Medicare Advantage Fraud: Kaiser Permanente

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Anytime you reward an entity monetarily for an act you run the risk of having them extort loopholes or commit outright fraud. We have Medicare fraud, waste, and abuse regulations to hopefully curb that desire, but still, we see this behavior break through from time to time. Most recently there is the allegation against mega insurance corporation, Kaiser Permanente.

Kaiser Permanente, commonly referred to as Kaiser, is a managed care titan. They’re headquartered in Oakland, CA, and tout over twelve million active members on their plans. Kaiser is more than an insurance company. It owns and operates thirty-nine independent hospitals and over seven hundred stand-alone medical offices. These facilities employee more than three hundred thousand personnel, including eighty thousand physicians.

California has fined Kaiser Permanente more than any other medical provider for COVID related issues, approximately $500,000, but that type of fine is not what we’re writing about today. This article is about a different type of transgression, and it’s one we believe could be happening at a more widespread pace.

Managed care refers to a type of healthcare that implores Health Maintenance Organizations to partake in practices designed to simultaneously reduce healthcare costs while improving the quality of care. We view this kind of like trying to put on twenty pounds of muscle without putting on any fat. It’s a great idea that polls well, but it is easier said than done. One of the ways Health Maintenance Organizations are supposed to actively try to improve quality of healthcare is to diagnose people utilizing them as their primary care provider with certain illnesses. When they diagnose someone say with Type II Diabetes, they get a slightly higher Medicare reimbursement rate. This allows them to focus a little more of their energy on these clients with higher health risks. However, it also creates a system that rewards diagnoses financially and begs fraudulent or at least aggressive diagnosing.

And that is just what we are looking at with this Kaiser Permanente story. The Department of Justice recently joined the lawsuit against Kaiser stating, “Kaiser pressured physicians to add diagnoses to patient medical records, diagnoses they did not actually have, to boost patient risk scores to land higher payments”.

Medicare Advantage is a managed care concept that was primarily created to become the savior of Traditional Medicare by creating a more predictable cost per pupil. Unfortunately, lobbyists have advocated for these companies in ways that have seemingly created a system where Medicare Advantage is likely not saving Medicare at all. It could even be costing our Medicare division more money than keeping these individuals on Public option, Traditional Medicare.

Kaiser Permanente may be under investigation for this, but as put it, this seems to be a perennial issue. The reward for diagnoses process is a cancer that will continue to plague the Part C: Medicare Advantage program until it is revised. There must be a predictable and cost saving cost assigned per pupil regardless of overall health. The purpose of health insurance is to pool large numbers of people together and mitigate risk utilizing the law of large numbers. Part C lobbyists paired with their special interest groups have created a system whereas risk grows, profit grows. This will not create a cost saving system for our taxpayers.

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Disproportionate amount of Medicare Fraud, Waste and Abuse claims.

A recent study has recently found the over two and a half billion dollars have been spent on unjustifiable diagnosis codes. Kaiser Permanente makes up just 7% of the national Medicare Advantage market but seems to have a disproportionate amount of Medicare Fraud, Waste and Abuse claims.

Medicare is viewed as one of the highest quality health insurance segments in the country, and fraud can be a black eye that it doesn’t need. The name Medicare polls so well that many champions of concepts like Medicare for All or Medicare Part E are mistakenly using the name Medicare in these landmark bills. Medicaid for All would be a better title for these as that’s what they’re more commonly advocating for.

What we see more likely getting passed in the future is Medicare Advantage for all, but black eyes like this Kaiser Permanente scandal have to get in check before lawmakers, the insurance industry and the special interest groups and lobbyists will be able to come to terms on a timeline to make this happen. As an industry we will have absolutely no chance at a Medicare Advantage for all or Medicare Advantage for more push with blatant abuse. The first step is to remove rewarding diagnosing people with things like heart disease, COPD, cancer, or Kidney Disease.

Now, just to clarify, we do not want to stifle any ability of a doctor or healthcare provider to diagnose these things, we just do not want to financially reward it. We believe there should be quality assurance controls that monitor the percentages of people diagnosed or not diagnosed with these illnesses by plan sponsors so that the Center for Medicare and Medicaid Services can keep tabs on any numbers that fall grossly outside of geographical averages. This will keep doctors from being able to slack on their job, but will also create a system that does not require rewarding financially the diagnosis itself.

We also do not want a system where healthcare providers are further strained financially, so we do not think these changes should fall at the feet of a provider. There should be a fixed number that makes sense for Medicare Advantage carriers so that they can maintain a high funding that motivates a substantial standard of care.

If you have any questions about Medicare fraud, waste and abuse or Medicare plans such as Traditional Medicare, Medicare Advantage, Medigap or Stand Alone Part D plans, please let us know here.

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Justin Brock

President & CEO of Bobby Brock Insurance