the cost of restricted access, surprise denials, and opaque medical decision-making driven by corporate cost controls rather than patient need.
The Kaiser settlement is not an isolated scandal or a management failure. It is a textbook example of why Medicare Advantage is fundamentally broken.
For years, insurers and their defenders have insisted that inflated risk scores are simply the byproduct of “better documentation.” The Justice Department’s allegations cut through that narrative. When physicians are pushed to mine charts for diagnoses that were never treated, never discussed, and never followed up on, documentation becomes a financial weapon, not a clinical tool.
Medicare Advantage is designed to pay insurers more when patients are sicker on paper. That incentive does not disappear with oversight or better compliance training. It is built into the model. When billions of federal dollars hinge on diagnosis codes, the pressure to overcode is not a bug. It is the feature.
The damage goes beyond wasted public funds. Inflated diagnoses permanently alter patient medical records, saddling seniors with conditions they may never have had. Those records can affect future care, insurance decisions, and even how patients are perceived by providers. In many cases, the government has found that these high-value diagnoses come with little or no actual treatment, exposing the truth that the coding exists for payment, not care.
Kaiser is often held up as the gold standard of nonprofit healthcare. Yet even here, the logic of Medicare Advantage turned clinical judgment into a revenue stream. A $556 million settlement may sound enormous, but for a system with tens of billions in annual revenue and reserves, it functions as a cost of doing business, not a deterrent.
This is why repeated enforcement actions have failed to fix Medicare Advantage. The program privatizes Medicare while socializing the risk, allowing insurers to extract more public money while regulators chase fraud after the fact. Seniors are promised coordinated care and savings, but taxpayers foot the bill for inflated payments, and patients inherit corrupted medical records.
The Kaiser case confirms what critics have argued for years: Medicare Advantage does not need better guardrails. It needs fundamental reform or replacement. As long as insurers are paid more for making patients appear sicker, fraud enforcement will always lag behind financial incentives.
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