EXPECT MORE FEDERAL
OVERSIGHT OF MEDICARE
Complaints grow at a faster rate than the market
By Kevin P. Hennosy
Through the year 2022, federal and state officials have looked at the publicly funded, and privately delivered, Medicare Advantage (MA) product with increasing concern. Expect more—especially from federal officials—in 2023.
This may not be welcome news to insurance producers who craft employee benefit packages. No one likes to hear that “the regulators” have taken an interest in your business sector, even if competing with unethical rivals gets old.
One cannot simply depend on informed consumers in a competitive market to weed out the fraudsters. The use of MA plans to fund retiree health benefits is a growing market, and about 45% of those transactions do not require a choice made by the retiree. The consumer of the service does not make a choice, let alone an informed choice; therefore, the market is not “competitive.”
Whether readers welcome the following information or not, this column will explain the roots of any policy reforms enacted in the next several years. In both the group benefits and individual sectors of the MA business, insurance professionals should expect a government crackdown, initially from regulators and later from Congress.
This writer has not seen such a scathing series of government investigative reports concerning insurance marketing practices since the Medicare Supplement Scandals of the 1980s. In those days, the tales from the field of “churning,” “twisting,” “stacking,” and fraud in the “Medigap” sector drew congressional ire.
Those scandals led to Congress twice directing the federal Executive Branch to work with state insurance regulators through the National Association of Insurance Commissioners (NAIC) to first draft consumer protection amendments and later draft standardized Medicare Supplement products. In each case, the NAIC received a statutory deadline to complete the congressional charge, and if they missed the deadline, Executive Branch officials would write the national rules. The NAIC completed the charge on each occasion.
One of the most effective and efficient reforms implemented in response to the scandals related to the use of the term “Medicare.” Regulations prohibited referring to additional insurance plans as “Medicare.” Private carriers could use the name “Medicare Supplement” and “Medigap,” but private insurers could not mislead elders to believe that their products were Medicare benefits.
Federal officials from both the Executive and Legislative Branches describe their reasons for reform as follows: 1) unwarranted denial of claims, 2) overpayments to the participating insurance carriers using faulty coding data, and 3) unabashedly predatory advertising campaigns.
Civil rights and claims
The Department of Health and Human Services (HHS) is updating civil rights protections in rules governing MA claims based upon investigative findings.
The department’s interest in Medicare Advantage Organizations (MAO) increased after the HHS Inspector General’s Office investigation of claims denials in 2019, which produced findings that the department analyzed for nearly two years.
In April 2022, the Office issued its report, which found that a material number of denials by MAOs were eligible for coverage under existing prior approval and claims payment Medicare guidelines. Also, the investigators opined that the traditional (public) Medicare would have prior approved the denied procedures and paid claims consistent with the program guidelines.
Through the year 2022, federal and state officials have looked at the publicly funded, and privately
delivered, Medicare Advantage (MA) product with increasing concern.
Expect more—especially from federal officials—in 2023.
In an October 2022 letter, the NAIC counseled the HHS that its proposed rule provided “excessive restrictions” on discrimination based upon race, color, national origin, age, disability, or sex (including pregnancy, sexual orientation, gender identity, and sex characteristics) of beneficiaries.
Channeling the states rights advocates of the 1950s and 1960s, the NAIC letter mentions that some state laws exempt from public oversight overt acts of discrimination against the elderly and other protected classes; therefore, the HHS proposed rules that should defer to those state laws.
Furthermore, the NAIC advocated that HHS should not track federal tax-payer funds provided to insurance carriers to offer the privatized Medicare benefits—advice that flies in the face of federal officials’ suspicion of overcompensation of carriers and wanting to verify their suspicions.
In other words, “Keep moving, Uncle Sam, nothing to see here, all is well.”
I will not put my money on the NAIC winning this debate.
MPAC report on finance
Critics of the MA program charge that the over-compensation of participating insurance carriers provides financial motivation for the most egregious marketing abuses.
Also, a federal commission charged with overseeing Medicare expenditures, the Medicare Payment Advisory Com-mission (MPAC), opines that faulty claims coding processes add to the over-payment problem.
We should note that the federal MPAC membership does not consist of Marxian dead-enders who shuffle into cell meetings mumbling “all power to the Soviets!” The report notes that the commission “strongly supports the inclusion of private plans in the Medicare program.”
The 2022 Annual Report of the MPAC found that MA does not provide the Medicare program savings promised when the George W. Bush Administration and Congress initiated it in 2003. The MPAC report noted, “The private plans in the aggregate have never produced savings for Medicare, due to policies governing payment rates to MA plans that the Commission has found to be deeply flawed.”
The primary argument for including private plans in the delivery of Medicare benefits presupposed the reduction of delivery costs.
Also, the commission’s report found that MA plan sponsors received material overpayments from the federal government in 2020—which just may explain the motivation for the use of saturation advertising for MA plans. Line them up and sign them up; the Feds pay by the head!
At a level of public policy debate that makes “civilians’” eyes glaze-over, the Commission opined, “Most claims in FFS [Fee For Service] Medicare are paid using procedure codes, which offer little incentive for providers to record more diagnosis codes than necessary to justify providing a service. In contrast, MA plans have a financial incentive to ensure that their providers record all possible diagnoses: Each diagnosis documented raises an enrollee’s risk score, and enrollees’ higher risk scores result in higher payments to the plan.”
“In 2020, differences in diagnostic coding caused Medicare to pay MA plans $12 billion more than it would have spent if the same beneficiaries had been enrolled in FFS Medicare,” according to the report.
One may ask, does the higher payments from Medicare result in better medical care? Improvement of the quality of care is another promise associated with the privatized Medicare plans.
The MPAC report noted that the processes for quality reporting by MAplan sponsors is inadequate, but Medicare still pays quality of care bonuses.
“In its June 2020 report, the Commission, recognizing that the current quality program is not achieving its intended purposes and is costly to Medicare, recommended a new value incentive program for MA that would replace the current quality bonus program,” the Commission reminded policymakers.
Senate report on marketing
On November 3, 2022, the Majority Staff of the Senate Finance Committee, at the direction of Senator Ron Wyden(D-Ore.), published a report on an investigation of MA marketing practices. In addition to committee investigators, the report benefited from “information provided by stakeholders including independent agents, health plans, and consumer groups.”
The investigation produced a brutal finding. The report hammers fraudulent and abusive marketing practices, which cannot be defended on ethical grounds. Furthermore, the most disreputable practices of marketing to the elderly seem directed at the poor and weak.
For readers who like horror stories, the full report is available on the website of the Senate Finance Committee, in the Newsroom Section and Chairman’s News subsection and connected to a November 3, 2022, news release.
Some readers may ask: How bad can the report be? After all, nearly half of all Medicare beneficiaries receive benefits from MA plans.
One could observe that the MA option proves overwhelmingly popular with beneficiaries; however, it is more accurate to say that the MA option as described in an overwhelming advertising blitz is wildly popular.
According to the Senate Committee report, the actual MA product differs from the advertised product in material ways. When Medicare beneficiaries realize that the promises made by 1960s and 1970s celebrities are not promises kept, they complain at rates far higher than growth in the market.
Participation in the MA market in-creases by about 3% a year, but the report notes: “Between 2020 to 2021, CMS received more than twice the number of beneficiary complaints related to the marketing of MA plans.”
The promise to “add money back to your Social Security Check,” is both a prime element in many beneficiaries purchase decisions, and the primary topic of many complaints about MA plans. The report explains:
MA plans may buy down Medicare Part B premiums for their enrollees, which would result in a higher Social Security payment for the beneficiaries who choose the plans. For many low-income seniors and people living with disabilities, these savings are meaningful. However, brokers and agents appear to use the promise of this additional benefit as a “bait and switch” tactic to lure beneficiaries into plans, even when lower Part B premiums are not offered by plans in the geographic area or the plan does not cover beneficiaries’ needed services and providers. Ultimately, this marketing strategy harms beneficiaries more than it helps them.
The report does not provide evidence that proves that the “brokers and agents” are the source of the bait and switch and not subject to faulty information provided by carriers. It would also be interesting to see the breakdown of data that segregates local agents from “boiler room” operations.
The Senate report describes a predatory marketing system unleashed upon American elders. Some schemes uncovered by investigators reflect the worst in humankind, such as:
“The Committee heard that unscrupulous actors are targeting individuals dually eligible for Medicare and Medicaid (so-called ‘dual’ eligibles who are allowed to switch MA plans once every quarter) as well as individuals with cognitive impairments.” (Emphasis added.)
Some people must not have mirrors in their houses.
In early February of 2022, the federal Centers for Medicare & Medicaid Services(CMS) released new rules expanding the definition of MA Third-Party Marketing Organizations (TPMO) to “include an organization or individual, including independent agents and brokers, who is compensated to perform lead generation, marketing, sales, and enrollment-related functions as part of the chain of enrollment.”
As noted above, in the early 1990s, federal officials turned to the NAIC for expert drafting of Medicare supplement reforms. In the case of MA, federal officials seem prepared to play the hand alone, without the states or the NAIC. Since the NAIC incorporated in 1999, the organization has proved less capable of acting independently of the regulated industry in the public interest—such as, defending state laws discriminating against protected classes.
The guidelines address business in MAs, Medicare Advantage Prescription Drug Plans (MA-PDs), Prescription Drug Plans (PDPs), and 1876 Cost Plans. (The following information is presented as an overview and is not a regulatory compliance guide.)
The new rules place responsibility for compliance on carriers for the activities of any TPMO offering their MA product. A TPMO includes a vendor or other contractor retained to do any of the following: 1) generate sales leads, 2) conduct marketing communications, and/or 3) execute enrollment. The CMS rules state: Plans are responsible for ensuring compliance with applicable Federal laws and regulations, including CMS’ marketing and communications regulations. This includes monitoring and overseeing the activities of their subcontractors, downstream entities, and/or delegated entities. Failure to comply with applicable rules may result in compliance and/or enforcement actions, including, but not limited to, intermediate sanctions and/or civil money penalties.
Expanding the definition of TPMO attempts to preclude carriers or other licensed entities from “giving away the pen” and claiming ignorance of problematic interactions with Medicare beneficiaries. All TPMOs face greater accountability to CMS oversight under those February 2022 rules.
Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nation-wide and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.