DOJ Turns Up the Heat on Medicare Advantage Plans: Lessons From the Kaiser and Aetna Settlements

Key Takeaways

• The U.S. Department of Justice enforcement activity targeting Medicare Advantage risk-adjustment practices is increasing, as reflected in the Kaiser and Aetna settlements under the False Claims Act.
• Federal scrutiny is focused on system-level coding practices, including chart reviews, addenda, and incentive structures that may lead to unsupported diagnoses or inflated reimbursement.
• Both Medicare Advantage plans and providers face heightened False Claims Act exposure, particularly where inaccurate diagnosis codes are submitted, unsupported codes are not corrected, or identified overpayments are not timely refunded.

The U.S. Department of Justice (“DOJ”) recently announced major settlements with two national Medicare Advantage (“MA”) insurance plans: a $556 million settlement with Kaiser Permanente affiliates and a $117.7 million settlement with Aetna. Both settlements resolved the DOJ’s allegations that the plans violated the False Claims Act (“FCA”) by using practices that inflated MA reimbursement.

To determine reimbursement amounts, the MA program relies on diagnosis and billing codes that plans submit based on patients’ medical records. Plans may collect higher reimbursement amounts for patients with more serious health conditions, as these patients may need more expensive treatment. The DOJ may view practices associated with a plan’s systems or programs as evidence of intentional coding fraud if they:

1. pressure physicians to amend codes after a visit in ways that are not supported by the underlying clinical documentation; or
2. focus heavily on adding new diagnosis codes that raise payments but do not equally correct inapplicable codes that reduce payments.

As these settlements demonstrate, MA risk‑adjustment coding has become a DOJ enforcement priority.

Kaiser Permanente Pays $556 Million

The DOJ’s allegations against Kaiser focused on its use of follow‑up chart reviews and addenda to insert new diagnosis codes into patients’ records following their visits. According to the DOJ, Kaiser allegedly pressured physicians and staff to add unsupported codes, even allegedly going so far as to tie bonuses and anchoring performance goals to raising risk scores. This created a strong internal push to increase Medicare payments. The DOJ also alleged that Kaiser relied on data‑mining tools to flag potential diagnoses and then frequently asked physicians to add those diagnoses to a patient’s chart, even when the condition was not actually addressed at the visit in question. In the government’s view, these practices created a system designed to augment diagnoses and bolster payments, without adequately ensuring that the diagnosis codes were accurate and properly supported.

Aetna Pays $117.7 Million

The DOJ’s allegations named Aetna’s use of a chart review program in 2015 to find and add new diagnosis codes, without equally correcting or deleting unsupported codes, as a violation of the FCA. The DOJ also alleged that, from 2018 to 2023, Aetna submitted certain diagnoses (e.g., morbid obesity) as part of the MA program even when the underlying medical records did not justify those codes. The DOJ also claimed that Aetna did not adequately repay overpayments when internal reviews identified the coding problems.

What This Means for Medicare Advantage

Taken together, the Kaiser and Aetna examples are not just about individual billing errors. Rather, these settlements concern allegations that plans developed large‑scale systems to generate diagnosis codes without effective oversight. In both matters, DOJ focused on programs and processes that, in its view, were designed to artificially increase MA payments, while overlooking or ignoring warning signs about errors in the data.

For MA Plans

There is an increased tension between MA plans’ coding practices and their duty to cover medically necessary and covered services. It is no longer enough for plans to deploy sophisticated tools and vendors that surface codes that happen to increase payments. Plans also need equally robust processes to remove codes that are wrong or not supported by the medical record, and to fix issues identified in audits. Plans should also scrutinize how physicians are contacted after visits and how often they are asked to add diagnoses through addenda, especially when those queries are accompanied by reminders about revenue or performance targets. The DOJ may view those visits and communications as pressure rather than neutral clarification. Incentives, scorecards, and dashboards that heavily emphasize higher risk scores without visible guardrails around accuracy and compliance can be persuasive evidence in an investigation. Plans should be able to show that they reward accurate and compliant coding, not just higher coding.

For Providers

MA risk‑adjustment is not just an insurer issue. When MA plans or their vendors run chart reviews, request addenda, or mine old records for “missed” diagnoses, they may ask clinicians to bless codes that will directly affect how much the plan is paid. Providers who sign off on diagnoses that are not well supported in the chart, overlook unsupported codes identified in reviews, or disregard internal complaints about coding practices can also face FCA risk. The risk increases when providers delay investigating potential overpayments tied to documentation or coding issues or are slow to refund money once problems are confirmed. In each of these situations, the government may argue that the provider knew about inaccurate claims and failed to act.

On the other hand, the DOJ’s treatment of risk adjustment coding may be favorable to providers who are in dispute with MA plans that have refused to pay or underpaid individual claims by citing a lack of medical necessity or insufficient documentation. Public enforcement documents about MA plans, such as DOJ settlement announcements, watchdog reports, or Medicare audits, can sometimes be used as helpful background when providers fight denials, payment cuts, or claw‑backs. The DOJ’s focus on Kaiser’s and Aetna’s practices particularly underscores how heavily MA plans rely on provider documentation to justify higher reimbursement amounts per patient. In litigation or arbitration, providers can ask: if the provider’s chart is strong enough to support risk‑adjusted payments for the MA plan, then is it not strong enough to support payment for the underlying services?

Conclusion

MA enforcement is now a core DOJ priority. As a result, the government is scrutinizing how plans design and run their coding, chart review, and incentive programs — not just error rates. In the current environment, organizations that can demonstrate and document a genuine, consistent commitment to accurate and balanced coding will be far better positioned if regulators or whistleblowers raise concerns.