Once health care's “good guy," Kaiser Permanente is being investigated for defrauding taxpayers.

The U.S. Department of Justice is looking into claims by whistleblowers that Kaiser Permanente has been systematically defrauding Uncle Sam.

Et tu, Kaiser?

I was crestfallen when I read that the U.S. Department of Justice is going after nonprofit Kaiser Permanente for–according to whistleblowers–systematically defrauding taxpayers by doing exactly the same thing that Kaiser’s for-profit peers have been doing–and getting gentle slaps on the wrist for–more many years. 

As Axios and Modern Healthcare are reporting, the DOJ has joined six whistleblower complaints alleging that Kaiser “made its Medicare Advantage patients look sicker than they were as a way to obtain more money from the federal government.”

It was sad for me to read that because I had always thought of Kaiser as one of the good guys (relatively speaking) in the health insurance business. Toward the end of my career at Cigna, at a time when I was growing increasingly disenchanted with my work and the industry, I got a call from a recruiter looking to fill the job of VP of Communications at Kaiser. 

Even though that was the same role I had at Cigna, I thought Kaiser, being nonprofit and also a leading provider of health care, would be different. I had long admired the company’s commitment to integrated care, which is a team-based approach with the objective of making sure patients get the care they need and don’t fall through the cracks. 

I quietly flew to Oakland for a round of interviews but, alas, didn’t get a job offer. The recruiter told me Kaiser had decided to go with a candidate who lived in California where the company is based and has a huge share of the health insurance market. Fair enough. 

What I learned then and later was that the company had no choice but to mimic the business practices of its for-profit competitors to hang on to its market share and make money. Among other things, it started moving away from its HMO core and into the high-deductible health plan space. Its HMOs had networks limited to Kaiser doctors and hospitals but very low copayments–and no deductibles. Concerned that the company’s employer customers would abandon them if it didn’t offer high-deductible plans, Kaiser executives hopped on the industry bandwagon. And thus Kaiser became largely indistinguishable from the profit-driven bad guys. 

(As Axios’ Bob Herman reported, the DOJ has also probed Anthem, Humana, UnitedHealth and Sutter Health, as well as other companies,, over alleged abuses of the Medicare Advantage program. Just this past April, the Department of Health and Human Services’ Office of Inspector General issued a report claiming that Humana, where I also used to work, overcharged CMS nearly $200 million for false or inflated claims.)

Kaiser Permanente higher-ups couldn’t help but notice how its for-profit peers were unlawfully sucking billions of extra dollars from Uncle Sam by gaming the Medicare Advantage program and thwarting the intent of Congress to keep insurers honest. In an attempt to make sure insurers wouldn’t sign up just the healthiest seniors and dump the ones who got sick and needed expensive care (common industry practices known as cherry-picking and lemon-dropping), lawmakers created a risk-scoring system. Insurers would be paid more for every health plan enrollee with one or more conditions, and the list of qualifying conditions was long

As my former Center for Public Integrity colleague Fred Schulte reported in an award-winning series a few years ago entitled “The Medicare Advantage Money Grab,” taxpayers have been bilked out of untold billions of dollars. And much of Fred’s reporting was back in 2014. Clearly, the bilking hasn’t stopped despite insurers being fined every now and then. Medicare Advantage has become such a cash cow for big insurers that they risk these lawsuits and sanctions and view any fines as just another cost of doing business. 

The Government Accountability Office (GAO) later confirmed and validated Fred’s investigative reporting. The GAO found that the Center for Medicare and Medicaid Services improperly paid more than $14 billion to Medicare Advantage insurers in 2013 alone. 

If you’ve been following my reports on big health insurers' earnings this year, you have noticed that taxpayers are now the source of most of those companies’ revenue and profits. In company after company, I’ve found that their only membership growth has come entirely through their Medicare Advantage health plans and the state Medicaid programs they manage. Meanwhile, their commercial membership has been declining because Americans who aren’t eligible for Medicare and Medicaid can’t afford private health insurance premiums and out-of-pocket requirements. 

The lawsuit against Kaiser Permanente makes it even more imperative that Congress pass legislation this year to improve the benefits of the traditional Medicare program by adding dental, vision and hearing benefits and putting a cap on out-of-pocket spending. Their absence is why so many people find Medicare Advantage plans (most of which include dental, vision and hearing and cap out-of-pocket spending) so appealing.

If Congress does that, it will put the traditional Medicare program on a more even playing field with private insurers. If it doesn’t, in the next few years, more people will be enrolled in Medicare Advantage plans (more than 40% already are) than in traditional Medicare. 

By the way, former Kaiser Permanente CEO George Halverson (who also served as chair of America’s Health Insurance Plans before he retired) has become a leading proponent of Medicare for All–so long as it is Medicare Advantage for All. You can be certain the executives and shareholders of all the big health insurers would love that world