[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
----------
JUNE 26, 2007
----------
Serial No. 110-60
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JUNE 26, 2007
__________
Serial No. 110-60
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PRINTING OFFICE
43-431 PDF WASHINGTON DC: 2008
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PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE
?
COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
RICK BOUCHER, Virginia RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey FRED UPTON, Michigan
BART GORDON, Tennessee CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois NATHAN DEAL, Georgia
ANNA G. ESHOO, California ED WHITFIELD, Kentucky
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland HEATHER WILSON, New Mexico
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado CHARLES W. ``CHIP'' PICKERING,
Vice Chairman Mississippi
LOIS CAPPS, California VITO FOSSELLA, New York
MICHAEL F. DOYLE, Pennsylvania STEVE BUYER, Indiana
JANE HARMAN, California GEORGE RADANOVICH, California
TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois MARY BONO, California
HILDA L. SOLIS, California GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas LEE TERRY, Nebraska
JAY INSLEE, Washington MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York TIM MURPHY, Pennsylvania
JIM MATHESON, Utah MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
______
Professional Staff
Dennis B. Fitzgibbons, Chief of Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff Director
(ii)
Subcommittee on Oversight and Investigations
BART STUPAK, Michigan, Chairman
DIANA DeGETTE, Colorado ED WHITFIELD, Kentucky
CHARLIE MELANCON, Louisiana Ranking Member
Vice Chairman GREG WALDEN, Oregon
HENRY A. WAXMAN, California MIKE FERGUSON, New Jersey
GENE GREEN, Texas TIM MURPHY, Pennsylvania
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
C O N T E N T S
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Page
Hon. Bart Stupak, a Representative in Congress from the State of
Michigan, opening statement.................................... 1
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 4
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 5
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 7
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 8
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 9
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Witnesses
David Lipschutz, staff attorney, California Health Advocates..... 12
Prepared statement........................................... 14
Kathleen Healey, director, State Health Insurance Assistance
Program, Alabama Department of Senior Services................. 39
Prepared statement........................................... 41
Lee Harrell, deputy commissioner, Mississippi Insurance
Department..................................................... 46
Prepared statement........................................... 49
Brenda Clegg-Boodram, Judiciary House............................ 63
Accompanied by Mary Royal, Grady Hammonds, Edith Williams, and
Jennifer Mezey, supervising attorney, Legal Aid Society of
the District of Columbia
Prepared statement........................................... 65
Francis Soistman, executive vice president, government and
individual plans, executive vice president, health plan
operations, Coventry Health Care, Incorporated................. 84
Prepared statement........................................... 87
Peggy Olson, Healthwise Insurance Planning, LLC.................. 104
Prepared statement........................................... 106
Gary Bailey, vice president, Medicare operational performance,
Wellcare Health Plans, Incorporated............................ 112
Prepared statement........................................... 113
Abby Block, director, Center for Beneficiary Choices, Centers for
Medicare and Medicaid Services................................. 133
Prepared statement........................................... 136
Answers to submitted questions............................... 238
Kim Holland, commissioner, Oklahoma Insurance Department......... 147
Prepared statement........................................... 149
Jim Poolman, commissioner, North Dakota Insurance Department..... 150
Prepared statement........................................... 153
Submitted Material
``Medicare Private Fee-for-Service Plans: A Market Driven
Blueprint for Enhancing Value,'' by John Gorman and Jean
LeMasurier..................................................... 191
James S. Theiss, chief privacy officer, Human, Incorporated,
letter of June 2, 2006 to Mr. Jim Poolman...................... 195
Humana, Incorporated news release of June 5, 2006................ 213
``After the Goldrush: the Marketing of Medicare Advantage and
Part D Plans,'' California Health Advocates, January 2007...... 215
``Methods Used by Insurers Are Questioned,'' by Robert Pear, the
New York Times, May 7, 2007.................................... 234
Subcommittee exhibit binder...................................... 257
PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE
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TUESDAY, JUNE 26, 2007
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:03 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Bart
Stupak (chairman) presiding.
Members present: Representatives Stupak, Green, Schakowsky,
Inslee, Dingell, Whitfield, Walden, Murphy, Burgess, and
Barton.
Staff present: Kristine Blackwood, Joanne Royce, Paul Jung,
John Sopko, Scott Schloegel, Voncille Hines, Kyle Chapman,
Peter Spencer, Alan Slobodin, Matt Johnson, and John Stone.
OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Stupak. This hearing will come to order. Today we have
a hearing entitled ``Predatory Sales Practices in Medicare
Advantage Programs.'' Each Member will be recognized for 5
minutes for an opening statement. I will begin.
Our hearing will examine the program known as Medicare
Advantage which provides insurance options for Medicare
beneficiaries. One of its primary objectives was to provide
Medicare beneficiaries a wide array of managed-care choices.
However, the proliferation of private Medicare insurance plans
has come at a price. Investigators for this committee have
verified countless stories of deceptive sales practices by
insurance agents who prey upon the elderly and disabled to sell
them expensive and inappropriate private Medicare plans. These
shameful marketing practices targeting our most fragile and
vulnerable citizens are the subject of today's hearing.
As often happens in the process of our investigation,
usually just before this subcommittee holds a hearing, those
being investigated make changes in their practices to appear as
though they are addressing the problems at hand. On June 15,
seven major health insurance companies, two of which are
represented here today, voluntarily agreed to stop marketing
one type of Medicare Advantage plan, the Private Fee-for-
Service plan, in response to complaints about deceptive sales
practices including forged signatures and enrollment of dead
people.
Today we will explore how CMS and the insurance industry
reached the point where they had to call a moratorium on
marketing the Private Fee-for-Service Medicare Advantage plans.
We will also hear about the real life consequences of
fraudulent marketing practices. Unfortunately, many seniors are
coaxed into plans that don't adequately meet their health care
needs. They don't understand that if they sign up for Medicare
Advantage they no longer have the benefits of traditional
Medicare coverage.
In some instances the Private Fee-for-Service plans being
sold to these individuals result in reduced coverage and higher
out-of-pocket expenses that seniors on a fixed income cannot
afford. And what most people realize about the Medicare
Prescription Drug Improvement Modernization Act of 2003, MMA as
it is referred to, is that it created part D of Medicare and
launched prescription drug plans run by insurance companies.
But what MMA also did was boost the payments to insurance
companies operating managed care alternatives to traditional
Medicare and called the private plans Medicare Advantage.
Before MMA the Government was paying the private plans 95
percent of the cost of traditional Medicare. Now the Government
is paying them 112 to 119 percent of traditional Medicare.
Medicare Advantage is aptly named. It is richly funded to
out-compete or privatize traditional Medicare. The launching of
part D in combination with the boost in payments to Medicare
Advantage plans has resulted in a dizzing array of choices for
seniors and disabled persons.
In Houghton, MI, one of the small towns in my district in
the Upper Peninsula, Medicare beneficiaries have 54
prescription drug plans to choose from, plus 14 Medicare
Advantage plans. And that is nothing compared to other parts of
the country. For instance, in Miami there are at least 57
prescription drug plans and 55 Medicare Advantage plans
available. A May 2006 report by AARP documented the problems
faced by seniors sorting through this maze showing wide-spread
confusion and even anxiety over the new Medicare Advantage and
prescription drug plans.
At what point does consumer choice become meaningless? When
seniors and their families sit down at a kitchen table to
figure out what health care program grandma or grandpa need,
they should not have to hire an accountant to help make the
right choice for them. Now we have a glut of private plans that
end up dispatching fleets of sales agents racing each other to
get to the local retirement community, assisted living facility
or senior center first. We have telemarketers and insurance
agents competing for commissions, prizes and trips to Las Vegas
based on who sold the most policies in the shortest time.
These abusive practices under Medicare Advantage are very
similar to the rampant sales problems witnessed with the launch
of the Medigap Insurance in the 1980s. The regulatory model
which eliminated Medigap sales fraud should be applied to
Medicare Advantage. As with Medigap plans, MA plans should be
standardized, States should be able to regulate Medicare
Advantage companies and agents, and insurers should be held
accountable for their agents' actions.
Our first panel will explore the extent of the problem and
the consequences of deceptive sales. We will hear first from
David Lipschutz, an attorney for the California Health
Advocates. California has had a lengthy experience with
Government managed care plans and has often served as the role
of the canary in the coal mine. We are especially grateful
today for the testimony of three victims of predatory sales
practice. Ms. Barbara Clegg-Boodram, a resident of Judiciary
House in Washington, DC, home to a large number of seniors and
disabled persons a few blocks from here, will testify on behalf
of her fellow residents, Edith Williams, Mary Royal and Grady
Hammonds. Mrs. Williams, Ms. Royal and Mr. Hammonds were
victimized by an agent who failed to properly explain the
consequences of their enrollment in Medicare Advantage plans.
Next, we will hear from Kathleen Healey, the director of
the Alabama State Health Insurance Assistance Program, SHIP.
SHIP is a national program in each State that offers one-on-one
free counseling and assistance to people on Medicare. Also, on
the first panel is Mr. Lee Harrell, deputy commissioner of the
Mississippi Insurance Department. Mr. Harrell will share with
us some of the practical problems State regulators face when
they investigate deceptive practices under the current
structure.
We will hear from the insurance industry in our second
panel, Fran Soistman from Coventry Health Care and Gary Bailey
from WellCare Health Plans will testify about the efforts of
their companies to combat marketing of abuses. They are joined
by Ms. Peggy Olson, a licensed insurance agent who has
specialized in Medicare coverage since 1985. We will explore
with this panel the role of the independent agents, companies'
relationship with field marketing organizations, general agents
and sub agents, and some of the inherent challenges these
relationships pose. We hope each of you will share with us your
candid assessments and your constructive ideas.
Finally, we will hear from the Government regulators, Ms.
Abby Block, the director of the Center for Beneficiary Choices
at CMS, will testify about CMS oversight of Medicare Advantage.
She is joined by Jim Poolman, the commissioner of North Dakota
Insurance Department, and Ms. Kim Holland, the commissioner of
the Oklahoma Insurance Department. These witnesses will discuss
steps their departments are taking to investigate questionable
practices and to warn seniors in their States so they can avoid
being victimized.
The financial windfall to the insurance industry
attributable to the Medicare Advantage program has been likened
to the gold rush. We are bound to hear today that the industry
and CMS have zero tolerance for deceptive sales practice. What
we need, however, is zero abuse. Why do so many elderly and
disabled continue to be enrolled through confusion, if not
trickery, in unsuitable and ultimately costly plans? Hopefully,
our hearing will answer some of the questions.
Next, for an opening statement I would like to turn to my
friend and ranking member of the committee, Mr. Whitfield from
Kentucky.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. Well, Chairman Stupak, thank you very much
for holding this hearing on problematic sales practices of
Medicare Advantage plans. And I certainly want to thank at the
outset Ms. Clegg-Boodram, Ms. Royal, Mr. Hammonds and Mrs.
Williams, who have come this morning to talk about their
personal experiences with a a deceptive insurance agent just a
few blocks from the Capitol trying to sell them a Medicare
Advantage plan.
Today we are focused on Medicare beneficiaries who have
been unscrupulously coaxed, misled or fraudulently signed on to
plans that they do not really want and we appreciate this panel
helping us understand this problem.
It is important to expose problems and gaps in the
oversight of Medicare Advantage sales practices and to insure
ultimately that the Medicare Advantage program operates to its
full potential as a new benefit for Medicare beneficiaries. The
program cannot reach that potential when there is a cloud of
distrust over the plans created by disreputable sales
practices.
The problems we will examine today have occurred amidst a
large and rapid spread of Medicare Advantage plans across the
country. More than 8 million people are enrolled in private
Medicare Advantage plans, up from about 5 million just 3 years
ago when the Medicare Modernization Act took effect. The
expansion has been particularly rapid for the Private Fee-for-
Service version of these plans which accounted for some 500,000
of the 700,000 new enrollees in 2007 so far. These Private Fee-
for-Service plans now serve some 1.5 million beneficiaries,
strong evidence of their popularity. Because these plans are
not as constrained as their managed-care counterparts are by
the need for contracted doctor networks, they have spread
particularly fast in the rural areas and heretofore have not
had much access to what Medicare Part C offers in terms of
extra benefits and services, lower premiums and the like. Yet
it is with these plans that State and Federal officials,
consumer advocates and the health plans themselves have seen
the large number of sales problems.
Medicare Advantage relies heavily upon insurance agents to
educate people about these plans to assess the beneficiaries
needs and to assure they know what they are purchasing. With
this in mind I would like to hear specifically from
representatives of the two insurance plans testifying today
about how they encourage their agents to make sales but at the
same time ensure that the enrollees are fully informed. How do
they train and monitor their agents? How have they reacted to
reported problems?
We should bear in mind that much of this growth in these
plans--of sales--has occurred in the shadow of the launching of
the Medicare drug benefit. With the intense focus on the drug
benefit there may have been less than necessary Federal
attention on the growth of the Advantage plans and attendant
need for informing physicians and the public about the new
offerings.
Mr. Chairman, this hearing comes at an opportune time. The
Centers for Medicare and Medicaid Services has issued a new
marketing guideline for the upcoming year and I understand that
State regulators and CMS have been working to improve oversight
of the marketing practices and most recently seven insurers who
account for 90 percent of the Medicare Private Fee For Service
market announced a moratorium on sales until CMS certifies they
have instituted new marketing provisions.
This is a good juncture for the subcommittee to examine why
the sales abuses have occurred and whether the new measures
will be sufficient to reduce the problems as we move forward to
the future. And I yield back the balance of my time.
Mr. Stupak. I thank the gentleman.
For an opening statement, the chairman of the full
committee, Mr. Dingell, opening statement, sir.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr Dingell. Mr. Chairman, this is a very important hearing
and I thank you and commend you for having it.
I will be blunt. The Medicare Advantage marketing practices
that have come to the attention of this committee are
disgraceful in the extreme. Frankly, they have come as no
surprise to those of us who have long questioned the structure
of the Medicare Advantage Program and they tend to be a
replication of some of the charges we have seen of some of
these same people doing the same thing with regard to Medigap
which this committee had to act upon years ago to stop the same
kind of outrageous practices again by some of the same people.
I would note that we ought to ask why are Medicare payments
for Medicare Advantage beneficiaries on the average 12 to 50
percent higher then those that Medicare pays for beneficiaries
enrolled in traditional Medicare. We were told that this is
going to be a device which will bring competition and reduce
costs. Why should the vast majority of traditional Medicare
beneficiaries pay higher monthly premiums to subsidize Medicare
Advantage enrollees? And that total subsidy is something on the
order of $700 million that is flowing to a group of people
through the hands of a group of insurance companies to others
who oft times are more affluent.
Wasn't privatization supposed to help contain costs and
allow for more efficient delivery of quality health care? In my
view Medicare Advantage is not containing costs and there is no
evidence that it is providing value to beneficiaries
commensurate with its greater cost. On the contrary, as we will
hear today the very structure of Medicare Advantage creates
conditions ripe for swindling the elderly and disabled. The
real beneficiaries of these programs are the insurance
companies, which are profiting splendidly. Humana is reportedly
earning 66 percent of its net income from sales of Medicare
Advantage products this year.
Should our Medicare Trust Fund be subsidizing the insurance
industry? And, indeed, there is an interesting thing to note
here. The Medicare Trust Fund is being depleted 2 years early
by the events that we are discussing today. Clearly, the
administration thinks so. The unprecedented overpayments to the
insurance industry are part of the administration's agenda to
privatize the Medicare system and they are being subsidized by
overpayments of somewhere between 12 and 30 percent. Something
that is totally unjustifiable and unsupervised. So far this
privatization has neither saved money nor provided verifiable
efficiencies. It has created some very interesting things.
First, deep confusion over a ballooning array of plans, and
second armies of sales agents competing for commissions, cash
prizes, trips to Las Vegas for those who sign-up the greatest
number of seniors in the shortest time.
The industry will tell us that they need time to work out
the kinks in the provision for bringing about more effective,
more cost effective, and more coordinated care. But they have
had decades to do this. It is undone, and I hope that Mr.
Chairman, your labors thus far and that of the committee will
help us move this matter forward.
Private managed care options to traditional Medicare have
been around since the creation of Medicare. With the
introduction of the Medicare Plus Choice Act in 1997, Medicare
Health Maintenance Organizations (HMOs) and Preferred Provider
Organizations (PPOs) really took off. In order to encourage
cost containment, private insurers were reimbursed between 95
percent and 102 percent of the cost of traditional Medicare. A
number of the better run Medicare managed care plans were able
to offer additional benefits even at these lower
reimbursements.
But after an initial surge in growth many plans started
withdrawing from the market citing inadequate payments from the
Government even though they were turning in some fine profits.
The administration responded in 2003 by throwing still more
money at the insurers to prime the Medicare privatization pump.
Insurers responded to the lure of big profits by launching a
dizzying number and variety of Medicare Advantage plans.
In addition to draining the Medicare Trust Fund, as I
mentioned, by 2 years, more quickly, overpayments to the
insurance industry serve as a pervasive incentive for insurance
companies and agents to aggressively market their products
without regard to the seniors' health, financial well-being or
ability to deal with the kind of practices which we are seeing.
Let us look at some of the things that the committee has
heard. We have received evidence of shameful practices. What
are they? Brokers signing up people with Alzheimer's and
psychiatric disorders, brokers forging signatures, and signing
up dead people, brokers telling people that Medicare sent them
and that Medicare is being eliminated and they must sign-up or
lose their health coverage.
I want to thank our witnesses for appearing before us today
to share with us some of the glaring problems with Medicare
Advantage and possible solutions. And I look forward to working
with you, Mr. Chairman, and members of the committee, not only
to bringing this out but to correcting some of these scandalous
abuses. Thank you.
Mr. Stupak. Thank you, Mr. Chairman.
Next, Mr. Green, for an opening statement, sir.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, for holding this
hearing on predatory sales practices involved with the
enrollment of Medicare beneficiaries in Medicare Advantage
plans. While the notion of private Medicare contractors has
been around since the 1970s participation in the Medicare
Advantage Program has increased dramatically since Congress
passed it. The Medicare Modernization Act, which significantly
increased payments to Medicare Advantage plans in Harris
County, TX, which Houston is a part of, along with seniors who
want to participate in Medicare Advantage have to choose among
37 different private plans. Unfortunately, the litany of
choices creates a significant confusion among our seniors,
confusion that enterprising agents have taken advantage of to
enroll seniors unwittingly in various Medicare Advantage plans.
In my State of Texas some of these questionable marketing
practices include door-to-door marketing of these plans, which
is illegal. We know in other States that agents have paired
this door-to-door marketing request with a that a beneficiary
fill-out a request for more information, a document that the
beneficiary finds later was truly an enrollment form for a
Medicare Advantage plan. Some of the tactics offered are so
egregious that as part of these bait-and-switch routines their
agents reassure seniors they will still be enrolled in Medicare
and that their enrollment in a Medicare Advantage plan will not
affect their Medicare coverage.
These tactics involve the use of half-truths that seize
upon the trust that is built for more than 40 years now between
seniors and the Medicare Program. Medicare is a trusted brand
name that seniors equate with balance, cost-sharing and open
access to providers. After being duped in the Medicare
Advantage plans many seniors now feel misled and frustrated.
They can't necessarily see their family doctor they have
trusted for decades and they can't do anything about it until
the next open enrollment period.
In Houston we are proud to be the home of M.D. Anderson
Cancer Center, one of the top cancer centers in the Nation.
Most cancer centers that are across the country do not accept
Medicare Advantage plans yet the sales practice of bundling
part D and part C plans has denied many of the seniors the
access to these world-renown cancer centers. Unknowing
beneficiaries find out too late that their part D enrollment
included enrollment in a corresponding part C plan and their
dis-enrollment from part B. In fact, Memorial Sloan-Kettering
had to proactively send letters to its Medicare patients to
educate them on the distinctions between parts B and C so that
more beneficiaries wouldn't fall for those bundling tactics and
lose their access to cancer care.
The Texas Department of Insurance gets daily complaints
about the marketing practices of Medicare Advantage plans.
Unfortunately, the Medicare Modernization Act tied their hands
and preempted State insurance commissioners from having
enforcement authority over these practices. Unlike was
mentioned earlier in Medigap coverage from decades ago, CMS
doesn't have the time or the resources to adequately enforce
consumer protections. If the recent agreements between CMS and
seven Private Fee-for-Service plans are any indication, the
agencies are relying on the industry to police itself. CMS in
this particular program is in need of strong congressional
oversight and I want to thank the chairman for making it a
priority for our subcommittee.
As a member of the Health Subcommittee I hope we can learn
from this investigation and enact some much needed consumer
protections for our Medicare beneficiaries so they can renew
their trust in the Medicare Program. I look forward to hearing
from our witnesses today and I thank you for sharing your
experience. With that, Mr. Chairman, I will yield back my time.
Mr. Stupak. Thank you, Mr. Green.
Ms. Schakowsky, for an opening statement, please.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you. Thank you, Mr. Chairman.
First, I would like to associate myself with Chairman
Dingell's remarks regarding overpayments to Medicare Advantage
plans, even those that are not engaged in predatory marketing
practices. Since the creation of Medicare Advantage plans in
2003 and the subsequent ability to market those plans in 2005,
there has been an explosion in the number of Medicare Advantage
products on the market. This has brought serious new challenges
to beneficiaries who must navigate the chaos of varying
programs with different cost-sharing provisions. It has also
posed serious questions about the State agencies ability to
regulate the sales and marketing of these programs.
Fast forward now to 2007 and you have got seven private
insurers who cover the largest number of Private Fee-for-
Service beneficiaries voluntarily suspending their marketing
programs from Medicare Advantage plans in light of serious
reports of predatory sales practices. Something has gone
terribly awry.
Inappropriate sales practices, manipulation and coercion
have no place in personal decisions about health care. For many
people insurance agents rank right up there as a source of
information about their Medicare plan options, that is why I
have serious concern about States' lack of tools for regulating
the insurance sales industry, particularly in light of accounts
of our most vulnerable members of society being targeted.
Dual-eligibles who are more likely to live alone or likely
to suffer from mental or psychiatric disorders, and who are
more likely to have higher levels of chronic diseases or
serious disabilities are especially susceptible and
particularly targeted by predatory sales practices. This is
primarily due to their ability to switch plans on a monthly
basis. These characteristics also make it all the more
important that they maintain appropriate coverage throughout
the year.
As I suspect we will hear from our witnesses today the
appalling sales practices employed by some of these bad actors
can cause immeasurable damage to a person's financial
stability, prospects for regaining coverage in the future and
overall personal health and safety. I look forward to working
with the subcommittee to end these practices once and for all.
I think we need to look at the commission structure of the
insurance industry sales industry, the wide variety among plans
and most importantly the lack of authority and oversight
granted to CMS to regulate sales agents and plan sponsors. This
is a very timely hearing as the committee looks for ways to
truly improve health care, efficiency and quality. And I truly
want to thank the witnesses for being here today and look
forward to hearing what you have to say.
I yield back.
Mr. Stupak. I thank the gentlelady.
Mr. Burgess, opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman, and thanks for
calling this hearing. We are going to be gathering some
information on potential abuses by insurance brokers and agents
marketing Medicare Private Fee-for-Service and Medicare
Advantage plans. And I think we are all struck by those who
would either prey on the elderly or defraud the U.S. taxpayer.
Those brokers and agents who violated the trust of their
customers must be dealt with in a way that limits their ability
to ever do that again.
Medicare beneficiaries rely on information that these
individuals provide to be accurate, they rely on it to be
truthful as they evaluate the different health plans to meet
their specific needs. When a broker or agent seeks financial
gain by defrauding these customers, and these customers are our
parents, they are our brothers or our sisters, they are our
grandparents, when these agents seek financial gain by
defrauding those customers they erode the trust that makes up
the foundation of the Medicare Program.
The American Association of Insurance Plans has recently
set forth a new initiative that sets up the responsibilities
that go beyond existing guidelines and make clear that health
plans are committed to giving Medicare beneficiaries peace of
mind. The American Association of Insurance Plans will work
with the Centers for Medicare and Medicaid Services to
implement new steps on training, retraining, monitoring to
ensure compliance, including requiring beneficiary attestation
on enrollment applications and other steps to confirm that
beneficiaries understand the plan they have chosen. In
addition, plans must strengthen the mechanisms to promptly and
effectively address non-compliance, including working with an
actual Association of Insurance Commissioners, the Center for
Medicare/Medicaid Services, different beneficiary groups and
broke organizations and insure that new uniform processes and
criteria be adopted to report serious broker misconduct in
these areas as well as misconduct by the agent or the plan
employee.
I am grateful that the industry has taken some proactive
steps to address this issue. Whatever we do to reinforce this
initiative the solution should not delegate authority to the
various States because of the national characteristic of many
of these plans. An idea that may have merit is to create a
national database of brokers or agents that engage in predatory
or fraudulent sales of plans. That way the plans know how to
steer clear of certain individuals when contracting with
independent brokers and agents. I also thank the witnesses for
giving of their time in being with us today and providing
valuable insight into this problem and, Mr. Chairman, I will
yield back the balance of my time.
Mr. Stupak. I thank the gentleman.
Next I will turn to ranking member of the full committee,
better known as the winning manager of the baseball team last
night, Mr. Barton from Texas.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Well, thank you, Mr. Chairman, that was the
best played game I would say in the last 20 years; no errors or
very few errors and the Republicans caught the breaks at the
right time. Praise the Lord, but it was a good game and
Washington charities are about $90,000 richer as a consequence.
You, as usual, played a very good game.
I do appreciate you and Ranking Member Whitfield holding
this important hearing on the Medicare Advantage Program.
Medicare Advantage is an important part of Medicare. Congress
has worked hard to expand the benefits to those who choose this
particular type of program, and it looks like it is a very
popular program since there are more than 8 million seniors who
have enrolled in Medicare Advantage plans so far.
Having said that no part of government is immune from
responsible oversight. I believe that responsible oversight is
important but it does not include second-guessing successful
and popular programs to death or taking benefits away from
Medicare beneficiaries who paid for them. I want to assure the
enrollees in Medicare Advantage that their new benefits are not
going to be taken away.
I hope this hearing will be a means to strengthen the
program and ensure those enrollees that they get the benefits
that they have chosen as they enrolled in this particular type
of Medicare Program. We have a real responsibility to prevent
any program and its agents from preying on the weak and the
vulnerable. To the extent that there are abusive sales
practices in Medicare Advantage we should find them and we
should stop them. Mr. Chairman, you and Ranking Member
Whitfield are going to have my full support for a
straightforward inquiry into what may be a very serious
problem.
Let me also note that I appreciate your efforts as chairman
to focus this hearing on the consumer protection elements of
Medicare Advantage marketing. Reports of any consumer practices
among some sales agents are troublesome, especially when
misleading or abusive sales tactics target the seniors, the
poor and the disabled. If there are gaps in regulatory
oversight or in our marketing guidelines or in our enforcement
authorities we should fill them and we should do so in a
bipartisan basis very quickly.
Medicare Advantage has sought to harness the free market to
improve what its beneficiaries can receive in terms of
increased choice, increased competitive benefits, and different
payment options. I think this is a good thing. Yet a free
market approach does not mean a sales free-for-all where agents
can have their will over the interests of the beneficiary. CMS
has obligations, the health plans have obligations, and indeed
even the sales agents have obligations to ensure consumers
receive necessary information to make informed choices. Let me
emphasize, we will hold to account those who fail the Medicare
Advantage patient. And we are going to do that beginning in
this hearing, Mr. Chairman. You will have the Republicans full
support on that.
There are areas that need attention. This is demonstrated
by the health plans and CMS' own recent actions to put in
disclaimers and to improve communication about what the plans
are all about. It is a fair question why it took so long to do
that. Why weren't problems like have happened anticipated? What
else needs to be done?
I am perplexed at some of the problems that I understand
continue to exist. For example, Private Fee-for-Service plans
are popular, people like them, they offer benefits that you
cannot get in traditional Medicare. Private plans also are
potentially more attractive then traditional Medicare managed
care to doctors and hospitals because these plans pay at the
same rates and even more in some cases then Medicare pays. This
is a selling point to beneficiaries and should be to health
care providers. So why does CMS continue to code these plans as
HMOs in the common data file potentially causing physicians to
turn beneficiaries away? This is not an insurance agent
problem. This is a CMS problem and it needs to be fixed.
I would like to echo you, Chairman Stupak, and Mr.
Whitfield, to say that I am seeking constructive information
today from all parties to identify problems accurately, be
confident that appropriate measures are in place to reduce
abusive sales practices. Again, Mr. Chairman and Mr. Whitfield,
thank each of you for holding this hearing today and I look
forward to hearing what the witnesses have to say.
Mr. Stupak. Thank you, Mr. Barton.
Well, that concludes the opening statements by Members. We
have our first panel assembled. Mr. Lipschutz, an attorney with
the California Health Advocates, Ms. Kathleen Healey, director
of the Alabama State Health Insurance Assistance Program, Mr.
Harrell, deputy commissioner of the Mississippi Insurance
Department, Miss Brenda Clegg-Boodram, a resident of the
Judiciary House housing complex here in DC, and you are
representing your fellow residents, but they are all at the
table. It is Ms. Royal, Ms. Mezey, you are an attorney on
behalf of the residents of Judiciary House, correct, and Mr.
Hammonds, correct, and Ms. Williams.
Since you are all assembled, it is the policy of this
subcommittee to take all testimony under oath. Please be
advised that witnesses have their right under the rules of the
House to be advised by counsel during their testimony and Ms.
Mezey, I understand you are to provide that counsel to the
residents there. OK. Does anyone else wish to be represented by
an attorney or counsel here before they testify today? OK. As I
said all testimony is taken under oath so I am going to ask you
to rise and raise your right hand to take the oath. Ms.
Williams, if you just want to sit there and just raise your
right hand that will be fine.
[Witnesses sworn.]
Mr. Stupak. Let the record reflect all witnesses answered
in the affirmative so we will begin with opening statements.
You have 5 minutes for opening statement. We have your opening
statements so if you want to paraphrase or summarize that would
be great. Mr. Lipschutz, we will start with you, please.
STATEMENT OF DAVID LIPSCHUTZ, STAFF ATTORNEY, CALIFORNIA HEALTH
ADVOCATES
Mr. Lipschutz. Chairman Stupak, Ranking Member Whitfield,
and distinguished committee members, thanking you for giving me
the opportunity to testify today. My name is David Lipschutz
and I am a staff attorney at California Health Advocates, an
independent, non-profit organization dedicated to education and
advocacy on behalf of Medicare beneficiaries in California. We
do this in part by providing technical assistance and training
to the network of State health insurance programs known in
California as HICAP. Our experience with Medicare is based in
large part on our close work with the HICAPs and other consumer
assistance programs that are on the front line assisting
Medicare beneficiaries.
We recognize that Medicare Advantage plans can be a
suitable option for some people with Medicare, but as the
Medicare Program has grown and become more complex during the
last year and a half, consumers and consumer advocates have
witnessed an alarming epidemic of abuse surrounding the sale of
Medicare Advantage plans primarily, Private Fee-for-Service
plans. In the next few minutes I would like to highlight some
of the abusive practices we have seen and point out how CMS'
recent cumulative response to misconduct will help but does not
go far enough in curbing some of the root structural causes of
misconduct.
Medicare Advantage marketing misconduct ranges from
outright fraudulent practices to the misrepresentation of plans
due to agent ignorance or failure to ensure that consumers
understand what they are enrolling in. Examples of predatory
sales practices occurring in California and across the country
include the following.
Medicare beneficiaries are being signed-up for plans
without their consent or knowledge through a variety of means
including forged applications. Agents are using scare tactics
to convince people to join plans such as saying you will lose
your Medicaid unless you join, or are being lied to, such as
Medicare is going private, you must pick a plan.
Individuals who sought one type of product such as a PDP or
a Medigap go to an agent and end up in a Medicare Advantage
plan that they did not want. Individuals dually eligible for
Medicare and Medicaid, who in most cases already have
comprehensive benefits, are being targeted to enroll in plans
that may not be suitable for them. And in one of the more
common scenarios agents will make sales at senior or disabled
housing facilities, either after dropping by unannounced or
after presentations arranged under false pretenses. For
example, agents will say they are from Medicare and want to
talk about changes to the program without disclosing that they
are in fact insurance agents selling a product.
Damage that occurs as a result of marketing misconduct can
range from access and continuity of care issues when new
enrollees cannot find providers who will take their plan and
forgo treatment as a result, to financial, including unexpected
out-of-pocket costs or the loss of previously held insurance,
such as retiree coverage. Undoing the damage for individuals
can be challenging as plans can be unresponsive in obtaining
relief to the Medicare Program can sometimes be delayed.
CMS has recently responded to the overall problem of
misconduct by implementing new requirements for Private Fee-
for-Service plans and announcing the voluntary suspension of
marketing by certain Private Fee-for-Service plan sponsors. For
our outstanding questions, perceived shortcomings and specific
recommendations concerning these new requirements I will refer
to our written testimony.
In short, these new requirements will be helpful but they
stop short of stemming the full-range of abuse we are seeing
and they should be applied to all Medicare Advantage and part D
prescription drug plan sales, not just Private Fee-for-Service
plans. CMS action has culminated in the recent voluntary
suspensions by certain plan sponsors. While this announcement
has had a loud bark, it will likely have a soft bite as far as
curbing ongoing marketing abuses. At least some of the plans
were already under corrective action plans or have announced
that they are already close to meeting the new requirements,
meaning the suspension will likely be short-lived. In addition,
the suspension is in place between the major enrollment periods
when most people make plan changes. So impact on enrollment
numbers and company bottom line is expected to be minimal.
CMS and the insurance industry place the blame for
marketing misconduct on a few rogue agents. Attention to the
misconduct of agents committing abuse is certainly warranted
but plans should not escape scrutiny for their role in this
problem. One of the primary forces driving inappropriate sales,
we believe, is profit. The high payments Medicare Advantage
plans receive and the commissions plans pay to agents that
drive them to steer people towards Medicare Advantage products
over PDPs regardless of whether it is the best option for the
individual. Plans motivate their sales forces to maximize
enrollment through contests, TVs, trips to Vegas, and cash
bonuses for benchmark numbers of sales. At the same time plans
fail to properly oversee and train their contracting agents,
many of whom appear to lack an understanding of the products
they are selling.
As a result of these factors underlying marketing abuse
coupled with the dramatic growth in the types, numbers and
variation of Medicare Advantage plans being sold across the
country, many people with Medicare have been enrolled in part D
or Medicare Advantage plans they do not understand, did not
want or are inappropriate for their needs. In order to more
effectively address widespread marketing abuses recommendations
in our written testimony include achieving payment parity
between Medicare Advantage and original Medicare. Applying the
standards governing the sale of Medigap plans to Medicare
Advantage and part D sales which better protect prospective
enrollees and curb abuses driven by agent commissions. And
standardizing and simplifying the Medicare Advantage and part D
benefits so that Medicare beneficiaries can make meaningful
comparisons and plans can be held accountable for providing
adequate benefits. Thank you for this opportunity to testify.
[The prepared statement of Mr. Lipschutz follows:]
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Mr. Stupak. Thank you.
Ms. Healey for 5 minutes, please.
STATEMENT OF KATHLEEN HEALEY, DIRECTOR, STATE HEALTH INSURANCE
ASSISTANCE PROGRAM, ALABAMA DEPARTMENT OF SENIOR SERVICES
Ms. Healey. Thank you, Chairman Stupak, Ranking Member
Whitfield and members of the subcommittee for the opportunity
to speak on the predatory sales practices in Medicare
Advantage.
SHIPs are State-administered grant programs funded by CMS.
SHIPs are housed in State Departments of Aging, Departments of
Insurance and in one State, the Medicare Quality Improvement
Organization. Nationally, SHIPs receive significantly less than
$1 per beneficiary from CMS. SHIP is a volunteer-based program
and we ask a lot of the volunteers who join us. The SHIP
network is the only personalized community-based, systematic
and established source of one-on-one Medicare beneficiary
counseling in the United States. We must know all of Medicare
from parts A, B, C and D, to coordination of benefits, Medigap,
long-term care insurance, preventative benefits and Medicaid.
Our services are free, unbiased and confidential.
Today's Medicare environment is very complex. The numerous
and various options offered by private plans has exponentially
increased the demand for SHIP services. These new products
offered by private companies have presented a challenge for
beneficiaries unused to a myriad of choices. It is not that
people with Medicare are incapable of making a wise choice; it
is that the system often prevents an informed choice.
Unscrupulous agents seeking only a fast commission provide
misleading information and utilize questionable sales tactics
to encourage beneficiaries to sign-up for their plan. Let us
look at some of the examples from Alabama that our clients from
SHIP have experienced.
Despite the prohibition on door-to-door marketing, agents
arrive on residents' doorsteps stating that the President sent
them or that they represent Medicare. These agents bear
business cards touting themselves as Medicare specialists,
senior service specialists, not insurance agents.
Agents ask beneficiaries to show them their Medicare cards
and if applicable their Medicaid cards to verify that the
beneficiary is on Medicare. Later the beneficiaries find out
they were enrolled in the plan without their knowledge. After a
sales presentation agents ask beneficiaries to sign forms
verifying that the agents have met with the beneficiaries or
they ask beneficiaries to sign forms in order to receive their
free gifts. What the beneficiaries are actually signing is the
plan's Medicare Advantage application form. Agents repeatedly
use red, white and blue business cards that look like miniature
Medicare cards.
Telephone marketing has been equally aggressive. Repeated
phone calls to beneficiaries have become increasingly
threatening using scare tactics and misrepresentation. One plan
called the same person five times in 1 day. Telemarketers have
called beneficiaries stating that Medicare needs to send an
agent to their homes to correct a mistake in the Medicare and
You book that all beneficiaries receive. Telemarketers have
told beneficiaries that Medicare is going out of business or
that Medicare is being turned over to the plan.
Agents will arrive early if they know that the
beneficiaries have requested friends or relatives with them
during the appointment. By the time of the appointment and the
arrival of the trusted third party, the agents have already
enrolled the beneficiaries and gone on their way. When
beneficiaries learn that they deceptively enrolled in Medicare
Advantage plans they try to sort out the challenges and
problems on their own. Too often they discover it is not an
easy problem to fix and they require assistance. SHIPs provide
that needed help.
Deceptive marketing has a profound impact on a person's
access to health care and well-being. CMS has told SHIPs on
several occasions that the responsibility to fix the problem
lies squarely with the Medicare Advantage plans. Consequently,
SHIP contacts the plans. In some instances we must contact 1-
800-Medicare as we piece together a case history. There are two
main stumbling blocks which often stymie SHIP case resolutions
efforts.
First, SHIP has no official, dedicated lines to plans or 1-
800-Medicare numbers. Second, 1-800-Medicare refers directly to
SHIPs. Each SHIP has seen an increase in case work volume.
These cases are also increasingly complex and require an
extraordinary amount of time to resolve. Mandatory access to
plans and the necessity that these companies recognize SHIP and
our efforts on behalf of beneficiaries would be one key to more
efficiency in handling the complaints and problems we receive.
However, that still doesn't address the fundamental marketing
problems and processing delays that get the beneficiary in the
pickle in the first place.
The most recent solutions presented by CMS and the State
Departments of Insurance are a start, however, they are not the
complete answer. It does no good to establish rules and
regulations about what agents may or may not do or what type of
marketing the plans may or may not undertake and not speak
directly to the very population these plans and agents are
targeting. There must be a prevention message about health
insurance fraud aimed at Medicare beneficiaries. Medicare
beneficiaries must know the red flags to look for and how they
can protect themselves.
SHIP is ideally situated to deliver the insurance fraud
prevention message to Medicare beneficiaries since we already
have the infrastructure in place. However, SHIPs are severely
under-funded and consequently under-resourced so it is
difficult for many SHIPs to provide the proper tools to
beneficiaries. The Alabama SHIP is in the process of developing
an insurance fraud prevention campaign which includes tools
that empower our seniors. However, we do not have adequate
funding or resources to implement such a program. With less
than a dollar per beneficiary for our entire program and more
than 750,000 Medicare beneficiaries in our State alone our task
is daunting. I urge you to support an increase in SHIP funding
nationwide. Preventing the deceptive enrollment into Medicare
Advantage plans including Private Fee-for-Service plans would
greatly diminish the casework of SHIPs and CMS regional
offices. Please help SHIP provide the tools to prevent Medicare
beneficiaries from becoming victims and give State enforcement
agencies the teeth to bring both insurers and agents to task
for fraudulent actions.
I want to thank the committee for holding this hearing. I
have shared with you only a handful of examples they are not
the only ones or even the most egregious. Rather, they are
representative of the problems experienced by thousands of
beneficiaries nationwide. I hope these experiences I have
shared with you will help serve as a catalyst for the
development of real solutions so Medicare beneficiaries may
rest assured that their health care, whether it is original
Medicare or Medicare Advantage, is truly their choice. Thank
you.
[The prepared statement of Ms. Healey follows:]
Testimony of Kathleen Healey
Thank you, Chairman Stupak, Ranking Member Whitfield and
members of the Subcommittee for the opportunity to speak on the
predatory sales practices in Medicare Advantage and the
challenges facing our Medicare beneficiaries and State Health
Insurance Assistance Programs (SHIPs) throughout the United
States.
State Health Insurance Assistance Programs (SHIPs) have
been in existence for more than 15 years and are designed to
help seniors and people with disabilities understand their
health care coverage options. We are state-administered grant
programs funded by the Centers for Medicare and Medicaid
Services (CMS). SHIPs are housed in state Departments of Aging,
Departments of Insurance and, in one state, the Medicare
Quality Improvement Organization. Nationally, SHIPs receive
significantly less than $1.00 per beneficiary. While some
states receive state funding in addition to their Federal
grant, many states rely solely on Federal funding.
SHIP is a volunteer-based program and we ask a lot of the
volunteers who join us. Many programs operate with one or two
staff members and rely on volunteers to educate, counsel, and
assist Medicare beneficiaries in their community. The SHIP
network is the only personalized, community-based, systematic
and established source of one-on-one Medicare beneficiary
counseling in the United States. We must know all of Medicare--
from Parts A, B, C and D to coordination of benefits, Medigap,
long-term care insurance, preventive benefits and Medicaid. Our
services are free, unbiased and confidential. Our dedication is
strong.
SHIPs respond on a community level to Medicare
beneficiaries:
SHIPs educate beneficiaries about Part D, the
Medicare Prescription Drug benefit, and the extra financial
help available through the Low Income Subsidy and Medicare
Savings Programs.
SHIPs help beneficiaries understand their Medicare
benefits by explaining which services are covered under which
part of Medicare.
SHIPs help beneficiaries determine if a Medigap
policy is good for them and explain the benefits of each
policy.
SHIPs help beneficiaries understand the various
public and private long-term care financing options that are
available.
SHIPs help beneficiaries resolve disputes with
Medicare or a private Medicare plan.
SHIPs provide consistent, unbiased counsel for
beneficiaries and their caregivers, often in times of crisis.
SHIPs educate seniors, those with disabilities,
caregivers, and providers of medical services on all aspects of
Medicare.
In Alabama, our volunteers and staff have been interviewed
on television and radio. We have been quoted in newspaper
articles, newsletters and magazines. We are a trusted resource.
Nationally, SHIP staff and volunteers have educated and
counseled millions of people and have distributed hundreds of
thousands of informational flyers and tip sheets at enrollment
and educational events.
Wherever Medicare beneficiaries have gathered, SHIPs have
been there. We make presentations to retirees and also visit
senior centers, congregate housing sites, libraries and
churches. We also make presentations to state and county
provider groups. Over the past two years, with the
implementation of Medicare Part D (drug benefit) and the rapid
expansion of Medicare Advantage plans, SHIPs have educated
beneficiaries and their caretakers, provided enrollment
assistance, counseled and resolved problems encountered by
beneficiaries. We continue to monitor ongoing issues that have
not been resolved, and provide reassurance to beneficiaries
that there is an entity they can turn to when they do not know
where else to go. We have worked with our CMS Regional Offices,
hosted CMS Mobile Office Tour events, and implemented new CMS
mandates. We have reached out to create partnerships to better
serve Medicare beneficiaries and to reach hard-to-reach
populations.
Medicare's environment today is very complex. The numerous
and varied options offered by private plans has exponentially
increased the demand for SHIP services. Demand has increased
not just from Medicare beneficiaries and their families and
caregivers, but also from health care providers and community
leaders. SHIPs are the essential, local resource for seniors
and people with disabilities.
The Advent of Medicare Advantage and Prescription Drug
CoverageThese new products, from stand-alone prescription drug
plans to Medicare Advantage plans offered by private companies,
have presented a challenge for Medicare beneficiaries
unaccustomed to myriad of choices. Never before have
beneficiaries had to select from so many different plans
offering various options and levels of coverage. Never before
have they had so many independent agents, whether welcome or
unwelcome, selling health insurance plans. It is a new
experience for many of our clients and this opportunity for
choice has also created significant challenges.
Many times SHIPs have said that having choices, especially
with prescription drug coverage, can be a good thing. At the
same time, SHIP staff and volunteers have warned Medicare
beneficiaries to guard their information; to keep their
Medicare card as safe as possible as they would their credit
card or Social Security number. The warnings have been
inadequate because unscrupulous agents continue to lure
unsuspecting and ill-informed beneficiaries into plans they do
not want nor necessarily need--especially if they are on both
Medicare and Medicaid (also known as dual-eligible).
Keep in mind, Medicare Advantage products may provide good
coverage for some beneficiaries. If a beneficiary makes an
informed choice, has sufficient resources to cover co-payments
and knows that his health care providers will accept it,
private fee for service (PFFS) and other Medicare Advantage
plans can work very well. It is not that people with Medicare
are incapable of making a wise choice; it is that the system
often prevents an informed choice. The choices available are
not meaningful when Medicare beneficiaries do not understand
how the plans are structured or how to discern true benefits
from the flood of sales material coming their way. Unscrupulous
agents, seeking only a fast, and high, commission, provide
misleading information or utilize questionable sales tactics to
encourage beneficiaries to sign up for their plan.
Medicare Advantage Marketing PracticesLet's look at some
widespread examples from Alabama that our SHIP clients have
experienced:
Despite the prohibition of door-to-door marketing,
agents arrive on residents' doorsteps stating that ``the
President'' sent them or that they represent Medicare. These
agents bear business cards touting themselves as ``Medicare
specialists'' or ``senior services specialists,'' not insurance
agents.
Agents ask beneficiaries to show them their
Medicare cards and, if applicable, their Medicaid cards, to
verify that the beneficiaries are on Medicare. Later, the
beneficiaries find out they were enrolled in the plan without
their knowledge. If they are dual-eligibles, the applications
often state that the beneficiaries are not Medicaid recipients.
Agents ask some beneficiaries, after an initial
visit, to take them around their apartment building or
neighborhood so the agent could visit and sign up their
neighbors. These agents ask the beneficiaries to introduce them
to friends and relatives who are Medicare beneficiaries and who
may or may not live in the same neighborhood. In one situation,
an agent told the residents of a senior residential apartment
complex that Medicare and a specific PFFS company had assigned
the agent to that apartment building and that no other company
was supposed to be there.
After a sales presentation, agents ask
beneficiaries to sign forms merely verifying that the agents
have met with beneficiaries or they ask beneficiaries to sign
forms in order to receive ``free'' gifts. What the
beneficiaries are actually signing is the plan's Medicare
Advantage application form.
Agents encourage beneficiaries to enroll in plans
stating the beneficiaries would not pay anything for medical
care and if they did not sign up, the beneficiaries would be
penalized by Medicare. Not wanting this ``penalty,'' the
beneficiaries, who are often dual-eligible, enroll in the
plans.
Agents tell beneficiaries that the private fee for
service (PFFS) plan they are offering is supplemental
insurance.
One agent continued to visit a building where he
enrolled many of the residents. When residents complained to
the agent about receiving bills for co-payments from their
health care providers, the agent took the bills and said that
he would straighten them out with the plan and call the
beneficiaries back. They did not hear from him again and the
unpaid bills were turned over to collection agencies.
Agents have repeatedly used red, white and blue
business cards that look like miniature Medicare cards.
Telephone marketing has been equally aggressive.
Repeated phone calls to beneficiaries have become increasingly
threatening, using scare tactics and misrepresentation. One
plan called the same person five times in one day.
Telemarketers have called beneficiaries stating that Medicare
needs to send an agent to their homes to correct a mistake in
the Medicare and You handbook that all beneficiaries receive.
Some telemarketers insist that they are calling from Medicare
and they tell beneficiaries that they will lose their Medicare
if they do not sign up for the telemarketer's plan.
Telemarketers have told beneficiaries they have the plan that
the government won't tell beneficiaries about and it could save
beneficiaries money. Telemarketers have told beneficiaries that
Medicare is going out of business or that Medicare is being
turned over to the plan.
Agents will arrive early if they know that the
beneficiaries have requested friends or relatives to be with
them during the appointment. By the time of the appointment,
and the arrival of a trusted third party, the agents have
already enrolled the beneficiaries and gone on their way.
In many instances, beneficiaries do not even realize they
are no longer enrolled in Original Medicare. Beneficiaries
learn of their enrollment into Medicare Advantage plans when a
health care provider refuses to see them because the provider
does not accept the terms and conditions of the new plan--most
often a private fee for service (PFFS) plan--the provider is
out of the plan's network, or the beneficiary begins to receive
bills from providers for unpaid services or co-payments.
When beneficiaries learn that they have been deceptively
enrolled in Medicare Advantage plans, they try to sort out the
challenges and problems on their own. Too often they discover
that it is not an easy problem to fix and that they require
assistance. SHIPs provide that needed help. Deceptive marketing
has a profound impact on a person's access to health care and
well-being. The best way to have a clear picture of the problem
is to have the rest of the story--the before and after the
misrepresentation or deception by the agent:
Example 1: Ms. J is a 61-year-old disabled woman. She has
had both Medicare and Medicaid (a dual-eligible) for several
years. In January 2007, she went to her local pharmacy for
assistance in finding a Part D plan. Her pharmacist signed her
up with Company D's prescription drug plan. Several months
later, an agent with Company D came to her home and asked her
if she would like to sign up for free supplemental insurance
since she did not have any. He also told her that by signing up
she would not lose any of her current benefits and she would
receive additional coverage that Medicare does not provide.
In May 2007, she went to her family doctor and discovered
that she was no longer covered by Original Medicare and that
her doctor did not take Company D's private fee for service
(PFFS) plan. She contacted Social Security and was given the
number for SHIP.
SHIP discovered that Ms. J was not enrolled in the Part D
plan that could save her the most money, so we changed her drug
coverage plan to something that would work better for her. At
the same time, we also faxed and mailed a request for her to be
disenrolled from Company D's private fee for service plan.
Example 2: Ms. F is an 80-year-old widow. She has been on
Original Medicare with Company X's Medigap policy providing her
with supplemental insurance. Ms. F takes care of Ms. G who is
her 55-year-old disabled daughter. Ms. G has been a full dual-
eligible (which means she has both Medicaid and Medicaid) for
many years. Ms. F chose Company X's prescription drug plan
(PDP) for herself and her daughter in January 2007. In February
2007, an agent from Company X came to her home and asked her if
she would like to make her life easy by having her and her
daughter's medical coverage simplified by having Company X
serve as their supplemental insurance. She explained that her
daughter had Medicare and Medicaid; therefore, she did not need
supplemental insurance. The agent countered this by saying she
would get extra benefits for her and her daughter at no
additional cost and that their current benefits would not be
affected. Ms. F then enrolled herself and her daughter into
Company Xs plan--a private fee for service (PFFS) plan.
Two months later, Ms. F took her daughter to see her
specialist. When they arrived, Ms. F was asked to make a co-
payment. When she inquired why (because they had never paid one
before), she was told that her daughter no longer had Medicare
and Medicaid. Ms. F went home and contacted the agent who sold
her the plan and was told that she could not get out of the
plan. Ms. F contacted SHIP. Our office contacted Company X and
was told she could disenroll. We then faxed and mailed a
request for Ms. G and Ms. F to be disenrolled from the plan.
Example 3: Mrs. H and Mr. I are in their seventies. Both
have been on Original Medicare for years and have a
supplemental insurance policy (a Medigap) with Company M. In
March 2007, Mrs. H received a call from Company B's agent
inquiring about her supplemental coverage. He wanted to know
how expensive the coverage was. Mrs. H told him that it was
rather expensive and that she was concerned because it was
going up every year. He then asked if he could come by and talk
to her and her husband about a supplemental plan with his
company that was not expensive. Once the agent arrived, he told
them they were eligible for a free supplement to Medicare
through his company. Mrs. H inquired about the cost that they
would have to pay up front to see their doctor and was told
that they would only have to pay a $10 co-payment and that they
could drop their policy with Company M.
Two days after enrolling in the plan, Mrs. H and Mr. I went
to their local senior center and heard a presentation given by
the SHIP coordinator on Medicare Advantage. It was not until
they heard the presentation that they realized the agent had
given them misleading information.
After leaving the senior center, Mrs. H went home and
contacted the plan and asked if she and her husband could be
disenrolled. She was told they could not. She contacted SHIP.
We sent a request to be disenrolled for Mrs. H and Mr. I. They
were successfully disenrolled on May 1, 2007.
Example 4: Ms. C is disabled. She has been a dual-eligible,
having both Medicare and Medicaid, for many years. She has
suffered from seven strokes and is required to see numerous
specialists. In January 2006, she was auto-enrolled in Company
A's prescription drug plan (PDP). In April 2006, she was
suddenly disenrolled from Company A because she had been auto-
enrolled into five other prescription drug plans, all of which
began to cancel each other out.
In May 2006, Ms. C was not enrolled in a PDP and she had to
pay for her medications without any help. One day in May 2006,
she was shopping with her parents at a retail store and saw a
Company A agent. She asked the agent if he could sign her up
for the stand-alone prescription drug plan (PDP) she first had
in January 2006; however, the agent, knowing she was receiving
Medicaid benefits, signed her up for Company A's private fee
for service (PFFS) plan even though she repeatedly told him she
only wanted drug coverage.
After Ms. C enrolled with what she thought was Company A's
PDP, she received a card from Company B, another company.
Company B paid for her prescriptions until August 2006. Company
B was cancelled in August because Company A (the plan into
which she was enrolled in May) reflected on the Medicare system
in August. Ms. C decided it was best to contact CMS about her
problems. CMS filed a complaint on her behalf.
Meanwhile, she began receiving calls and bills from her
physicians as a result of unpaid medical bills. Ms. C was
shocked because she was under the assumption that Medicare and
Medicaid were still paying her bills. She had no idea that
Company A was supposed to be paying. When she tried to get her
physicians to file with Company A, she discovered that they did
not accept Company A. Ms. C contacted CMS again because she had
over $900,000 in unpaid medical bills. CMS forced Company A to
pay the unpaid bills and to process her disenrollment from its
plan.
Unfortunately for Ms. C, she began receiving collection
letters from Company A because of unpaid premiums. The premium
was over $33 per month. Her income was $643 per month. Ms. C
contacted Company A and the collection agency because she did
not think she should have to pay for the plan since she never
asked for it. Both Company A and the collection agency told her
that there was nothing she could do but pay the bill. Ms. C
began to send regular payments of whatever amount she could
afford. The collection attempts still continued, only stronger.
Ms. C found out about the SHIP program and contacted our
office. We have worked with Ms. C to stop the collection
efforts and to have the premiums written off by Company A. In
late June 2007, we received a letter stating that the plan
would not seek payment for the premiums.
These are just some of the examples of how the marketing
practices impact Medicare beneficiaries and impede their access
to health care. We send complaints to the CMS Regional Office
when we need a retroactive disenrollment and to provide
examples of what we are seeing at the local level.
CMS has told SHIPs on several occasions that the
responsibility to resolve problems lies squarely with Medicare
Advantage plans. Consequently, SHIPs contact the plans. In some
instances, we must also contact 1-800-MEDICARE as we piece
together a case history.
There are two main stumbling blocks which often stymie SHIP
case resolution efforts:
1. SHIP has no official, dedicated lines to plans or 1-800-
MEDICARSHIPs have had to be resourceful to serve the
beneficiaries. With no ``named'' plan contacts from CMS nor
required dedicated phone lines for SHIPs to utilize in case
resolution for plans or 1-800-MEDICARE, state SHIPs have
developed workable solutions to get the job done. We find our
own contacts at plans. When we run into issues where the
``scripts'' used by the customer service representatives with
the plans and with Medicare are incorrect or miss the point, we
muscle our way up the chain of command to find someone who can
solve the problem. We try not to refer cases to the CMS
Regional Offices if we can solve them ourselves because we know
of the backlogs and time delays that can result. These time
delays often cause additional issues as beneficiaries hesitate
to seek necessary medical care, unsure of their health
insurance coverage.
2. 1-800-MEDICAR refers directly to SHIPsThroughout the
existence of Medicare Advantage and Part D, SHIPs have
consistently experienced Customer Service Representatives (CSR)
at 1-800-Medicare referring beneficiaries to SHIPs for
assistance. The CSRs follow scripts for the calls. It is not
unusual to have a SHIP counselor or even a SHIP director or
program staff member contact 1-800-MEDICAR for assistance only
to be referred back to the state SHIP.
Each SHIP has seen an increase in casework volume. These
cases are also increasingly complex and require an
extraordinary amount of time to resolve. However, we have been
doing the best we can given our limited Federal funding and
staff resources. Mandatory access to plans and the necessity
that these companies recognize SHIP and our efforts on behalf
of beneficiaries would be one key to more efficiency in
handling the complaints and problems we receive. After all,
access is critical to handling cases in a timely fashion. That
still does not address fundamental marketing problems and
processing delays that get the beneficiary in the pickle in the
first place.
Are the solutions proposed by CMS to address predatory
marketing practices enough?The most recent solutions presented
by CMS and the state Departments of Insurance are a start,
however, they are not the complete answer. Yes, a State
Department of Insurance can pass regulations that would require
each insurance agent to leave a business card with the
beneficiary. And yes, they could also require agents to
identify themselves as insurance agents and inform the person
that they are representing a product, not Medicare or Medicare
supplements. And, if they violate these provisions and other
marketing guidelines, these agents could be subject to
discipline. As you know, CMS will be requiring more of the
plans beginning in 2008.
Is the problem real? In a recent press release CMS has
stated that it has received only 2,700 complaints nationwide, a
relatively minimal number. It is my impression that not all
cases are being reported. For example, SHIPs do not refer all
cases to CMS. We handle them ourselves. Additionally, from my
involvement with elder abuse and legal assistance with our
agency, I have learned that for all the elder abuse cases that
are reported, there are just as many or more that go
unreported. Perhaps a better gauge is the number of Medicare
Advantage disenrollment requests that have been filed.
Beneficiaries must receive information on how to prevent
becoming a victim of unscrupulous marketing practicesCMS has
taken steps in the right direction by announcing some new
corrective actions. However, CMS has failed to mention the
prevention message that must be delivered to Medicare
beneficiaries. It does no good to establish rules and
regulations about what agents may or may not do, or what type
of marketing the plans may or may not undertake, and not speak
directly to the very population these plans and agents are
targeting. How would a beneficiary know that they should be
very suspicious of an insurance agent who comes to his or her
door unannounced and without an appointment?
There must be a prevention message--not about health care--
about health insurance fraud aimed at Medicare beneficiaries.
Medicare beneficiaries must know the red flags to look for and
how they can protect themselves. A comprehensive media campaign
with a simple message would be a start.
SHIP is ideally situated to deliver the insurance fraud
prevention message to Medicare beneficiaries since we already
have the infrastructure in place. I have seen it work in
Alabama. Our SHIP has been able to educate beneficiaries and
those who have heard the message have been empowered. For
example, an agent attended a senior center when the director
was absent hoping to make a sales presentation and enroll
attendees. Unfortunately for the agent, the seniors had also
been taught by SHIP what questions to ask agents and how the
PDPs and Medicare Advantage plans work. The seniors were able
to determine fact from fiction and literally ran the agent out
of the building.
However, SHIPs are severely under-funded and consequently
under-resourced so it is difficult for many SHIPs to provide
the proper tools to beneficiaries. An adequately funded,
comprehensive educational and media campaign with a unified
message aimed at beneficiaries would achieve dramatic results.
The campaign could arm Medicare beneficiaries with the
information they need to protect themselves from unscrupulous
insurance companies and their agents.
The Alabama SHIP is in the process of developing an
insurance fraud prevention campaign which includes tools that
will empower our seniors. However, we do not have adequate
funding or resources to implement such a program. With less
than a dollar per beneficiary for our entire program and more
than 750,000 Medicare beneficiaries in our state alone, our
task is daunting. Developing the media campaign and printing
and disseminating these materials to the target population is
expensive. I urge you to support an increase in SHIP funding
nationwide.
Preventing the deceptive enrollment into Medicare Advantage
plans, particularly private fee for service (PFFS) plans, would
greatly diminish the casework of SHIPs and CMS Regional
Offices. Please help SHIPs provide the tools to prevent
Medicare beneficiaries from becoming victims and give state
enforcement agencies the teeth to bring both insurers and
agents to task for unscrupulous and/or fraudulent actions.
I want to thank the Committee for holding this hearing. I
have shared with you only a handful of examples; they are not
the only ones, or even the most egregious. Rather, they are
representative of the problems experienced by thousands of
beneficiaries nationwide. I hope the experiences I have shared
with you will help serve as a catalyst for the development of
real solutions so Medicare beneficiaries may rest assured that
their health care--whether it is Original Medicare or Medicare
Advantage--is truly their choice.
----------
Mr. Stupak. Thank you.
Mr. Harrell, deputy commissioner of Mississippi Insurance
Department, your opening statement, please, sir.
STATEMENT OF LEE HARRELL, DEPUTY COMMISSIONER, MISSISSIPPI
INSURANCE DEPARTYMENT
Mr. Harrell. I appreciate the chairman for allowing us to
come speak. I am Lee Harrell, deputy commissioner of insurance
for the State of Mississippi and on behalf of commissioner of
insurance George Dale. We appreciate the opportunity to share
with you the experiences we have had in Mississippi related to
Medicare Advantage plans.
I am not here to demonize CMS or the plan sponsors but we
want to walk through what we are seeing in Mississippi and it
is going to be typical of what you are going to hear today from
your other witnesses, I believe. You will hear about problems
today, there are a lot of problems in the Advantage program. We
don't need to get into a blame game but we need to work
together to find a solution to protect our senior citizens.
Aside from the specific unfair misleading and the
fraudulent marketing practices that are in my written testimony
that you have heard today, we have also seen other general
problems with agents who sell these plans. Agents being hired
to sell only during the open enrollment periods, these agents
get licensed around the first of October, sell through
December, than let their license lapse until the following
year, in other words the equivalent of seasonal help. By far
the biggest problem is lack of sufficient training of agents.
One of the companies who touts the best training of its agents
gives 10 hours of instructional training all in one sitting.
The biggest problem we are seeing in making a case against
agents alone is the fact that the primary witnesses are often
elderly persons who because of their age or physical condition
may become easily confused or simply cannot accurately remember
the sequence of events. Even if they are able to provide the
department with clear and accurate information about the
tactics used by the agent, by the time the matter gets to a
hearing their memories may not be as clear. Also, many elderly
victims are not able or are unwilling to attend a hearing and
sometimes they are simply too embarrassed to even report that
they have been a victim.
Some of these specific types of complaints we have received
in Mississippi are door-to-door solicitation or cold calls by
agents without having been invited by a Medicare recipient to
do so. Agents claiming to be from Medicare and sometimes
presenting a red, white and blue card designed to look like a
Medicare card. The agent has a recipient complete a request for
more information form which turns out to be an application for
a Medicare Advantage plan. The agent asks a recipient to sign a
form just to show my boss that I have contacted you, which
again turns out to be an application form. The agent assures
the recipient that enrollment in this plan would not affect the
recipient's Medicare coverage without mentioning that the
recipient may not be able to go to the same health care
provider or other facility. And that he may be required to pay
a co-pay. Recipients being enrolled without their knowledge
without having any contact with the agent, it is believed that
recipient's personal information was fraudulently obtained and
that does not mention the problems of having the recipient
victim dis-enrolled or un-enrolled in the plans they were
improperly enrolled in.
Our Department of Insurance has obtained the licenses of
two agents involved in Medicare scams. The first license was
revoked on a finding that the agent retained recipient's
personal information from a home health agency. The recipients
were enrolled in a plan without their knowledge or consent.
There was also evidence in that case where the mother of the
daughter was bedridden and unable to write or communicate but
according to the agent she signed the form to sign-up in the
Advantage program. That agent has been indicted in Mississippi
for these allegations.
One of the agents was revoked for door-to-door solicitation
of Medicare Advantage plan in two low-income housing areas. As
a result of that the Department of Insurance sent a team of
lawyers and investigators into the complex to interview the
victims. Some of them were afraid to talk to us because they
did not know who they could trust. We were able to obtain 21
affidavits. Some of the people who did not take affidavits
based on their mental condition. At the 11th hour prior to the
hearing the attorney for the agent subpoenaed all 21 victims
and was going to make them travel 150 miles to Jackson,
Mississippi to testify.
We were in the process of investigating a third agent for
similar practices when that agent surrendered his license. From
2006 to the present, the Mississippi Department of Insurance
received over a thousand complaints on Medicare Advantage plans
alone in part because we are the people they know. They are not
familiar with CMS and they are not generally going to call a
stranger in Atlanta, Georgia when their insurance commissioner
is right there at home. These complaints represent at least
twice as many complaints as we normally receive on all other
topics combined. We speak to senior groups across the State
about these practices and how can they avoid the problems.
Mississippi takes seriously its duty to protect its consumers
while promoting a healthy insurance market. But the way the
current Medicare Advantage system is designed we are precluded
from fully meeting that duty. Clearly, the piecemeal approach
to enforcement is not working nor is it realistic to expect
that it will. We suggest as a regulatory model the current
system for regulating Medigap insurance, which is the States
enforce Federal minimum standards. If you don't think there is
a problem I urge you to contact your respective insurance
department or more important go out to the senior citizen
groups in your respective States and talk to them, ask them. I
think someone said somewhat earlier that these are our parents,
our grandparents and our aunts and uncles. We have to find a
way to protect the senior citizens. I appreciate you allowing
me to testify today.
[The prepared statement of Mr. Harrell follows:]
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Mr. Stupak. Thank you for your testimony.
Ms. Clegg-Boodram, on behalf of your residents there at
Judiciary House, care to state a few words?
STATEMENT OF BRENDA CLEGG-BOODRAM, JUDICIARY HOUSE, ACCOMPANIED
BY MARY ROYAL, GRADY HAMMONDS, EDITH WILLIAMS, AND JENNIFER
MEZEY, SUPERVISING ATTORNEY, LEGAL AID SOCIETY OF THE DISTRICT
OF COLUMBIA
Ms. Clegg-Boodram. Good morning.
Mr. Stupak. Good morning.
Ms. Clegg-Boodram. My name is Brenda Clegg-Boodram. I live
at Judiciary House which is a DC housing authority property for
seniors and disabled people of low income. I am accompanied by
Grady Hammonds, Edith Williams and Mary Royal. We all are
residents in the Judiciary House which is located in Chinatown
section of Washington, DC. Our population is deemed independent
living. I volunteer as the acting president and treasurer for
the resident counsel which acts as a liaison between DC housing
and other social service organizations.
The Judiciary House is as I said a housing authority
property which provides low-income housing to the most
vulnerable population in the city. The elderly and disabled
tenants do not and many times cannot understand paperwork.
Although the tenants are deemed capable of independent living
in reality for much of this population this is not true.
I was approached in late January 2007 by two gentlemen who
identified themselves as having good news about Medicare Part
C. At this point I was not aware that they were selling
insurance. Initially I thought they worked with Medicare.
Darnell Keys and T.C. were sent to my office by the property
manager's office. They advised me that they had information
about Medicare. They proceeded to explain that Medicare had
recently approved part C which was specifically for eyes,
dental and hearing. And as I understood them this would be in
addition to Medicare Part A, B and D.
They asked me when could they do an educational
presentation to my tenants and advised that they would provide
the posters. I advised that I had already had the Legal Aid
Society lawyers to assist my tenants with their health care and
their prescription coverage. They advised that they understood
and they told me that they were not dealing with part D for
prescription coverage.
I felt confident that these men understood and I treated
them like any other health outreach. I provided them with a
date and about a week later they gave me the posters. At this
point they did give me some paperwork about Coventry and I
again reminded them that Legal Aid had already reviewed and
assisted my participating tenants for appropriate insurance and
prescription coverage. I posted the posters but I did not read
the information about Coventry.
I arranged for them to do their presentation at two of our
tenant meetings. One meeting took place in the resident council
office and the other in the community room. I was not ever told
that they were selling insurance or that they intended to
change my tenants' health coverage. It was my understanding
that they were going to add Medicare Part C to their current
coverage. They did two presentations in the month of February
2007. About 3 or 4 weeks later Mary Royal came to me and
advised that her coverage was changed. Then Grady Hammonds,
Edith Williams and there were other tenants who complained.
They could not get their medications and that their physicians
and hospitals did not accept and/or know about this insurance
company and calling customer service did not help.
Please note, this incident created a health crisis for our
witness Ms. Edith Williams, who has MS and had to be treated by
an emergency room visit and subsequently she had to pay cash
for her medications because they had changed her Medicare Part
D drug coverage. She did not have all the money and over a
period of 2 weeks or more she suffered physically and she had
to scrape-up money for her meds.
I contacted Jennifer Mezey, supervising attorney of the
Legal Aid Society of the District of Columbia. Attorney Mezey
helped Mary Royal, Grady Hammonds and Edith Williams with their
dis-enrollment. I know that there are other tenants in my
building who need the assistance of Ms. Mezey to dis-enroll but
they are unable to ask for help and they are still suffering.
I believe that there is a lack of responsible coverage of
care for seniors, mental, emotional and sometimes the
physically disabled. And I feel that there should be measures
taken to prevent these types of incidents from occurring.
This statement is also a question, where is the
accountability? Who makes sure that the population who can
least afford these types of mistakes are protected? I know of
individuals in other States who are having similar problems so
this is not a local but rather a national problem. We barely
survived the Medicare Part D problems and, in fact, there are
citizens who are unable to advocate for themselves who do not
understand and are stuck with inadequate health care and
prescription coverage as a result of part D. We seriously need
more checks and balances written into the regulations.
I really think that this is not just a rogue salesman
problem and I think that you guys who create these programs
fail in the detail aspect of these programs and you need to
look at it seriously because you are hurting the people who
can't help themselves and some of these people worked for you
guys in the service industry. We all can't be rich or famous or
whatever. We do these little jobs like cleaning and all of that
so detail really makes a difference and the salesmen are not
the only ones who are responsible and I thank you for the
privilege of making this statement.
[The prepared statement of Ms. Clegg-Boodram follows:]
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Mr. Stupak. Thank you.
Now that concludes the opening statements of the opening
panel here so we will move to questions, we will go for 5
minutes. I will begin.
Ms. Clegg-Boodram, let me ask you this question. You
indicated in your testimony you said there are still residents
of Judiciary House then you said unable to ask for help to dis-
enroll in this Medicare Advantage. Explain that.
Ms. Clegg-Boodram. Because we are a ``multi-function
community'' the disabled refers to people who are mentally-
challenged and intellectually challenged and they know
something is wrong because when they go to the doctor or all of
a sudden their personal care assistant disappears or they go to
the pharmacy things are not working. But because of the Privacy
Act and many other issues I can't just arbitrarily snatch them
and say you need my help and you have got to sit down. Allow me
to allow Legal Aid to help you through this. And they will come
and you will talk to them and you have to be very patient.
There is a whole bunch of stuff that you guys have no clue
about.
Mr. Stupak. That is why we are having this hearing.
Ms. Clegg-Boodram. Right.
Mr. Stupak. Try to get a clue.
Ms. Clegg-Boodram. I hope you can because it is very
serious.
Mr. Stupak. I agree.
Ms. Healey, is there a SHIP program in Washington, DC or do
we rely strictly on Ms. Mezey and Legal Aid?
Ms. Healey. There is a SHIP program in DC, yes.
Mr. Stupak. Ms. Mezey, so you work with SHIP then over here
in DC to get these folks dis-enrolled?
Ms. Mezey. We work with the SHIP program. We collaborate
with them but Legal Aid also does this work on our own.
Mr. Stupak. OK. Very good.
Mr. Harrell, and in your testimony was this--is this the
type of problem you have seen in Mississippi? You said you have
over a thousand complaints, this, what we see at Judiciary
House, is this common and found in Mississippi, also?
Mr. Harrell. The problem is--the gentleman from the, Mr., I
am not going to attempt to pronounce his name, from California,
[Mr. Lipshutz's] problems sound very similar to Mississippi's
problems and I don't think you can get any more different than
California and Mississippi. So that the problems are going to
be systematic across the country deemed by other insurance
regulators across there. The problems are the same using the
business cards, misrepresenting, forging people's names, so it
is not a Mississippi problem. It is a national problem from one
State to the next, I think the problems are the same.
Mr. Stupak. Then I guess the point I was trying to ask you,
I know you mentioned door-to-door and salesmen, and going to
senior housing and you encouraged us to check with our senior
groups to see if they are having the problems. I guess the
point I am trying to get at is, Ms. Clegg-Boodram said, they do
not know how to dis-enroll or how to correct the problem, or
unable to ask for help. Do you see that with the people you, as
the insurance commissioner you represent?
Mr. Harrell. Yes, sir. They are not familiar with the
program. They do not know who to call and for an example I have
got one here that did contact the actually, the gentleman that
the lady's brother, and for example on one day he called
Humana, stayed on the phone for an hour and a half. Calls the
next day, hour and a half, the next day an hour, on and on and
on. One day he stayed on the phone from 10:30 to 5:15 on hold.
Never spoke to a person. It said hold please when he would
call--just on and on for looks like 10 or 12 days. The most
time he stayed on hold was 10:30 to 5:15.
So most of them do not know who to ask, most of them, and a
lot of them are embarrassed to go ask because they have been
taken advantage of and they do not, like I said, they do not
know what CMS is. Mississippi has an elected commissioner and
that is who they call. And we are not able, due to the
jurisdictional limitations, we are not able to give them the
help that they deserve and need.
Mr. Stupak. You indicated that there is a 2-month window
period here where these agents come out and they get 10 hours
of training and basically what, October to December, is the
enrollment period or December to February is the enrollment
period, whatever you said. Do those so-called agents who get
the 10 hours worth of training, do they become insurance
agents, licensed in Mississippi or are they temporary and do
not need a license?
Mr. Harrell. They are a temporary license. They come in and
sell, well they do not have a temporary license, they have a
real license but they only sell for those 2 to 3 months, then
they go back to wherever they came from and they may go to
another State. They may go to sell maybe some other product. We
do not know where they go, we just see examples of a lot of
agents allowing their licenses to lapse and then come back the
next year.
Mr. Stupak. OK. Ms. Healey, when Commissioner Harrell
mentioned about this person being on hold from 10:15 to 5:30,
you indicated about numbers, direct numbers, the 800 number. Is
this what you are trying to express to the committee?
Ms. Healey. Exactly. The SHIPs have to call the same number
of the plan and 1-800-Medicare so we go through the same
process. Even though we have all the information that we need
to and we just need to get the plan to do what we need them to
do, we are on hold just as long as everybody else.
Mr. Stupak. OK. Mr. Lipschutz, what recommendations would
you make to ensure these abuses that we have heard of this
morning actually stop? I know there are guidelines but the
guidelines are just simply that, guidelines. There is no
enforcement. There is no accountability. You do not have to
follow a guideline, right, if you do not wish to, what would
you recommend? What would you like this committee to see done?
Mr. Lipschutz. Our recommendations would range from the
specific, including mandatory agent training with the standard
curriculum and testing. It would include standardizing appeals
processes, including retroactive dis-enrollment and securing
special enrollment periods through the Medicare Program, as
well as broader recommendations such as achieving payment
parity between Medicare Advantage and the original Medicare
Program, which we believe would minimize some of the incentives
that are currently driving plans, to neutralize the commission
structure, and to rely upon many of the protections that are
contained in the Medigap rules that apply to the sale of
Medigap products that include insuring that products are
suitable for beneficiaries before they are sold, insuring that
beneficiaries--or that commissions for sales--are not higher
when someone duplicates coverage that they already have or
switches out coverage with comparable coverage. So our
recommendations, I will refer you to our written testimony for
our specific recommendations concerning CMS' new requirements.
Again, they are helpful but we have a lot of outstanding
questions about how far they will really go to stop the abuses.
Mr. Stupak. OK. My time is expired.
Mr. Whitfield, for questions, we may go around more than
once here with Members because of a very interesting panel.
Thank everybody on this panel for being here. Mr. Whitfield.
Mr. Whitfield. Thank you. Ms. Clegg-Boodram, how many
people actually live in, is it Judiciary House, and what is the
total number of people that live there?
Ms. Clegg-Boodram. Judiciary House is a 10-story building
with essentially 271 units. Currently, they claim we have about
192 occupied units.
Mr. Whitfield. But it is an independent living facility?
Ms. Clegg-Boodram. That is what they say, yes. And some of
us are independent.
Mr. Whitfield. But there are some people who live there
that are not able----
Ms. Clegg-Boodram. Fifty-five percent of my population.
Mr. Whitfield. And what is your responsibility there?
Ms. Clegg-Boodram. I am on the resident council. It is a
volunteer position. And so essentially I connect them with
services when they come and ask.
Mr. Whitfield. So Ms. Mezey, you are the attorney for these
groups of residents that were defrauded. Is that right?
Mr. Mezey. Legal Aid in November and December of last year,
had come out to Judiciary House to help people with their
Medicare Part D enrollment. To make sure they were in
appropriate prescription drug plans. After these people had
come to Judiciary House and Ms. Clegg-Boodram realized that
people had signed-up and wanted to get out, she called me and
then we helped them to dis-enroll from the plans.
Mr. Whitfield. OK. So they had signed up for Medicare
Advantage Program but they had no idea of what that really was.
Ms. Mezey. Right. As Ms. Clegg-Boodram said during, in
February, there were two sessions.
Where the residents signed-up for plans and then when they
realized that they did not want to be in these plans anymore we
helped them get out of them.
Mr. Whitfield. But there also is a DC health insurance
assistance program, correct?
Ms. Mezey. Correct. There is a SHIP here the same way as
Ms. Healey's counterpart in DC, and they have also helped a lot
of people get out of these plans as well.
Mr. Whitfield. So, Ms. Boodram, when, Ms. Clegg-Boodram,
when salesmen come to you, you would frequently call Ms. Mezey,
and then would you call the health insurance assistance program
as well to ask for their thoughts on it or anything like that?
Ms. Clegg-Boodram. No, unfortunately, the health insurance
whatever program is not widely publicized. A lot of this
information is not available. And my question is to you, sir,
is why doesn't CMS do an educational component?
Mr. Whitfield. Yes.
Ms. Clegg-Boodram. So that we really understand what the
different parts of Medicare or an agent----
Mr. Whitfield. So you were not even aware that there was a
DC health insurance program.
Ms. Clegg-Boodram. No. I called Legal Aid because I
realized there was a problem. There was a contact I have at GW,
George Washington University Medical Center.
Mike, who helped me out through some of the part D problems
but in the long run I had to call lawyers because I really
could not do it.
Mr. Whitfield. And, Ms. Mezey, were any legal steps taken
against the salesmen who convinced these people to sign-up
without their being fully aware of what they were doing?
Ms. Mezey. We have been focusing at this point, we are
mainly focused on getting people out of the plans, which we
were able to do through our CMS regional office. And helping
Ms. Williams get her prescription drugs, which were cut-off,
through these efforts. And as far as I know, to my knowledge,
nothing has happened to the salespeople.
Mr. Whitfield. Yes. Now, Mr. Harrell, you are with the
insurance commission in Mississippi, correct?
Mr. Harrell. Yes, sir.
Mr. Whitfield. So if a person is licensed to sell insurance
in Mississippi and they use fraudulent practices, you all have
the authority to take their license, would that be correct or
not?
Mr. Harrell. That is in question now. You have the license
that the State of Mississippi would issue, but the underlying
product, Medicare Advantage, is not something the State of
Mississippi regulates. Attorney general lawyers have raised
that as an issue for the Department of Insurance, as to how are
you taking action against an agent for a product that you do
not have any jurisdiction over, period.
Mr. Whitfield. So there is a legal question of whether or
not you have any jurisdiction, is that correct?
Mr. Harrell. The department maintains the position that we
do, and we have taken licenses and we have multiple open
investigations ongoing as we speak.
Mr. Whitfield. Ms. Healey, what about in Alabama, has this
issue been discussed in Alabama, the authority that Alabama has
to take a license?
Ms. Healey. Well, I am housed in the Department of Senior
Services. We are working with our Department of Insurance but I
would defer that question to our Department of Insurance.
Mr. Whitfield. Now, Mr. Lipschutz, your organization in
California is that a private entity or is that a governmental
entity or----
Mr. Lipschutz. We are independent, private non-profit
agency. So we are not funded by the SHIP program and we do not
administer them but we work closely with them.
Mr. Whitfield. Ms. Healey, I was curious of people who
sign-up for Medicare each year, they become eligible to sign
up. Do you have any idea what percent would come to your agency
for assistance in selecting the right plan?
Ms. Healey. I would be giving an estimate but in the
information in the Welcome to Medicare packet that CMS sends to
the beneficiary, they do have a list of the SHIPs called in the
materials.
We do get quite a few beneficiaries aging into Medicare but
I do not know the percentage.
Mr. Whitfield. OK. My time has expired.
Mr. Stupak. And thank you. Mr. Burgess for questions.
Mr. Burgess. Thank you, Mr. Chairman. This is not going to
be a question but a statement to you, Mr. Chairman. Are we
going to hear at some point from the Inspector General of
Health and Human Services? Are we going to hear from the
appropriate people at the Department of Justice to find out
what is happening with the people who are apparently guilty of
malfeasance in the sale of these products? This sounds to me
like Medicare fraud, Mr. Chairman. This hearing is all well and
good but it seems like this should be pursued at a different
level than simply an oversight hearing.
Mr. Stupak. Well, unfortunately, in the bad piece of
legislation that was passed, the standardization of policies,
the regulations of insurance agents and that which we usually
find in the Medigap and Medicare Supplementals were stricken
for at least a couple years under part D here it is more of a
State issue there so----
Mr. Burgess. Well, reclaiming my time, I have an article
here from the New York Times dated May 7, 2007, and it talks
about individuals who are being signed-up who are deceased.
Does anyone on the panel have any direct knowledge of a
deceased person being signed-up for one of these plans?
Mr. Stupak. Congressman, I have read media reports about
it.
Mr. Burgess. Well, again, I would just ask the question,
signing-up a deceased person for a Medicare plan sounds to me
like Medicare fraud and I am not a lawyer, I am just a simple
country doctor but I would think that that would fall into that
purview and I do not see how you can suspend the investigation
and the prosecution of somebody who is guilty for Medicare
fraud simply by passing a statute, even if it was us who passed
it.
Mr. Stupak. I will give the gentleman his time back but
that is really consumer fraud. It is not a Federal fraud case
to do that.
Mr. Burgess. I beg to differ. As a practicing physician, if
I was guilty of Medicare fraud I was going to jail, and it was
Attorney General Janet Reno who made that very clear back in
1990.
Mr. Stupak. Right. But the way this program was written and
that is why it was such a controversial program when it was put
forth, the dual-eligibles and the others, the standard frauds
that we see as you as a doctor with the Federal Government is
much different underneath this legislation and that is why we
have the State insurance commissioners and State folks here
because they really have the consumer protection.
Unfortunately, it is lacking at the Federal effort and I will
be glad to join you in trying to tighten that loophole.
Mr. Burgess. Well, let me just ask Mr. Harrell then because
it was always my understanding in my home State of Texas that
when the insurance commissioner had the ultimate trump card.
They could pull the license of someone to sell insurance in the
State and then you told Mr. Whitfield that you do not think you
have that authority in this situation?
Mr. Harrell. That was an issue that was raised by our
attorney general lawyers. It is an issue that is out there. The
Department of Insurance still believes that we have the legal
jurisdiction over yanking, as you called it, the agent's
license. And we would make a referral if we determined if or
thought there were criminal activities.
Mr. Burgess. Well, and I would encourage you to do so and I
would hope you would do so if that is indeed the case. Ms.
Clegg, let me just ask you, I know when Medicare Part D first
started, my office, you are correct, there were some problems
and my office was aware of the problems we had in our area. I
took each of those problems on as individual casework, if the
person who was calling and complaining was willing to sign the
appropriate formwork to allow me to intercede on their behalf.
I know Washington, DC has a delegate, not a representative, but
did you contact your delegate's office? Did you get the
delegate's office involved in the individual casework when
these problems started to come to light? You alluded that you
had some problems with some of the privacy restrictions that
prevented you from getting too deeply into a person's medical
care and I appreciate that. Obviously, privacy laws are
something that we continue to strengthen up here and that is
always going to be an issue, but if the person was willing to
sign a release at the delegate's office and let their delegate
intercede with CMS directly on their behalf, did that happen at
Judiciary Center?
Ms. Clegg-Boodram. No, we did do an approach to the
delegate's office but we did not get a response. So I just kept
moving until I could find someone to help us.
Mr. Burgess. Well, again anyone has the right to petition
their member for help and we were pretty aggressive about it
because the pharmacist, some of which I knew from my previous
professional life, were not at all shy about calling me and
faxing me and telling me the problems they were having so we
did take a very aggressive stance and CMS to their credit would
deal with those. And I would just offer that as--if you
continue to have problems, please, do not overlook that as an
avenue because my experience I found that to be a pretty
powerful way to intercede on someone's behalf and from again,
maybe our experience was different. I have not had the
experience that has been discussed here today and to the best
of my knowledge it has not come up as a constituent issue back
in the district office, but you can bet I will be checking on
it later on today. I think the individual Member of Congress'
office does have some ability to help dis-enroll, with the dis-
enrollment process and working through some of these problems
and if we are the ones who caused it then, as has been alleged,
then certainly we are the ones who should be on the front lines
of solving it. Just as we have dealt with the passport issue
here recently. Thank you, Mr. Chairman, for your indulgence. I
will yield back.
Mr. Stupak. Thank you, Mr. Burgess.
Ms. Clegg-Boodram. May I speak?
Mr. Stupak. I have to go to Mr. Murphy. I think we are
going to go another round. I am certainly going to give you an
opportunity and your residents if they want to say a few words.
Mr. Murphy, 5 minutes.
Mr. Murphy. Thank you, Mr. Chairman. I want to ask a couple
of folks, maybe Ms. Williams, you can help me with this. I am
trying to get a sense of how you were presented information on
these plans. So, for example, when someone was talking to you
about purchasing a Medicare Advantage plan, I am correct there,
that is what someone offered you, right? Did they offer a
comparison for example of Medicare Advantage or something else,
do you remember?
Ms. Williams. Well, if I can answer this correctly. First,
I was having trouble with another insurance company. OK. And
when I heard about Advantage and what they had to offer and I
went with them because I thought it was better then I found out
that it wasn't what I thought it was. When they interviewed me
I gave them my Medicaid and Medicare card. I asked them would I
need this and they said no, I didn't need that anymore, that I
would be covered with them.
Mr. Murphy. Can you, and this is really helpful and thank
you so much, if you could try and recall to the best of your
ability did they mention specifically what the Medicare
Advantage plan would cover that the Medicare and Medicaid
wouldn't cover?
Ms. Williams. They said that it would cover dental, eye,
eye doctor and something else and I asked them what about my
medicine? And they said that is why I didn't need the Medicaid
and Medicare because they would cover it.
Mr. Murphy. So dental, eye and medicine, and then when you
started with your Medicare Advantage plan did you find that
they did or did not cover dental and eye and medicine?
Ms. Williams. Well, I didn't take it that far to find out.
Mr. Murphy. OK.
Ms. Williams. Only as far as my medicine, I got sick.
Mr. Murphy. I appreciate it. I am trying to find out. I am
so sorry this happened to you.
Ms. Mezey. Congressman, can I explain what happened to Ms.
Williams?
Mr. Murphy. Yes.
Ms. Mezey. OK. Ms. Williams was previously in a Medicare
Advantage plan that also had prescription drug coverage. So
when Ms. Williams signed-up with the Advantra Freedom plan
which did not have drug coverage and this was not made clear to
her, she was in the hospital, she came out of the hospital and
had to take steroids and antibiotics and those drugs were not
covered.
Mr. Murphy. And I am trying to find out all of these
elements and thank you, it helps me to know this, Ms. Williams,
and I am sorry this is upsetting for her. I am trying to
understand what these folks said to you and it really helps us
a lot to know that. Is there anybody else who can give us
information in terms of the kind of information that was said
on these sales pitches in particular? Ms. Royal, could you let
us know a couple things?
Ms. Royal. Yes. I was the first person who informed Brenda
about the problems I was having. I had to go to the hospital
for a procedure. They had me down there as Medicare HMO. I said
I have regular Medicare and Medicaid. And so I could not get my
procedure done and so when I got home that evening I had got
the card from Advantage before I got any other information and
it said doctor co-payment $10, emergency room $50, and so I had
called customer service. I said I can't afford to pay $10 for
each doctor's appointment that I have I said because I go to
the doctor sometimes four times in a month. And so she said
well the reason I enter us in it, she said well you can write
us a letter and stating that I no longer have to be in the
program.
So I said what about my Medicare and Medicaid? She said I
would no longer have Medicaid and Medicare . That would be
discontinued and I would their insurance. I said well I don't
want your insurance I said because I prefer to have my Medicaid
and Medicare because it said that I may not have the same
doctor and be able to go to the same hospital. I said well I
have about five different doctors. I said I cannot afford to
try and find another doctor to train him and I said and have
different hospital because I went to Providence [Hospital].
Providence told me that they did not carry that type of
insurance.
Mr. Murphy. And just to be clear, and this is all what a
salesperson was telling you with Medicare?
Ms. Royal. They told me that they didn't even mention that
I had to change doctors.
Mr. Murphy. OK.
Ms. Royal. They didn't say that.
Mr. Murphy. That was never told to you----
Ms. Royal. Medicaid would take care of my eyes, my dental
and ears, nose and throat, which Medicare do not handle. But I
get all of that from my Medicare and my Medicaid.
Mr. Murphy. OK. Thank you, Mr. Chairman.
Mr. Stupak. Thank you. A few more questions here for you.
Ms. Royal. Oh, excuse me, I did have to show them my
Medicaid and my Medicare card.
Mr. Stupak. Ms. Healey, Ms. Royal was just talking about
Medicare and Medicaid and underneath the MMA Act of 2005 the
dual-eligibles are no longer, it doesn't exist. Would you
explain that a little bit the dual-eligibles and how it is
underneath the new program because there is so much confusion
out there and if you would explain that.
Ms. Healey. The dual-eligibles? There are several different
types of dual-eligibles. If you have Medicare and you may have
what is called a qualified Medicare beneficiary where your co-
pays and your co-insurance would be taken care of, the next
level would be what is called a SLMB, Specified Medicare Low, I
believe the acronym is wrong, and then QIs, and each one is a
different level but the QMBs are the full duals and that is
where Medicare and Medicaid covers most of their cost, all of
their costs actually.
Mr. Stupak. I guess the point I was trying to make and it
is easy for us to ramble off those acronyms but for people like
Ms. Royal and others it is very, very difficult and they don't
understand the changes that took place in 2005, therefore,
their coverage is much different then what it was before.
Mr. Harrell, Mr. Burgess and I were talking a little bit
about it, about the law and the agents. You indicated you have
jurisdiction over the agents but do you have jurisdiction over
the policies that are being presented in your State of
Mississippi or is that a subject still open to interpretation?
Mr. Harrell. The position is that we don't have
jurisdiction over the product itself which would be the
policies' marketing.
Mr. Stupak. Just the agents then?
Mr. Harrell. Yes, sir.
Mr. Stupak. Mr. Lipschutz, you indicated that one of the
things we have to do is to commission structure, take a closer
look at the commission structure. I get the impression that
Medicare Advantage are profit-driven policies?
Mr. Lipschutz. Well, they are profit-driven policies for
the companies but they also try to maximize enrollment into
their plans by using commission structures that tend to pay
more in commissions for enrollment into Medicare Advantage
plans than other plans and it is not uncommon for plans to pay
three, four, five, six times as much in commissions, each
commission in a Medicare Advantage plan than they pay for a
standard----
Mr. Stupak. Give me an example of a commission for a
Medicare Advantage plan versus a different plan.
Mr. Lipschutz. Well, one example would be say a company
that offers both a stand alone part D prescription drug product
and a Medicare Advantage plan will typically offer say $50 for
each enrollment into a stand-alone part D product and it will
offer $250 or more for each enrollment into a Medicare
Advantage product. That creates an incentive on the part of the
agent to steer people towards those Medicare Advantage products
regardless of whether or not that is actually the best option
for an individual.
Mr. Stupak. What responsibility, we talked a little bit
about agents here and their fees and commissions, but what
responsibility does the insurance carrier itself, the parent
company, have? Here are two people like Ms. Royal and Ms.
Williams and Mr. Hammonds, and others.
Mr. Lipschutz. It is my understanding that the companies
are free to set their own commission structures. A CMS
marketing guideline says that companies can set commission
structures commensurate with the level of involvement that is
entailed when trying to describe a product to an individual. So
in theory the Medicare Advantage product is more complex than
the stand-alone part D product the company can pay more or a
greater commission. But there are no standards that require an
agent to actually explain the additional complexity of a
particular plan. It is my understanding that it's a CMS
position that they do not have the ability to regulate
commissions that are paid to insurance agents.
Mr. Stupak. And have you or Mr. Harrell or Ms. Healey, have
you--gone back to the insurance carriers, the parent company
and say look what your agents are doing? You have a
responsibility here if not legal at least moral and ethical to
make sure that your policies are being presented accurately to
individuals. Have you contacted anyone like that?
Mr. Lipschutz. We have contacted some companies and some
companies have contacted us in response to complaints that we
have made about agent activity.
Mr. Stupak. Mr. Harrell.
Mr. Harrell. We have done the same thing in Mississippi
working with the respective carriers, working with CMS, working
with Social Security Administration and we have two on-going
marked conduct examinations of two of the carriers.
Mr. Stupak. Ms. Healey.
Ms. Healey. We have done the same thing, in fact, we worked
with some agents to talk about the difference between a full
dual and someone who just receives only Medicare.
Mr. Stupak. What I have seen thus far from CMS is maybe
some voluntary guidelines. Do you think voluntary guidelines
work or do we need more? Anyone, Mr. Harrell, Mr. Lipschutz,
Ms. Healey, Mr. Harrell?
Mr. Harrell. I don't think it has worked up to now. Same as
some of the same problems that we are seeing today are the same
problems that the Department of Insurance saw in the late 1980s
and early 1990s with Medigap products and it hasn't worked to
date and I don't think it is going to work.
Mr. Stupak. Ms. Healey.
Ms. Healey. We are moving forward with our toolkit because
we are going to focus on prevention. Two of the things we have
already developed is a form that we want the beneficiary to
fill out, did you check to make sure that your doctor is going
to accept this? Did you contact SHIP to work with us? We also
have a form that we can, that SHIP can hand the agent and they
will need to initial that this plan is going to take them out
of original Medicare so they are aware of what they are going
to be facing and try to make an informed decision because we
feel that the seniors are failing to ask enough questions and
they are not verifying the information and they are not
checking with a trusted resource such as SHIP before they make
that decision because the agents who are doing this are
basically predators.
Mr. Stupak. Sure. Mr. Lipschutz, did you want to add
anything?
Mr. Lipschutz. I would like to highlight a statistic I came
across the other day. It is my understanding that nationwide
there are roughly 12 to 14,000 SHIP counselors, including
volunteers. That is compared to what some industry estimates
put at 200,000 agents selling Medicare products across the
country. Whereas insurance agents are specifically trying to
steer people towards particular plans the SHIP programs are not
permitted to do so and instead it is their mission to provide
unbiased counseling about individual's options so that people
can make informed decisions about their choice.
Mr. Stupak. Thanks. My time has expired. Ms. Clegg-Boodram,
looked like you were wanting to say something there. Was there
something you want to say?
Ms. Clegg-Boodram. These individuals never made it clear
that they were an insurance company, No. 1. Number 2, when they
talked to our people they knew that most of our people did not
understand what they were talking about. Ms. Williams and Mr.
Grady Hammonds and Ms. Royal are probably three of the most
proactive individuals in our community. So that is the level
and it is not fair. And I have one last little, little
question, OK?
Mr. Stupak. Sure.
Ms. Clegg-Boodran. When you guys designed this program I
think you all realized that it had some problems because it
feels like it was designed to fail. OK. That is No. 1. I mean
my body is falling apart but parts of my mind still work. Then,
how could this program, and any rule written into it, supersede
the laws of this country so that someone couldn't be prosecuted
for Medicare fraud? I have a problem with that. So when you
guys are doing your legislative duties or whatever, you guys
got really good lawyers because they are making the dollars and
I think this whole problem is a dollar thing. And it has
nothing to do with the people of this country. And it is
getting old. Thank you very much.
Mr. Stupak. Thank you for your testimony and this program
was controversial when it was brought forth and it passed by a
very close vote, and but it did pass. In this country when it
passes, it becomes law. We have to administer it whether you
support the program or not the best as possibly can and we have
a couple more panels here and that is why your testimony is
important to us here today to understand the problems being
faced by folks out there.
Mr. Whitfield, questions please?
Mr. Whitfield. I don't have anymore questions. I do have
one comment before Mr. Walden I understand has questions. Ms.
Clegg-Boodram, I want you to know that CMS will be testifying
on a later panel and they have a responsibility for managing
the entire Medicare Program, and Medicaid as well at the
Federal level. But I can assure you that anyone that defrauds a
person relating to Medicare can be prosecuted. So this
Medicare, and we will have them talk about that but we do
appreciate your time very much today.
Mr. Stupak. Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman. Thank you, Mr.
Whitfield. I apologize for having to come and go here but some
other meetings I had to attend to but I am very concerned about
what I heard in your testimony and obviously it is our
obligation to not only learn about what went wrong but how to
make sure it doesn't go wrong again. And how to make sure that
people who have been harmed are unharmed, which is not a word
but I think it gets the meaning of the problem here.
Mr. Harrell, how effective do you think the new practices
such as post enrollment call-back can be. I mean I have heard
from some that say, OK, the agent comes in and makes the sale
but then the company calls back and says here is what you were
sold. Are you sure this is what works for you.
Mr. Harrell. The problem is when they call back, the
insured is still not going to understand it. That's the problem
that I think Ms. Boodram referenced a while ago with the three
witnesses she brought here today. They were, without putting
words in their mouth, they were at the top of the list in terms
of the most active. Who's out there protecting the ones who
don't know who to call? They don't know what the agents are
selling them. They don't know who CMS is or the carrier when
they call-back, so I don't see the call-back in some of the
more despicable cases. I don't see the call-back working.
Mr. Walden. OK. So how would you fix this then? Would you
just ban the sale of these products altogether?
Mr. Harrell. For the informed person I don't think the
product is a bad situation, for some people it is a good
product. If you can somehow just like the Congress did with the
Medigap product, if you give the State regulators the
jurisdiction over the product and the agent I think with that
joint effort that Congress did in the 1990s along with NAIC,
was able to solve the problem. You don't see those problems in
Medigap now that you see in Medicare Advantage due to the
policing of it from the State regulators who are in every State
who have been able to solve that. When you go out and penalize
the agent and the company that is when you are going to start
seeing some reaction from the carriers.
Mr. Walden. Are you seeing any of these problems with the
Medicare Part D?
Mr. Harrell. No, sir.
Mr. Walden. And are those products sold by agents as well?
Mr. Harrell. I mean you usually see problems with any
insurance product, in Mississippi we are very familiar with the
insurance issues the last couple years but we are not seeing
the same volume you are going to get a problem on any insurance
product, but the volume of what we are seeing, the largest
volume of complaints we are seeing, and we are a very rural
State, is involving Medicare Advantage once you get past
Hurricane Katrina issues.
Those are the two biggest problems we are seeing.
Mr. Walden. Why is it you are not seeing a problem with
Medicare D? That is a very complicated process I can assure you
having my wife's parents sign-up and go through that I
retreated immediately out of the room and told my staff, we
have got to hold some hearings, some meetings out, in the
district to educate people.
Mr. Harrell. I don't know exactly, I am very familiar with
that. My own parents call me about Medicare Advantage, what is
this? And I quickly got them in touch with our consumer
services director.
Mr. Walden. Right.
Mr. Harrell. And had her explain all of the nuances and
differences similar to what Ms. Healey does. I wasn't capable
of doing that and any time you are representing your parents, I
am also a lawyer by trade, it gets to be dangerous. But what I
have seen I don't know why when we are still complaints but we
are not seeing anywhere near the volume of the complaints we
are seeing on Advantage.
Mr. Walden. And when you talk about the volume in the
Medigap plans, can you give me some perspective here of how
many complaints you get overall versus complaints out of
Medigap? What is that volume figure you are referencing?
Mr. Harrell. I didn't bring those stats with me. Our office
keeps the stats of what kind of complaints we get but I will be
glad to provide them.
Mr. Walden. Is it twice as many as you get on other plans?
Mr. Harrell. The Medicare Advantage is the leader as it
relates to all complaints that we are getting now.
Mr. Walden. Among health and among these----
Mr. Harrell. Among all types of insurance.
Mr. Walden. All types. So does that include property,
casualty, auto?
Mr. Harrell. It even includes Katrina claims.
Mr. Walden. OK. And so it is No. 1.
Mr. Harrell. Yes, sir.
Mr. Walden. In Mississippi. Is that the same in California
from your perspective, Mr. Lipschutz?
Mr. Lipschutz. I think in California the State Department
of Insurance hasn't registered as many complaints as other
State insurance departments, in part because of the way
different SHIP programs are organized in different States. In
some States SHIP programs are administered through the
Department of Aging, whereas in some States it is administered
through the Department of Insurance. And I think in States
where the SHIP program is administered through the Department
of Insurance it is much more likely that complaints will get
registered and it is a much more streamlined process. So while
the complaint volume to the Department of Insurance might not
be as high in California as some of these other States, that
does not mean that the volume of problems are not in fact
happening.
Mr. Walden. OK. I understand what you are saying. My time
is about to expire. I want to thank all of you for your
testimony today and we obviously are going to pursue this with
vigor and certainly look to CMS to see how they plan to address
this issue as well. Thank you, Mr. Chairman.
Mr. Stupak. Mr. Burgess, any questions?
Mr. Burgess. Let me just ask Mr. Harrell a follow-up to
what your discussion with Mr. Walden. You said penalizing the
agent and the company was the best way to get this problem
solved. Did I understand that correctly?
Mr. Harrell. In our opinion, yes, sir.
Mr. Burgess. And right now there is a discrepancy with how
you are able to respond to someone who has a problem with
Medigap as opposed to someone who is in a Medicare Advantage
Program, is that correct?
Mr. Harrell. Yes, sir.
Mr. Burgess. And what is the nature of that discrepancy?
Mr. Harrell. Looking at it with the Department of Insurance
does not have jurisdiction over the product that is being sold
in Medicare Advantage due to the standardization that Congress
passed that relates to Medigap. If we could tie the two
together, link the company and the agent because the agent is
representing the company, he is not representing me.
Mr. Burgess. OK. Is the plan licensed by the State?
Mr. Harrell. The insurance company is, yes, sir.
Mr. Burgess. And you still have jurisdiction over that, is
that not correct?
Mr. Harrell. On the company itself we do but not the
underlying product that is being marketed.
Mr. Burgess. But if it is amalgamated to whomever and they
are selling a Medicare Advantage plan in your State you could
simply pull all of their license for all of their products,
could you not?
Mr. Harrell. That is in question. Our lawyers are advising
us that they don't think we have jurisdiction over the product
itself. Now whether we can or cannot take the license is
something that we have not, we have looked at it but also that
would also harm all the other individuals who sold good
products.
Mr. Burgess. Sure, sure it would be a drastic step, but it
would certainly be a way of getting the company's attention.
Mr. Harrell. Amongst the other thousands of policyholders
who were not victimized, yes, sir.
Mr. Burgess. Well, let me ask you this. If you had another
company with another policy that wasn't Medicare Advantage and
you discovered a problem with it what would be the trajectory
that you would follow there?
Mr. Harrell. It depends on what the situation would be.
Examine the company to find out what the problem was, what the
violations and how to fix them. And then take disciplinary
action against the company.
Mr. Burgess. And in your opinion what is it that prevents
you from doing that for the Medicare Advantage purchasers in
your State who feel that they have been harmed?
Mr. Harrell. Our lawyers have looked at it and had
discussions with CMS. It is their opinion that we do not have
the underlying jurisdiction to take action against the carrier
as relates to the product being marketed.
Mr. Burgess. Well, I think we are going to hear from CMS
later on this morning. I will be interested in their response
to that as well but clearly if that is an area where you don't
feel you have the power to advocate on behalf of the people in
your State, that is something that I think needs to be
corrected. And, Mr. Chairman, I will just for the good of the
order, I did follow-up with my constituent service department
back home. We currently have no Medicare Advantage cases that
are pending. We have two Medicare Part D that were just
resolved that were apparently long-term cases where people were
trying to dis-enroll and weren't allowed to do that. But again
the individual Member's office has considerable ability to deal
with CMS and for those of you who are having difficulty I would
not overlook that as an avenue to get some immediate help for
the recipients who are in the greatest amount of need. And with
that, Mr. Chairman, I will yield back.
Mr. Stupak. I thank you, Mr. Burgess. Every week my staff
gives a report and Medicare Advantage is one of those that
shows up every week in my district and I have half of the
geographic size in the State of Michigan and the problem we see
is once you recognize a problem with Medicare Advantage and you
want to dis-enroll, the length of time it takes and the hoops
you have to go through for our constituents is very, very
difficult, to dis-enroll once you realize there is a problem
there.
Mr. Burgess. But if the gentleman will yield, that and that
is exactly the place where the congressional office can make a
difference. Two cases that I referred to were long-standing
cases and we had them resolved within one, 4 weeks, and one, 5
weeks. I grant you that is a long period of time but when
someone has been fighting it for a year they are grateful to
have that sort of attention.
Mr. Stupak. Sure. And on behalf of Ms. Norton, the delegate
from Washington, DC, she advises that if you would vote to make
DC full voting rights in the Congress, she could move more
expeditiously to help her constituents. She is a very effective
voice here, right. Mr. Murphy, did you have any further
questions?
Mr. Murphy. Yes, Mr. Chairman, just real quickly.
Mr. Stupak. Sure.
Mr. Murphy. Mr. Harrell, are these the issues that the
insurance commissioners through other States have prepared any
sort of report on, these problems with Medicare Advantage, to
your knowledge?
Mr. Harrell. I believe the National Association of
Insurance Commissioners is working on that. You have two
commissioners on another panel later today and I think they can
update you as well. I know that the southeastern zone of the
insurance commissioners have been working on this together
trying to solve the problem. We have written our entire
congressional delegation on this issue.
Mr. Murphy. OK. I certainly hope that they will make that
available to the chairman. Also, how have insurance companies
responded to your requests about complaints from people selling
these plans in this way?
Mr. Harrell. On a one-on-one basis they have been very
cooperative working with us trying to solve the problems. They
have also been trying to work with the Social Security
Administration trying to get the bank drafts stopped, trying to
dry-up the checks, working with CMS. It is a very difficult
problem because you have got two very large governmental
agencies working together, hopefully, and a large insurance
company trying to work together but on a one-on-one basis they
have been, but that is just one-on-one of the ones who are
contacting the Department of Insurance. I know to contact CMS,
many don't know who they are and may not know to contact their
Senator or their Representative because they don't know that it
is not an insurance product. In fact, when we have written our
congressional delegation, we have even spoken to some of our
congressional staffers and some of them were not sure why the
people were calling them either initially. Now they do now
because of all the publicity that has been out there in the
last year.
Mr. Murphy. When they have identified that that there is
some problems in terms of agents, perhaps, less than scrupulous
behavior in terms of selling or promising plans there are a
couple of things I want to know. One is while people were
looking to switch plans back were there gaps in their coverage
and did anybody offer anything during that time to help with
payments or medications or hospital or anything, or were these
people left completely out in the dark.
Mr. Harrell. It is my understanding--I defer to some other
panel--some of them were left in some gap periods because they
had cancelled one and trying to get dis-enrolled in the other.
Mr. Murphy. How do we keep track of agents that are
involved in fraudulent behavior then? How do you keep track of
them? Is there a national database? How do we know in the
future if these people are trying to sell other----
Mr. Harrell. The National Association of Insurance
Commissioners has formulated a national database for an agent.
So if an agent in Pennsylvania has his license revoked and he
moves to Mississippi, when we run his name through the system
it will reveal that Pennsylvania Department of Insurance took
action regarding Mr. Smith.
Mr. Murphy. And then here is another issue here. When we
read now and then about people being involved in unscrupulous
activity with regard to sales tactics with insurance plans what
is unique to this issue, the Medicare Advantage or the Medicare
issues that is not just a matter of people doing bad things.
But what is there unique to this that is allowing this to occur
that we need to change?
Mr. Harrell. Well, my personal opinion is you look at the
victims here, the insureds, they are all elderly. Some of them
are in good mental shape, some of them in good physical shape,
a lot of them are not. If you go into a nursing home and start
enrolling individuals, you are going to have some who do not
need to be in a position of making that decision. And we have
seen a lot of them where they would have a power of attorney,
be it either brother or sister or another loved one, that is a
power of attorney. That person is supposed to be there but for
some reason they are not. I don't know why the agent would have
gone when the power of attorney person is not there. We are
seeing instances of those and some of the issues we have talked
about today are, if you give the States authority to enforce
it, right now that is in question, do the State regulators have
that authority? That is what we are trained for, that is what
we have been doing for over a hundred years, not me personally,
but that is what the insurance forum is across the country are
doing. All of them have specially-trained staff. In Mississippi
our SHIP program is not even part of the Mississippi Department
of Insurance and my figures don't even include what the SHIP
program has gathered complaints on.
Mr. Murphy. Ms. Healey or Mr. Lipschutz, either of you have
any comments on this in terms of the questions I just raised
about other things specific to this Medicare plan that allows
these fraudulent salespeople to operate here?
Mr. Lipschutz. I would say part of the reason is due to the
complexity of the Medicare Advantage Program, the sheer number
of plans that are now available, the differentiation between
the plan types, the great flexibility the plans have to design
their benefits and cost-sharing structures that can sometimes
leave people paying more for certain benefits if they are in
such a plan than they would in original Medicare.
Mr. Murphy. Did any of you know is there any side-by-side
comparison of here is what is in Medicare, here is Medicaid,
here is what is Medicaid Advantage, here is the preferred
plans, any side-by-side clear comparisons so that people can
either look at to see what is in this and what is not and how
much is it going to cost me? I haven't been able to find any
and so I find, no wonder people can be victimized.
Mr. Lipschutz. I think some SHIP programs do piece together
their own side-by-side comparisons of various plans. I would
also ask the Congressman to direct the question toward CMS
because there may be some prohibitions against plans actually
comparing benefits against one another. The one of our
outstanding issues when it comes to particularly Private Fee-
for-Service plans is that we believe that those that are
targeting marketing towards dual-eligibiles should be able to
clearly show how the benefits they provide are, in fact, better
than State Medicaid benefits, if at all.
Mr. Murphy. Thank you. Thank you, Mr. Chairman.
Mr. Stupak. Thank you. That concludes questions of this
panel and I want to thank this panel once again for putting and
bringing forth and educating Members as to the problems faced
with a Medicare Advantage. Thank you all for coming and you are
dismissed. And we will have our second panel come forward.
Our second panel of witnessess will be Mr. Francis
Soistman, executive vice president of health plan operations at
Coventry Health Care, Incorporated, Mr. Gary Bailey, vice
president of Medicare Operational Performance at WellCare
Health Plans, Incorporated, and Ms. Peggy Olson with Healthwise
Insurance Planning, LLC. Welcome, and as you know it is a
policy of this subcommittee to take all testimony under oath.
Please be advised that witnesses have a right under the rules
of the House to be advised by counsel during testimony. Do any
of our three witnesses wish to be represented by counsel here
today? They all indicate no. Then if so, I am going to ask you
to stand and raise your right hand and take the oath.
[Witnesses sworn]
Mr. Stupak. Let the record reflect all witnesses replied in
the affirmative. You are now under oath. We will start with our
opening statements.
Mr. Soistman, do you want to start, please.
STATEMENT OF FRANCIS SOISTMAN, EXECUTIVE VICE PRESIDENT,
GOVERNMENT AND INDIVIDUAL PLANS, EXECUTIVE VICE PRESIDENT,
HEALTH PLAN OPERATIONS, COVENTRY HEALTH CARE, INCORPORATED
Mr. Soistman. Chairman Stupak, Ranking Member Whitfield and
member of the subcommittee, thank you for inviting me here
today. I am Fran Soistman, executive vice president of Coventry
Health Care, a national health insurance company headquartered
in Bethesda, Maryland. Our Medicare programs provide part D
prescription drug coverage to 700,000 beneficiaries and serves
more than 200,000 beneficiaries through a variety of Medicare
Advantage plans. We understand the committee's concerns about
marketing activities of independent agents and we appreciate
the opportunity to discuss these matters with you.
I want to make three points today. Number 1, putting
beneficiaries first is a core value for Coventry and we have a
very good track record in doing just that. Number 2, while we
have faced some unanticipated problems with the conduct of some
independent agents we have taken steps to put this right. And
No. 3, we remain committed to working with CMS, State
regulators and our industry to insure fair and appropriate
marketing practices.
As a leader in serving Medicare beneficiaries for more than
a dozen years we have a solid track record. In marketing our
HMO and PPO plans through our internal sales force and then our
part D plans through national distribution partners we had
great success and encountered few complaints about agent
marketing practices.
When we began offering Private Fee-for-Service plans for
2007 enrollment we ran into some unexpected challenges with the
marketing activities of certain independent brokers and agents.
The situation at Judiciary House where an agent misrepresented
himself and misrepresented our product is an unfortunate
example of these activities. This was a deplorable situation
and I want to extend my personal and Coventry's deepest
apologies to Mr. Hammonds, Ms. Royal and Ms. Williams. This
kind of conduct is unacceptable.
Coventry has terminated both agents and the agency. We have
taken a number of steps over the past 8 months to deter sales
to dual-eligibles, protect beneficiaries, and enhance agent
training and accountability. First, in January we sent two
field communications to independent agents emphasizing that our
Private Fee-for-Service plans are likely not suitable for dual-
eligibles and reiterating special marketing guidelines for,
excuse me, for institutionalized settings.
Second, to further deter agents from selling Private Fee-
for-Service plans to dual-eligibles, we proposed eliminating
commissions on such sales. CMS advised that our proposal would
not satisfy their non-discrimination rules so instead we
stopped paying upfront commissions on these sales. We have
already seen significant reductions as a result.
Third, we began a successful program to make verification
calls to all enrollees in Mississippi to confirm that they
understand and intend to sign-up for our Private Fee-for-
Service plans. We are moving to extend this program across the
country.
Fourth, we are implementing stricter guidelines for
marketing our products in subsidized housing facilities. Fifth,
we raised the bar for agents requiring they pass a test to
ensure their grasp of our products and the do's and don'ts of
marketing. Sixth, agents are now required to re-train and re-
test prior to selling products for the 2008 enrollment year.
Seventh, we have enhanced our broker quality-management program
to include new performance metrics and an expanded special
investigations unit that allow us to evaluate agent practices
and take action when necessary.
Coventry remains committed to working with CMS, State
regulators and our industry to protect Medicare beneficiaries.
As the committee knows on June 15, CMS, Coventry and six other
leading companies announced a temporary suspension of Private
Fee-for-Service marketing activities. This was done to
strengthen consumer protections for early implementation of
CMS' new marketing guidelines for 2008.
We continue to work constructively with regulators in a
number of States including Mississippi, Georgia and Oklahoma.
Finally, we are working with AHIP to identify helpful industry
level measures such as a national registry of sanctioned
brokers.
In conclusion, Mr. Chairman, we have no tolerance for
improper agent conduct and we are committed to doing whatever
it takes to ensure appropriate marketing practices by everyone
who sells a Coventry product. This is good for our customers.
It is good for us. We have an excellent reputation in this
industry. We value that reputation and we intend to keep it.
Thank you.
[The prepared statement of Mr. Soistman follows:]
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Mr. Stupak. Thank you.
Ms. Olson, your opening statement, please, for 5 minutes.
STATEMENT OF PEGGY OLSON, HEALTHWISE INSURANCE PLANNING, LLC
Ms. Olson. My name is Peggy Olson. I am honored to have
been asked to testify before the subcommittee. I am a licensed
health insurance agent from Portland, OR, and I specialize in
the sale of Medicare-related health insurance products
including Medicare Advantage plans. I have been in the
insurance business for 25 years and I have counseled seniors
since 1989.
I am very aware of the publicity surrounding agents selling
Medicare Advantage plans. I make absolutely no excuses for
those individuals or their egregious violations of the Medicare
marketing rules. However, I do not think the outrageous
behavior of a dishonest few is in any way reflective of my
entire industry.
The sale of senior products is a labor of love. This is not
a quick way to get rich. I have never been offered a trip to
Las Vegas.
The Medicare eligible population has unique needs. Clients
are frequently suffering from debilitating or chronic medical
conditions. Many have trouble with functional literacy or
comprehension. Selling any Medicare-related product if it is
done properly is a very labor-intensive process that requires
patience, compassion and specialized knowledge.
I have an example in here of a client I worked with
recently who it took a long, long time to get her problems
straightened-out. For this nice lady, I will receive $4 per
month in commission for the entire time she stays on the
contract.
The standard I use for advising my clients is to treat them
as I would my own parents and this is the standard that most of
my professional colleagues use too. Most licensed producers who
sell Medicare Advantage plans spend a lot of time advising
their clients, answering questions and helping to select the
best possible plan for them.
I would hate to see the subcommittee take any actions that
would limit the ability of people to access the services of a
licensed, ethical health insurance producer. One of the main
ways we can make sure that all producers selling Medicare-
related products do so in the most ethical manner is through
education. My passion for education is a large part of what led
me to become involved with the National Association of Health
Underwriters, which is my industry's professional trade
association. Since joining I have worked with HCFA, on Medigap
standardization and to create agent training programs for the
sale of Medicare managed care.
NAHU has been committed to senior product education but I
wanted to make sure that all of you were aware of the project
we have undertaken in cooperation with America's health
insurance plans to make sure the producers have access to high-
quality, consistent training.
Our program has been reviewed by CMS and approved for
Continuing Education Credit in almost every State, except
Oregon. And we are actively promoting the course to both NAHU
members and non-members. The program is currently being updated
and expanded to include more training on Private Fee-for-
Service plans and will be available in a more universal format.
It is our understanding this will be the standard for education
for producers whether they are independent agents or employees
of insurance carriers.
The recent voluntary suspension of Medicare Advantage Fee-
for-Service product sales accentuates the need for this type of
comprehensive training. It is our understanding that all
carriers will utilize this uniform training and its required
exam to be certain that all agents are trained with the same
information.
I truly appreciate this opportunity to appear before the
subcommittee today and hope that I can help.
[The prepared statement of Ms. Olson follows:]
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Mr. Stupak. Thank you and thank you for your testimony.
Mr. Bailey.
STATEMENT OF GARY BAILEY, VICE PRESIDENT, MEDICARE OPERATIONAL
PERFORMANCE, WELLCARE HEALTH PLANS, INCORPORATED
Mr. Bailey. Mr. Chairman, Ranking Member Whitfield and
other members of the committee, I appreciate the opportunity to
testify about the sales practices of Medicare Advantage
Programs. I am Gary Bailey, vice president, Medicare
Operational Performance for WellCare Health Plans. At WellCare
I am responsible for monitoring and improving our Medicare
Advantage and prescription drug programs. Previously, I spent
over 30 year at CMS working to improve the operations of the
Medicare Program and services delivered to beneficiaries. Today
I am proud to be working at WellCare, a company committed to
providing high quality products and services to Medicare
beneficiaries.
WellCare is striving to have a best-in-class compliance
program. We have a zero tolerance policy for inappropriate
marketing. WellCare is a leading provider of managed-care
services with a long-standing commitment to Medicare/Medicaid.
Founded in 1985, our team of over 3,000 associates currently
serves over 2.2 million Medicare/Medicaid members nationwide.
We offer Medicare Advantage plans in 40 States and DC.
Today I will speak about WellCare's efforts to protect
beneficiaries in the marketing of Medicare Advantage plans. I
will provide this committee with specific recommendations on
how to improve this program. WellCare's corporate ethics and
compliance program is called the Trust Program. We have
enhanced the Trust Program with additional measures in the
oversight of independent sales agents who market our Medicare
Advantage products.
These measures include we conduct a thorough pre-screening
of all agents. We verify the agent as licensed. We conduct
extensive criminal background checks. We have extensive agent
training, re-training and testing. If an agent does not pass
with 100 percent or if they are not trained or re-trained, they
are suspended from selling WellCare's products.
We maintain a field management program. We conduct ride-
alongs with our agents. We also look at dis-enrollment rates to
see if there are any inappropriate trends. We call each and
every member after they enroll in our plan to measure their
satisfaction, to ensure that they fully understand their new
plan and that they are fully informed.
We have developed a strict code of conduct. Every agent
agrees to the code of conduct before they can market our
products.
We have recently started a secret shopper program. We have
an outside, independent organization that monitors our
marketing efforts to give us feedback from the member and to
ensure broker compliance. When any compliance issue is
identified agents are immediately investigated and if
appropriate are terminated. Over the last 7 months we have
terminated 18 sales agents for marketing conduct violations.
But there is more to do. We recently announced additional
efforts to strengthen our compliance program. These include
implementation of an in-bound telephone enrollment verification
process. This system will ensure that prospective enrollees
understand the plan while they are meeting with a licensed
agent. We will find this out in real time.
The program will be in addition to our 100 percent out-
bound call-back program already in place for new members. Also,
since we are recording the call we can monitor the agent's
behavior at the point of sale.
On June 15, we announced our decision to join six other
Medicare Advantage organizations in pledging to strengthen
consumer protections for Medicare beneficiaries. The pledge
implements CMS' 2008 marketing rules in 2007. This pledge
includes a temporary suspension of the marketing of our Private
Fee-for-Service plans until we implement these new rules.
Our Trust Program's compliance process works. For example,
in monitoring Medicare Advantage enrollment applications we
proactively discovered an agent in Georgia that had submitted
fraudulent applications. Working with the Georgia Department of
Insurance and others, aggressive action was taken against this
agent. This agent and his accomplice were subsequently
arrested.
In California we learned of improper marketing by an agent
that translated approved marketing materials into Chinese and
then distributed them to Medicare beneficiaries who do not
speak English. We terminated this agent. Following this we
immediately undertook a national agent re-training program and
initiated a program of making calls to 100 percent of our
members to verify their understanding of our plans.
But we support even more improvements. First, we believe
there should be a uniform national training program for all
agents who sell Medicare Advantage products. Second, we believe
a national database should be developed now to share
information about those agents and brokers who have been
sanctioned by a State or terminated by a health plan. We do not
want to be associated with an agent or broker who has been
terminated by another plan because of their non-compliance with
State or Federal rules.
Third, we believe all plans should conduct the in-bound
telephone enrollment and verification process I described. If
the national database had been established we would not have
hired an independent agent selling for another plan whose
license had already been suspended in Mississippi. This agent
then moved and was selling Medicare Advantage plans in Alabama.
We were one of the plans who unknowingly had this agent selling
for us. We then learned he had lost his license. We
investigated and terminated him within 72 hours. If we had had
a national database he would never have been allowed to sell
our products or any other plan's products.
We appreciate the committee's attention to this important
program and thank you for the opportunity to testify and I look
forward to answering your questions.
[The prepared statement of Mr. Bailey follows:]
Statement of Gary Bailey
Good afternoon, Chairman Stupak, Ranking Member Whitfield
and members of the Committee. I am Gary Bailey, Vice President,
Medicare Operational Performance for WellCare Health Plans. In
that role, I am responsible for monitoring and improving
WellCare's operations and performance in our Medicare health
plans, including both the Medicare Advantage (MA) plans and
Medicare Prescription Drug Benefit plans (PDP). Previously, I
was Deputy Director for Plan Policy and Operations in the
Center for Beneficiary Choices at the Centers for Medicare &
Medicaid Services (CMS). During my tenure at CMS, I was
responsible for the administration of Medicare Advantage plans
and the Medicare Prescription Drug Benefit. I appreciate this
opportunity to testify about sales practices in the Medicare
Advantage program, what we at WellCare have done to contribute
to industry improvement, and what more can be done to ensure
the program works well for Medicare beneficiaries.
In my 32 years of Federal Government service at CMS, I
consistently focused on improving the Medicare program. During
my tenure at WellCare, I have been extremely impressed with
WellCare's commitment to serving the needs of Medicare
beneficiaries, the organization's responsiveness to rapidly
changing Medicare program dynamics, and our commitment to
strong corporate compliance. WellCare is a company that prides
itself on continuous improvement, and I have seen this
improvement first hand in our approach to Medicare Advantage
sales and oversight.
WellCare understands the challenges and the rules
governing marketing practices in the Medicare Advantage
program, particularly for new Private Fee for Service (PFFS)
products that have expanded so rapidly. Health plans and their
independent sales agents must abide by appropriate marketing
and sales practices for these products so that beneficiaries
understand the important differences between PFFS and
traditional Medicare or other options, so they can select a
plan that best fits their health care needs. At WellCare, we
have a zero tolerance policy for non-compliance with our
marketing guidelines. We will--and we have--promptly terminated
contracts of non-compliant sales agents. It is our company's
ethic to do more than merely ``follow-the-rules''--we have NO
tolerance for any unethical behavior.
In my testimony today, I will provide information about:
WellCare's government-sponsored health care plans, specifically
our Medicare Advantage PFFS plans; CMS's recent audit of
WellCare's PFFS plans; our recently announced decision to join
six other leading health plans in pledging to strengthen
consumer protections for Medicare beneficiaries; and WellCare's
zero-tolerance of inappropriate marketing. Finally, I will
provide our recommendations about how further improvements can
be made to marketing and oversight of Medicare Advantage plans.
I. About WellCare Health Plans
WellCare is a leading provider of managed care services
dedicated exclusively to government sponsored healthcare
programs, such as Medicare and Medicaid. WellCare operates a
variety of Medicaid and Medicare plans, including health plans
for families, children, and the aged, blind, and disabled as
well as prescription drug plans. Founded in 1985, our team of
over 3,000 associates serves more than 2.2 million members
nationwide. We currently operate networked managed care
programs in eight states, and we are the fifth largest vendor
to CMS for the nationwide PDP program.
In order to better serve the Medicare population, WellCare
continues to expand its range of Medicare products. In 2006,
WellCare laid the foundation for the January 2007 nationwide
launch of our Medicare Advantage PFFS plans that feature an
open network and additional benefits for members. We operate
our open-network MA plans through three life and health
insurance subsidiaries under the WellCare name. We contract
with licensed, independent sales agents across 39 states and
offer these MA plans in 793 counties in 39 states and
Washington, D.C. As of March 31, 2007, WellCare has enrolled
over 32,000 members in our Medicare Advantage PFFS plans.
II. CMS Audit of WellCare
As you may know, there was a report in the New York Times
about a CMS audit conducted on WellCare's private fee-for-
service operations. The routine audit consisted of
documentation review, interviews with WellCare staff and
sampling of various records. Preliminary findings were issued
during the exit conference in mid-March and formal findings
were subsequently delivered to WellCare.
As a result of the CMS audit, WellCare has improved
several marketing processes, two of these, the ``secret
shopper'' program and the telephonic enrollment system, will go
a long way towards addressing the concerns put forth by CMS. In
addition to those improvements, WellCare has implemented
mandatory broker re-training and re-testing, the translation of
additional materials into multiple languages, and additional
outreach and coordination with advocacy groups and state
agencies.
WellCare appreciated the opportunity to have CMS come on-
site within the first 10 weeks of our launch of the Medicare
Advantage private-fee-for-service program to provide early
identification of concerns and improvement opportunities. We
welcome input and communication from others on issues and
concerns. We will investigate and take swift action when we
suspect any abusive practices.
III. Our Decision to Join Six Other Leading Medicare Advantage Health
Plans in Pledging to Strengthen Consumer Protections for Medicare
Beneficiaries
Based upon our concerns about misleading marketing
practices by independent agents, WellCare has helped lead the
drive toward industry improvements. We are working with CMS,
America's Health Insurance Plans (AHIP), the National
Association of Insurance Commissioners (NAIC) and other health
plans to develop consistent compliance and oversight standards
for independent sales agents.
On June 15, WellCare announced its decision to join six
other leading Medicare Advantage health plans in pledging to
strengthen consumer protections for Medicare beneficiaries.
This pledge includes the accelerated implementation of the 2008
CMS Call Letter, the CMS marketing guidance provided to MA PFFS
plans on May 25th as well as the development of best practices
for compliance oversight of independent sales agents. To allow
time for these activities, the pledge includes a temporary
suspension of the marketing of our PFFS plans.
Under the voluntary pledge of compliance with CMS, a plan
may not market PFFS plans until CMS certifies that the plan has
the additional systems and management controls in place to meet
all the additional requirements specified in the May 25, 2007
guidance and 2008 Call Letter issued by CMS. While the full
range of updated requirements will be in effect for all
sponsors of PFFS plans beginning October 1, 2007, WellCare and
the six other MA health plans have agreed to accelerate the
adoption of these new requirements. CMS will require the
following protections before PFFS marketing can resume:
All materials, including advertisements,
enrollment materials, and materials used at sales presentations
must include model disclaimer language provided by CMS in its
guidance;
All representatives selling the product must
pass a written test that demonstrates their thorough
familiarity with both the Medicare program and the product they
are selling;
A provider outreach and education program must
be in place to ensure that providers have reasonable access to
the plan terms and conditions of payment, and that provider
relations staff are readily accessible to assist providers with
questions concerning the plan;
Outbound education and verification calls will
be made to all beneficiaries requesting enrollment to ensure
that they understand the plan rules;
A list of planned marketing and sales events
must be provided to CMS that includes events sponsored by
delegated brokers and agents as well as those sponsored by the
plan; and
At CMS's request, plan sponsors must provide a
complete list of all representatives marketing a PFFS product
and authorize CMS to make that list available to State
Insurance Departments upon request.
Even before these new CMS requirements, WellCare had
previously announced enhancements to our compliance program for
our PFFS products, including an inbound telephone enrollment
and verification process and a ``secret shopper'' program using
an independent organization to anonymously monitor field
marketing activity. These enhancements are in addition to
extensive compliance efforts that were already in place for our
independent sales agents.
III. WellCare's Current Approach to the Marketing of Medicare Advantage
Plans
WellCare vigorously enforces a zero-tolerance policy for
the violation of all laws, rules, and policies. I will address
both the Federal and WellCare controls in turn.
A. Federal Controls on the Marketing of Medicare Advantage
Plans
As a rule, each WellCare employee is personally
responsible for compliance with all Federal, state, and local
laws and regulations. All employees and representatives of
WellCare must become and remain knowledgeable on the legal and
regulatory requirements applicable to their respective
positions, duties, and contractual requirements. Additionally,
WellCare has created an environment enabling all people who
work and are under contract with WellCare to exercise this
individual responsibility.
The marketing of Medicare Advantage plans is controlled by
Federal regulations and CMS guidance. Federal regulations
prohibit the distribution of any marketing materials or
election forms to prospective beneficiaries unless approved by
CMS. In conducting marketing activities, MA organizations may
not: (i) provide cash or other monetary rebates as an
inducement for enrollment; (ii) engage in any discriminatory
activity, including targeted marketing to Medicare
beneficiaries from higher income areas without making
comparable efforts to enroll Medicare beneficiaries from lower
income areas; (iii) solicit Medicare beneficiaries door-to-
door; or, (iv) engage in activities that could mislead or
confuse Medicare beneficiaries or misrepresent the MA
organization. Importantly, Federal rules also require an MA
organization to establish and maintain a system for confirming
that enrolled beneficiaries have in fact enrolled in the MA
plan and that beneficiaries understand the rules applicable
under the plan.
In addition to regulations, CMS has released numerous
guidance documents that reflect CMS's current interpretation of
the requirements and related provisions of the Medicare
Advantage and Medicare Prescription Drug Plan rules. As I
mentioned, on May 25, 2007, CMS issued additional guidance
specifically to MA PFFS plans outlining CMS's new requirements
for PFFS marketing. Finally, the CMS 2008 Call Letter outlines
in detail the information that health plans need to ensure
compliance with CMS policies and program requirements.
B. WellCare Health Plans Compliance Programs for Medicare
Advantage Plans
In addition to the Federal regulations and marketing
guidance, WellCare Health Plans has implemented even stronger
oversight policies. These are based upon our corporate ethics
and compliance program, known as the Trust Program, that was
adopted in 2002. All people associated with WellCare must
accept the individual responsibility and duty to conduct
WellCare's business in an ethical and compliant manner,
consistently adhering to the standards of conduct embodied in
the Trust Program.
1. The Trust Program
The Trust Program is the foundation for WellCare's
operations, unifying our long-standing corporate ethics and
compliance policies under a comprehensive program with the goal
of establishing a culture of integrity and trust within
WellCare. The Trust Program promotes prevention, detection, and
the resolution of conduct that does not conform to applicable
Federal or state laws or our high standards of business ethics.
The Trust Program applies to WellCare, our Board of Directors,
employees, and our business partners. The Trust Program
provides guidance and oversight to ensure that all work at
WellCare is performed in an ethical and legal manner.
The Trust Program, however, cannot substitute for an
individual's personal sense of honesty, integrity and fairness.
We strongly encourage all people within the WellCare community
to rely on their common sense in recognizing right from wrong
using the Trust Program to ensure that we observe high ethical
standards.
2. Additional Compliance Measures
To augment the Trust Program, we recently announced
enhanced compliance measures designed to protect the rights of
Medicare beneficiaries. These enhancements will increase the
oversight of independent sales agents who market the company's
MA products. Our recent improvements include two new components
for oversight of MA independent sales agents. Because
independent sales agents market more than health plans,
WellCare firmly believes these improvements are necessary to
ensure that the quality and professionalism of WellCare's sales
practices remains best-in-class.
The first improvement is an inbound telephone enrollment
and verification process. This system will allow prospective
enrollees an additional opportunity to verify their
understanding of plan benefits, acknowledge that they received
all the information needed to make an informed decision before
joining a Medicare Advantage program, and confirm their
voluntary election to select the plan terms. The phone call
verification will be digitally voice recorded at the point of
enrollment for all Medicare Advantage beneficiaries. With this
new enrollment process, WellCare will implement a real-time
verification and quality assurance process. The inbound
verification program will be in addition to the 100 percent
outbound callback program already in place for new members.
The second new component is the launch of a ``secret
shopper'' program where WellCare will use an independent
organization to anonymously monitor the compliance of Medicare
Advantage independent sales agents. This national program began
its rollout just before the announced voluntary suspension of
marketing. Once WellCare meets the benchmarks outlined in the
agreement with CMS, and resumes marketing, the program will
continue its phased nationwide rollout. All results of
WellCare's secret shopper program will be reported directly by
the independent organization to WellCare's Corporate Compliance
department, generally on a same-day or next-day basis. Like our
other compliance and consumer protection measures, the secret
shopper program aims at ensuing seniors are fully informed
about their PFFS benefits and treated appropriately by
independent agents. It also will help us to identify
inappropriate agent activity and aid in our ongoing efforts in
improving agent education.
In addition, WellCare is working with America's Health
Insurance Plans (AHIP) on new principles, standards and
practices to further protect Medicare beneficiaries. In short,
these new measures will tolerate nothing less than strict
adherence to a code of conduct that appropriately educates and
protects our members. We are confident that with these new
enhancements, our overall compliance strategy will continue to
be best-in-class.
Other enhancements to WellCare's compliance program will
build upon the extensive activities already in place to oversee
independent sales agents for Medicare Advantage private fee-
for-service products, including:
Confirmation of agent's state licensure;
Extensive criminal background screening;
Mandatory training and testing on product
benefits and marketing guidelines;
Mandatory contract terms, incorporating a sales
agent code of conduct;
On-site monitoring of agents by field sales
management;
Post-enrollment outreach calls to 100 percent
of new members;
Mandatory re-training and re-testing to refresh
knowledge of plan terms and marketing guidelines;
Secret Shopper program;
Developing an inbound enrollment verification
process;
Rapid resolution of any identified compliance
issues; and,
Zero tolerance for verified infractions.
3. Sales Agent Code of Conduct
As a leading provider of Medicare products, WellCare has
established a reputation for providing quality health plans at
affordable rates for beneficiaries. In an effort to ensure all
independent sales agents contracted with WellCare are
representing our plans with the highest degree of integrity, we
also require every sales agent to abide by the ``WellCare Sales
Agent Code of Conduct.'' This code of conduct requires the
following:
Respect the beneficiary: Agents must provide guidance with
the beneficiary's best interest in mind, be respectful of the
beneficiaries' wishes and understand their unique health care
needs. Sales agents should be available for any questions or
concerns before and after the sale.
Provide full disclosure: Agents must present all plan
options completely with full disclosure of any plan limitations
and compare WellCare plans to the beneficiary's current
coverage to ensure they understand differences in features,
benefits, costs, and access to providers.
Follow proper marketing guidelines: Agents must follow
approved marketing methods for setting appointments and
conducting sales sessions as outlined by CMS regulations.
Agents cannot solicit individuals via door-to-door sales, phone
calls or unsolicited email and cannot solicit or enroll members
where health care services are dispensed.
Use approved materials: Agents must use only WellCare and
CMS approved materials and agents must not alter the materials
in any way. WellCare has developed all the sales and marketing
material needed to present plan information to the beneficiary
and makes these materials available in multiple languages.
Proper use of sales tactics: Agents must never use high
pressure sales tactics to influence a beneficiary's decision to
enroll. Agents must allow the beneficiary time to review and
understand the information and offer them independent sources
of information such as the CMS web site: www.cms.hhs.gov.
Representation: Agents must always represent themselves
and WellCare appropriately to ensure that beneficiaries
understand that they represent WellCare but are not an employee
of WellCare, Medicare, Social Security, or any other government
entity.
Use enrollment forms correctly: Agents must not back-date,
falsify, or alter any enrollment document or form, and
applications must be submitted so that information on the
original copy matches exactly with the copy that was left with
the prospective member. Completed enrollment forms must be
mailed or faxed to WellCare within 24 hours of the date the
beneficiary signed the form.
Do not discriminate: To ensure fairness, agents must not
discriminate against potential enrollees on the basis of health
status, ethnicity, or any other improper criteria. If an agent
believes a beneficiary lacks understanding of the program or is
of questionable competence, he or she must observe proper
procedure by having the member's authorized representative
present at the time of enrollment and approve the member's
decision.
Comply with oversight standards: WellCare has rigorous
compliance standards for all independent sales agents. Agents
must know and understand these standards.
4. WellCare Oversight
To ensure compliance with all marketing guidelines and the
Code of Conduct, all Sales Agents are informed and understand
that WellCare undertakes the following initiatives:
Deployment of a secret shopper service to pose
as potential beneficiaries to experience the sales process/
presentation;
Revocation of selling privileges for sales
agents who do not complete the mandatory training and score 100
percent on the required testing;
Follow-up calls to all beneficiaries enrolled
by any terminated sales agent to confirm the beneficiary's
enrollment decision or to facilitate disenrollment;
Monitoring of sales data for potential issues
and to educate or even terminate agents based on the findings,
with emphasis on proactive resolution of issues;
Monitor a confidential compliance Hot Line
where members, associates and government regulators can report
concerns about potential marketing misconduct; and
As our inbound enrollment verification process
is implemented nationwide for PFFS, all agents will need to
complete any sales activities through this process.
The focus of our oversight is to ensure that each Medicare
beneficiary receives high quality, professional interaction in
their sales experience. Medicare beneficiaries must fully
understand their health plan benefits, coverage limitations,
and policies to make an informed choice about the health care
coverage that best suits their needs. Ensuring a positive sales
experience is in everyone's best interest. If a product or
service is not good for a beneficiary, then it is not good for
WellCare, either.
C. Recent Examples of WellCare's Zero Tolerance Policy
Through WellCare's compliance programs, 18 independent
sales agents have been terminated for marketing conduct
violations across the country because WellCare has a zero-
tolerance for agent misconduct. However, we are never satisfied
with our past performance, and we continue to improve our
internal compliance measures.
The New York Times report I mentioned was critical of
WellCare's private fee-for-service operations, and I'd like to
set the record straight. In January 2007, WellCare learned of
improper marketing efforts by a California licensed,
independent sales agent who was not an employee. This agent
translated approved marketing materials into Chinese and
aggressively distributed them to a group of Medicare
beneficiaries who did not speak English. WellCare immediately
analyzed the selling history of this agent to reveal that the
agent used inappropriate sales tactics and that the materials
he was using were not approved. As a result, WellCare
immediately terminated its contract with the sales agent.
Because WellCare takes its responsibilities under the
Medicare program seriously, we moved quickly and aggressively.
First, WellCare staff commenced mandatory retraining for the
insurance agency that contracted with the terminated agent to
reinforce the agency's understanding of the Medicare marketing
guidelines and WellCare's expectations. Second, WellCare
initiated mandatory retraining and testing on a national basis
for all licensed independent sales agents under contract with
WellCare for its Medicare Advantage products. If sales agents
do not complete this follow-on training and score 100 percent
on the required retesting, their selling privileges with
WellCare will be revoked. Third, WellCare initiated mandatory
new member call-backs to 100 percent of new Medicare Advantage
enrollees to confirm that their sales experience was positive
and that they understand their benefits. WellCare also placed
follow-up calls to the beneficiaries enrolled by the terminated
agent to confirm their enrollment decision or facilitate
disenrollment.
Another recent action occurred with a sales agent in
Georgia. In early December 2006, through our monitoring of
enrollment applications, we learned that an agent submitted
several Medicare Advantage applications for deceased persons.
That day, an investigation was initiated and within two days,
the agent in question was terminated. We conducted an analysis
of and contacted all of the fired agent's enrollees. Through
the investigation, we learned that the terminated agent
participated in several prohibited marketing activities in
violation of Federal regulations, CMS guidelines, and WellCare
policies. Accordingly, WellCare informed the Georgia Department
of Insurance and Federal authorities of the agent's actions,
and we cooperated with them on their investigation. In the
spring, the fired agent was escorted from his home in handcuffs
by Georgia law enforcement authorities. He and his accomplice
are now behind bars.
V. WellCare's Recommendations to Further Improve Marketing Practices
WellCare is extremely proud of our Medicare Advantage
offerings. The plans offer beneficiaries new choices to broaden
the ways in which beneficiaries can receive high quality health
care. We are confident that Federal regulations combined with
our vigilant internal compliance efforts and commitment by the
industry will help ensure the highest standards of integrity.
Nonetheless, through the operation of our zero-tolerance policy
as well as our recent dialogue with CMS, as evidenced by our
new compliance pledge to further strengthen consumer
protections, we recognize there is room for improvement. We
offer the following recommendations for your consideration:
Development of a mandatory national standardized Medicare
training program for all agents selling Medicare products.
While plans conduct such training and specific training will
always be needed for company-specific benefits and products,
consumer protection can be enhanced by ensuring all agents
marketing PFFS products are trained with a uniform set of
education materials and directed to cover with Medicare
beneficiaries a set of mandatory topics and disclaimers. This
will provide a platform for excellence in education of
consumers and streamline investigation of any compliance issues
with agents. This issue is currently under discussion with AHIP
and CMS;
Use of an inbound telephone enrollment and verification
process that would provide the opportunity to ensure that
enrollees fully understand the benefits and features of the
plan. Again, this proposal would serve to enhance consumer
education and help plans to quickly identify any compliance or
training issues with independent agents. It would ensure that
no person who did not have an adequate understanding of the
PFFS product would be enrolled in the program;
Creation of a national database to provide and share
information about agents and brokers that have been sanctioned
by a state or terminated by a health plan. While most agents
are ethical and professional in their marketing of our
products, a national database would allow plans to track and
quickly report any issues with a small subset of roque agents--
who sometimes seek to sell in other states when their bad
behavior is discovered in one state. Again, this issue is
currently under discussion with AHIP, NAIC and CMS;
Early implementation of the CMS 2008 Call Letter. This
effort is now underway for those plans, like WellCare, taking
the voluntary compliance pledge;
Additional provider outreach and education, including
fixing the ``Common Working File;'' and
Industry-wide adoption of secret shopper programs.
While all of the issues mentioned above should be adopted,
I want to stress the importance of two of them--inbound
verification and a national database. As the Committee is
aware, there was an independent agent whose license was
suspended in Mississippi, but he continued selling MA plans in
another state. WellCare was one of the plans who unwittingly
had this agent selling our products in Alabama because Alabama
was not aware the agent had been suspended in Mississippi, and
he passed all other background checks. We became aware of the
Mississippi suspension only through word of mouth during our
general outreach effort to the Mississippi Medicaid Agency and
the Department of Insurance. When they identified this agent as
a problem in Mississippi, we immediately sought to determine if
he was selling our products in any other states. He was, we
undertook an investigation, and within 72 hours had terminated
our relationship with him. We began contacting the members in
Alabama he had signed up and worked to disenroll those who were
not satisfied with our product.
Luckily, we found this agent, but it was very much due to
our aggressive oversight. It is our belief, though, that with
inbound verification and a national database, this agent and
others like him could be stopped much sooner. Inbound
verification would have stopped this agent from enrolling
individuals in the first place if they expressed concerns about
the agent. We also could more quickly and proactively
investigate such agents. And we could quickly report to the
central database any termination of an agent to protect other
Medicare beneficiaries who may be approached by the same agent
marketing for a different company.
In conclusion, we believe the most effective action to
undertake on behalf of Medicare beneficiaries is to improve
communication channels and provide effective confirmation of
allegations of abusive marketing practices. By fostering
cooperation at the Federal, state, health plan, and agent or
agency levels in communicating and resolving complaints, we can
take swift action against those who defraud Medicare
beneficiaries.
WellCare is proud to be an industry leader in good
compliance. We started with a best-in-class compliance program
five years ago and have added enhancements along the way as we
continuously seek to improve the quality of our products, our
operations, and the practices of the independent sales agents
that market our products.
Thank you again for this opportunity to testify about our
perspectives on these important issues. Please be assured that
WellCare remains deeply committed to the long-term success of
the Medicare Advantage program. We appreciate the critical
oversight that the Committee provides over this valuable
program and look forward to continuing to work with you to meet
future challenges in the Medicare and Medicaid health programs.
----------
Mr. Stupak. Thank you. We will start with the questions.
Mr. Soistman, Mr. Bailey talked about a national registry
for agents, would you be in favor of that?
Mr. Soistman. Mr. Chairman, we would be very much in favor
of that.
Mr. Stupak. OK. Would you be in favor of putting that
registry on the Internet so senior citizens would have access
to it so they could see if these agents were in fact registered
and licensed in good standing?
Mr. Soistman. We think the, Mr. Chairman, we think that
information should be available to the public at large and
obviously to State regulators provided it is kept timely and it
is reliable. I think it could be a very useful tool in the
process.
Mr. Stupak. You have all mentioned the abuses we have heard
about on Medicare Advantage. Strike that, I don't want to go
there.
Mr. Bailey, let me ask you this question. Your company is
on a corrective action plan by CMS right now, is that correct?
Mr. Bailey. Yes, sir, that is correct.
Mr. Stupak. What led to that? Why did you have to go on
this corrective action plan?
Mr. Bailey. OK. We were notified by CMS that they were
going to do an audit, a full review of our Private-Fee-For-
Service plan in March. They visited us on March 12. It was a
good opportunity for us. The program was only 10 weeks old and
we would rather find out if there were any issues that needed
to be corrected sooner than later. So they spent the week with
us. We had an informal debriefing at the end of that week on
March 16. They actually issued a requirement report to us on
April 19.
Mr. Stupak. Your private plan had only been out there for
what, 10 days you said?
Mr. Bailey. Actually, for 10 weeks. And it is not unusual--
--
Mr. Stupak. Was there a lot of complaints then?
Mr. Bailey. I think there were probably two reasons they
decided to visit us. One, it is not uncommon for the agency to
visit new plans when they are in start-up mode just to provide
technical assistance, but also I think they had received a
number of complaints about brokers in general and wanted to
visit us and make sure we were doing all that we could do to
prevent that from happening. So I think that is the two
contributing factors.
Mr. Stupak. Were the complaints on what you call on the in-
bound verification call? Is that what the complaints were based
on?
Mr. Bailey. Actually, what they really asked us to do after
spending a week with us in terms of corrective action, they
wanted to make sure we were managing the broker community as
effectively as we could.
Mr. Stupak. Now a broker community now, that would be
agents?
Mr. Bailey. That would be the agents. Primarily the agent
or brokers on this one. They wanted to make sure that, in fact,
they wanted to see the results of the calls that we were
making, as I had mentioned earlier, we began to make in
February before the CMS audit occurred, calls to our Private
Fee-for-Service applicants before they were enrolled to gauge
the satisfaction of their sales experience.
Mr. Stupak. Now that is that in-bound verification call,
right?
Mr. Bailey. Actually that is another thing.
Mr. Stupak. OK.
Mr. Bailey. There are three different levels of calls. What
we do for Medicare Private Fee-for-Service as a result of some
of the abuses that we had heard of earlier where that the agent
in San Francisco had illegally translated the marketing
materials, we realized at that point we need to reach out to
the beneficiaries before they were enrolled, before they were
into the system, so we implemented a 100 percent call-back on
Private Fee-for-Service enrollees. So that is call No. 1.
We would call them and we ask them about their satisfaction
of the sales experience. We wouldn't want to do that at the
time the broker was there so we waited about a week after is we
call them up, go down some of the benefits of the program, some
of their understanding, but more importantly how did the sales
satisfaction go. So that is the first call.
The second call that we have been doing on all members for
our programs are the out-bound calls within 2 weeks of
effective enrollment we call them and we discuss with them
their understanding of the benefits. We want to make sure that
we have the correct address, they understand their benefits and
how to access them.
The in-bound telephone and verification call is something
relatively new now. Some other major plans are using it. But
what we want to do there at the time of a sales transaction,
this may have occurred to several folks in this room or up
there, with other products. At the time of the sales
transaction, before the sale is actually consummated, the agent
will make a call, in this case to an enrollment verification
specialist working at WellCare, and they will talk to the
representative for several minutes to provide some of the
beneficiary's information. But more importantly, we ask the
beneficiary to take the phone, if they wouldn't mind, and the
enrollment verification specialist goes through a pretty
detailed questionnaire. We do not ask about broker performance
but you understand the deeming concept and how that works, the
provider must accept this. Do you understand that if it is a
Medicare Advantage plan and we go down a list.
Mr. Stupak. Does CMS approve these scripts that you are
like any other outward communications?
Mr. Bailey. Absolutely. That script like any other outward
communication that CMS has been approved.
Mr. Stupak. Go to exhibit No. 8. So CMS approved these
communications, halftime, extra points, we are urging your
agents to sign-up people. You get $100 bonus for every
application and you can possibly win a Panasonic 42-inch,
plasma HDTV.
Mr. Bailey. I don't think since this wasn't a communication
to the members that CMS would have had to approve it, but I
recall this.
Mr. Stupak. But wouldn't this go to your members, your
agents, your brokers, your independent brokers.
Mr. Bailey. The agents.
Mr. Stupak. OK. The independent brokers and----
Mr. Bailey. The CMS approveal, I believe, is required on
communications going to the members.
Mr. Stupak. To members you mean the people you sign-up, in
other words.
Mr. Bailey. We don't do this. We have actually stopped any
type of effective incentives January 1, when we began to offer
our product. I remember this specifically. We were very
concerned about the agents making sure they got their
applications of the members to us quickly. Because if not you
can run into some date lag so we don't want that, so we
actually put incentive out if, in fact, this was to promote
them getting their applications into us quickly and not
gathering them and sending them all at once.
Mr. Stupak. But they wouldn't get paid a commission unless
they got their application in, right?
Mr. Bailey. This is true but from the beneficiaries, we
wanted to minimize the amount of time from when the beneficiary
said I would like to join to when we were able to fulfill the
member, the member kit and providing the ID card.
Mr. Stupak. So you are telling us you had to do this to get
them to turn in their applications quicker?
Mr. Bailey. No, I think at the time we just wanted to just
have a double-check to make sure they got them as quickly as
possible. Again, we don't do this anymore but at the time the
program was relatively new for us, we just didn't have any
track records as to how long it would take to get those in. And
now we seem to have a pretty good flow of applications and we
are not really concerned about this.
Mr. Stupak. I find that hard to believe that you have to do
these kind of incentives to get them to get your application in
early. I would think they would get their application in
because their commission runs on it, right?
Mr. Bailey. In terms of what some of the folks have said
about things that you have done and what you have learned from
them, I think that situations like this that you have raised
have driven us to supporting the implementation of the in-bound
enrollment verification system. Because, in effect, what you
have done there if it is successful encounter between the
representative from the plan and the agent and the beneficiary
it all transpires over the telephone. It is done
telephonically.
Mr. Stupak. These sort of invites agents to play rather
quick and loose with the facts in order to get your points to
get your chance to win that plasma TV that retails at,
according to your flyer here, $1,439.99. I mean this would be
more encouraging to sign people up not to get your applications
in quickly. Well, I got to get it in by the deadline if you
want to qualify for the contest but and you don't do this
anymore?
Mr. Bailey. No, we don't do that anymore and that, as I
said there was some things in the administration of the program
that you learn from and you move forward so no we don't.
Mr. Stupak. OK.
Mr. Whitfield, for questions, please.
Mr. Whitfield. Ms. Olson, I represent a rural district and
a lot of people like these Medicare Advantage Programs and from
your experience as a person selling them, what are the
positives about these Medicare Advantage Programs? Why do
people like them?
Ms. Olson. There are a number of reasons. First of all, let
me state I do not sell Private Fee-for-Service plans because
they don't work very well where I am.
Mr. Whitfield. OK.
Ms. Olson. Medicare Advantage plans are relatively easy to
understand. There are co-payments, some of them offer both in-
plan and out-of-plan benefits, usually they offer vision
benefits, some alternative care benefits, depending on where
you are, and the price is reasonable. And you know, pretty
much, from month to month as opposed to a Medicare Supplement
or a Medigap plan exactly what your out-of-pocket is going to
be.
Mr. Whitfield. OK. Now, let me ask you, do you represent a
lot of different insurance companies?
Ms. Olson. I use to. I got it down to about seven companies
now for my Medicare people.
Mr. Whitfield. All right. So you have seven companies that
you represent.
Ms. Olson. Yes, sir.
Mr. Whitfield. Are you an agent or a broker or a
consultant?
Ms. Olson. I am an agent and a consultant.
Mr. Whitfield. And, Mr. Soistman, your company has a
Medicare Advantage Program that it put together and you were
selling it, is that correct?
Mr. Soistman. Yes, Congressman, we have multiple Medicare
Advantage Programs.
Mr. Whitfield. OK. And what percent of your sales force
would be actual employees of your company as opposed to
independent brokers or independent agents?
Mr. Soistman. Well, our Medicare Advantage plans that are
health plan based, we call them coordinated care plans, they
are in five markets, and they are limited by the number of
counties. So they are not even statewide in those five markets
and there are approximately 35 employees who are responsible
for selling.
Mr. Whitfield. So those are in-house employees and then you
have contracts with other agents that can sell them as well.
Mr. Soistman. That is correct.
Mr. Whitfield. OK. And, Mr. Bailey, what about how many
agents do you have in-house selling these programs?
Mr. Bailey. I don't have those numbers at my fingertip and
I can absolutely get those but I am thinking probably in-house
could be 15 to 20 percent, 25 percent of the total agent
population.
Mr. Whitfield. OK. Now, Mr. Soistman, unfortunately your
company was the one involved with Judiciary House and the
salesman that sold those Medicare Advantage Programs at
Judiciary House from your analysis and review of that case what
did they do wrong?
Mr. Soistman. Well, Congressman, they did a number of
things wrong. First, just so the committee understands these
are independent agents. They weren't employees of the company.
What we have been able to piece together through out internal
investigation is that as the previous panel indicated, the
agents did call on Judiciary House on two occasions in
February. They, apparently, made statements representing that
they were from Medicare and that they were there to talk about
the new part C programs. So clearly they were misrepresenting
themselves. They were misrepresenting the purpose of their
visit and, clearly, misrepresented the products that they were
marketing. As far as we can tell, they were indeed promoting
our Advance for Freedom Private Fee-for-Service plan. We know
these agents represent other companies so don't know exactly--
--
Mr. Whitfield. But they both had licenses to sell in the
District?
Mr. Soistman. The agent in particular that was identified
as having signed the applications was licensed, he indeed was
licensed.
Mr. Whitfield. And has he lost his license in the District?
Mr. Soistman. He has lost his license and the agency that
he is affiliated with was terminated as well.
Mr. Whitfield. But it would be possible----
Mr. Soistman. I am sorry, let me correct that.
Mr. Whitfield. OK.
Mr. Soistman. He has been terminated, losing his license is
not something that we really can affect other than report any
agent who has violated the contract and has done something of a
significant nature including fraud, we would report them to the
State Department of Insurance.
Mr. Whitfield. But if he went to Mississippi, say, and
wanted to sell insurance in Mississippi on his application
would he have to state or would they ask the question have you
been terminated in another jurisdiction or do you know?
Mr. Soistman. I would imagine that in most States that is a
requirement if you have ever lost your license you have to
report that. The States, I think, are somewhat limited in terms
of the availability of that information though.
Mr. Whitfield. Now, Ms. Clegg-Boodram, mentioned in her
testimony that when the Federal law passed that allowed
Medicare Advantage Programs to be sold that in essence CMS was
prohibited from bringing any Medicare fraud charges against
anyone. Now, you understand as an insurance company selling
Medicare products you can be prosecuted for fraud by CMS, is
that correct?
Mr. Soistman. Well, we can certainly, CMS has the authority
to take multiple actions, corrective actions, sanctions, et
cetera, if we are violating our agreement or not living up to
the agreement.
Mr. Whitfield. So that is quite clear that that is still in
place which we think is certainly helpful and I see my time has
expired.
Mr. Stupak. Thank you, Mr. Whitfield.
Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman. I want to
welcome our panelists. I appreciate your testimony as well.
Mr. Bailey, I want to go to you on this extra points sales
promotional flyer that went out to the agents. At the very
bottom it says WellCare reserves the right at its sole
discretion to determine eligibility for this program on a case-
by-case basis and may disqualify agents if they violated any of
these provisions, the producer agreement, CMS Marketing
Guidelines, or the law. So this flyer would aggressively, well,
it is designed to get agents to go out and sell your product
first of all, which isn't an offense I don't think.
I have been in the broadcast business for 20 years and we
are always trying to find ways to incent agents but we don't
incent them to violate the law or other practices of ethical
business behavior, so my question is given that last line
there, were there agents that you encountered that went too far
in WellCare, and if so were there case-by-case situations where
policies were not appropriate had been issued and were
subsequently reviewed and terminated?
Mr. Bailey. Let me try to answer that question the best
that I can. We have terminated 18 agents in the last 7 months.
Mr. Walden. Eighteen agents.
Mr. Bailey. Eighteen agents. When an agent is terminated in
terms of the downstream effect what we do is we then reach out
to talk to all of the enrollees of that particular agent just
to make sure that they were fully informed as to what the plan
was at the time of enrollment.
Mr. Walden. And let me stop you on that point because in
the prior panel I asked about the call-back notion which is a
little different then this but it is basically the same, you
are checking back and the answer I got was generally that that
is not an effective technique because some of these people
don't know whether they are in the right plan or not.
Mr. Bailey. All right. Well, several comments. With regard
to the calls that we made we actually have a compliance staff
with WellCare that will make these particular calls and we will
basically advise them, of what happened with the agent we found
that he had provided misleading information, and we just want
to make sure were you satisfied with the presentation, do you
feel fully informed. And several of those individuals for
whatever reason whether because of the fact we have told them
about the agent or have had second thoughts, have wanted to
dis-enroll and we have worked with CMS and the regional office
the SHIP, whomever to dis-enroll those people.
In terms of the previous person's comment, I can understand
that. I think that having an out-bound telephone verification
system, an out-bound call process, 2 to 3 weeks after they
enroll which what we do is great but it doesn't go the whole
way. We think it needs to be done in conjunction with the in-
bound telephone verification enrollment system. And that is
when the beneficiary actually is at the conclusion of the
appointment with the licensed agent the broker asks if he may
use the beneficiary's phone and they call an enrollment
specialist in the plan. The enrollment specialist goes down a
very detailed questionnaire to try to tease out the fact that
the beneficiary isn't fully informed and if any of these
answers appear not to be the fact that--not to be the matter,
actually, we actually will end it at that point. But what we
will do is say please, give the call back to the broker, the
telephone back to the broker and we will explain at this
particular point we don't think the person is fully informed.
It is not good to have someone that is not fully informed in
our plan.
Mr. Walden. So are you doing that now with each enrollment?
Mr. Bailey. Well, actually we were ready to roll this out.
Mr. Walden. OK.
Mr. Bailey. And then we participated and we let the
enrollment freeze.
Mr. Walden. Right.
Mr. Bailey. This was absolutely directed towards brokers so
while this halt is here, and we are determining other ways to
strengthen our broker management processes, we are actually
looking at this again to strengthen. But, yes, we are ready to
roll this out and we are excited about this.
Mr. Walden. OK. Mr. Soistman, is your company looking at a
similar sort of proposal?
Mr. Soistman. On the post verification process?
Mr. Walden. Or the in-bound, as the agent is sitting there
counseling somebody if they say it is, I have been on those
solicitation calls, not insurance but like to my alma mater and
if you agree to give they say, OK, now I have got to put my
supervisor on the line and they confirm that I have agreed to
give. It sounds like that sort of process is what Mr. Bailey's
company is looking at. Is that something that would work for
yours?
Mr. Soistman. Congressman, we have some concerns about that
process. More specifically, we are concerned that there may be
a feeling of intimidation to have the agent and the Medicare
beneficiary going through that process together and we really
feel that it would be best when the agent leaves to then
confirm and we can ask a series of questions and do it in a way
that is far less intimidating.
Mr. Walden. Well, let me because my time is about expired.
I was troubled by some of the comments from the last panel of
the delays in being able to get a live body on the line to get
an answer. And my frustration level is pretty short when it
comes to trying to get consumer help. And I am curious, maybe
Ms. Olson, can you tackle that one for me? What needs to happen
there that seems like a real abuse.
Ms. Olson. If I was queen of CMS or whatever----
Mr. Walden. Well, if you have got the answer we may convene
that.
Ms. Olson. We need a lot more very well-trained customer
service people, poly-lingual, if possible. I tell my people if
they are calling Medicare, 1-800-MEDICAR, have a cup of coffee
there. Be ready, it is going to take some time.
Mr. Walden. Right.
Ms. Olson. And be prepared. The Medicare Advantage plans
and the prescription drug plans have caused huge numbers of
questions. In Multnomah County, OR, we have 47 different
Medicare Advantage plans available. That is absurd. If I was
running things I would standardize the Medicare Advantage plans
and that was spoken of earlier. I think that makes sense the
same way we did with the Medicare Supplements a number of years
ago and I was involved in that. This population in particular,
spends a lot of time on the phone and they are very
deliberative and they have a lot of questions. And if an agent
can't answer them properly, first of all that agent shouldn't
be selling the product. Second of all those people need to have
instant access to somebody who can answer their questions.
Mr. Walden. And is that the responsibility of Medicare or
Medicare and the plans?
Ms. Olson. It could be the State SHEBA programs. It could
be the insurance plans.
Mr. Walden. Does anybody track how long you wait on the
call, and does that matter to anybody?
Ms. Olson. Yes, I do.
Mr. Walden. Who, but I mean as a consumer, do I know I have
been on, I think, phone companies that sort of thing, they tell
you how long you have waited but there internally they are
regulated on that, too, by their regulators. Does anybody
regulate you all on that from the plans, do you regulate it?
Mr. Soistman. I am happy to field that question.
Mr. Bailey. Yes, we have. We do have performance measures
and metrics on the quality and of the phone calls that we make
with members. I don't have them all at my fingertips. One is
the average speed of answer.
Mr. Walden. Got it.
Mr. Bailey. Another one is the waiting time. I am not sure
exactly----
Mr. Walden. Are those data published anywhere for consumers
to know about?
Mr. Bailey. I believe, we share those with CMS. I can
verify that.
Mr. Walden. OK. They are going to be on our next panel, I
guess, so thank you. Thank you. I have way over-extended my
time. Thank you very much.
Mr. Stupak. Let me follow that up, will you provide those
numbers to us, the waiting time and quality there? If you
provide them to CMS could you provide them this committee?
Mr. Bailey. Absolutely. And what is very interesting is the
person that runs our call center is extremely proud of those
because we always exceed the CMS metrics, so when I tell him
that the committee has asked for this, you will get it post
haste, sir.
Mr. Stupak. OK. This is not your agents waiting but your
clients waiting.
Mr. Bailey. No, at WellCare employee we have a call center
that this year we will probably handle 10 million calls and we
are proud of what they do and he will be very proud to submit
the data and probably come on a plane and walk you through it.
I know him very well.
Mr. Stupak. OK. And the last panel told us we would almost
need a direct line to Starbucks just to stay awake on the
phone.
Mr. Soistman, can you also provide those waiting time for
us?
Mr. Soistman. Mr. Chairman, it would be my please to do
that.
Mr. Stupak. OK. Thanks. Thanks, Mr. Walden.
Mr. Burgess, for questions.
Mr. Burgess. Thank you, Mr. Chairman. I can assure you that
I was monitoring the time that Mr. Walden went over.
Let me ask our witness from Coventry, Mr. Soistman, you
heard the testimony from the previous panel on the problems
that the young lady with multiple sclerosis had when she went
to the emergency room with the Coventry plan. Now, if you
proactively do these phone calls back to the people who signed-
up for the program, a lot of times they aren't going to know
that they have a problem with the product that they have
purchased until they go to use it. So what, do you have any
quality assurance mechanism in place at your company that makes
certain that at the point of utilization that the beneficiary
who enrolled in the plan understands what they got what they
understood they were getting? Because it seemed to be a real
disconnect there regardless of how she was signed-up and
whether or not it was, in fact, proper to sign her up, the
disconnect between what the beneficiary thought they had and
what they actually had?
Mr. Soistman. Congressman, let me begin by answering it
this way that the product that Ms. Williams and Ms. Royal both
were enrolled in was not really the right product given their
Medicaid status, the Medicare/Medicaid status. And that is
getting to the root cause which we took steps in early January.
Mr. Burgess. Well, let me just ask you this. Do you think
proactively you have gone back and now identified all of those
potential problems and corrected the defects in plan coverage
that might have been given to a dual-eligible?
Mr. Soistman. I don't think we have corrected all of the
defects meaning that there are still individuals enrolled who
are dual-eligibles into these plans. We have reached out to all
of the dual-eligibles who were associated with agents who
misrepresented the product to make sure that they knew they had
an opportunity to switch plans if they so choose.
Mr. Burgess. Was that only with a telephone call because
again we heard testimony from the last panel that maybe a
telephone call may not be a sufficient way to conduct that
interview?
Mr. Soistman. Presently, our process is by telephone. If we
are not able to reach the beneficiary by telephone we then
provide a letter.
Mr. Burgess. I don't want to ask this question but I have
to. You don't outsource that calling, do you?
Mr. Soistman. No, Congressman.
Mr. Burgess. This is someone who speaks English at least,
we heard about the problem of needing multiple, somebody who is
poly-lingual but at least the person who is calling them back
is calling from an American call center?
Mr. Soistman. It is and I am pleased to say, Congressman,
that we built that call center in your home State of Texas.
Mr. Burgess. Then I know they are getting good service. I
appreciate that. Well, how--for any of the three up there--do
you account for the predatory practices actually beginning in
the first place? What was the driver there? I mean you are
talking about, Ms. Olson, you are talking about $4 a
beneficiary, is that enough to drive the kind of practices that
we are seeing that caused people to go door-to-door to sell
these policies?
Ms. Olson. Well, $4 per month per client. And, of course,
that is one plan I am selling. I have one plan that I sell
where I don't get paid anything per month. But I think the
initial rules were not as clear as they could have been and I
think in the big rush to get particularly the Medicare
Advantage with prescription drug plans up and a number of us
talked about this before it happened, that we would see a rush
towards people signing-up as many clients as they possibly
could, either on the agent level or on the company side.
Mr. Burgess. Let me ask you this. We heard testimony from
the panelists who were the State insurance commissioners or
deputy commissioners and I have in the evidence binder under
tab 10 I have a letter from the Department of Insurance from
the State of North Dakota, Mr. Poolman, and the opening
paragraph, or the second paragraph, as part of MMA 2003, the
regulation of Medicare Advantage plans and the companies
marketing them was given to CMS. And the letter goes on to
state that maybe that is not the best way to deal with that.
Does anyone on the panel here agree or disagree with that
statement that, perhaps, this authority should be given back to
the State commissioners or do you feel that the State
commissioners lack the authority that they need to be able to
adequately provide the oversight?
Ms. Olson. Well, since my license or one of my licenses is
and my real license is through the State of Oregon, I mean I
have real license elsewhere but the State of Oregon can take
away my license. And at that point I would lose my errors and
omissions insurance and in theory could not get my license back
again.
Mr. Burgess. So the amount of regulatory authority that the
State commissioner at least in Oregon possesses should be
adequate for oversight to prevent this problem from happening?
Ms. Olson. On the agents' side, I would think.
Mr. Burgess. Mr. Bailey, you alluded to the fact that there
was an agent arrested in Georgia, is that correct?
Mr. Bailey. Yes, we had a situation where we have a process
in place to check the validity of the applications when they
come in and the system showed us that some of the applicants,
in fact, were deceased. We conducted a quick investigation. We
terminated the broker. We contacted the Georgia Department of
Insurance and they conducted their own study. We helped them on
the study and they actually, that agent and his accomplice were
arrested, not sure of the disposition now, but they were
arrested.
Mr. Burgess. Did that State insurance commissioner, let
me--did they have the authority to do what they needed to do
under the laws as it is written?
Mr. Bailey. I have not personally spoken to the
commissioner. I can assume that they probably have revoked this
gentleman's license and the fact, and actually he was
incarcerated for some period of time. What we have found in
terms of, it wasn't so much a case of do we need additional
regulation, it was more from what we have seen over the last 25
or 26 weeks since we have been in the program, it is more an
instance of communication and coordination. We have reached out
to a lot of DOIs to share information with them. A lot of the
DOIs have reached out to us to share information with us just
like the case for Mississippi where they advised us of the
gentleman that was working without--well, they had suspended
his license. What we have found we need to bridge the
coordination, the communication gap, we need some tools. We
need some help. And we think the national database where anyone
can go in and put information in, and anyone even an insurance
commissioner can check not only what is happening outside of
his or her State boundaries, but also within the State. We
think that coupled with something else that I want to mention
also, which was a national, mandatory standardized training
program for any agent that is going to sell Medicare products.
We have a lot of companies selling Medicare products. We
probably all have what we consider to be good training
materials. We would like to see something up to the next level,
work under the auspices of CMS and have this out and have----
Mr. Burgess. Does that function not already get taken care
of by the individual States in their Department of Insurance?
Mr. Bailey. I am sure that training of the agents is
absolutely essential to the States' requirements but we are
talking about a consistent and mandatory training to at least
guarantee that every agent has a certain level of Medicare
across the country and that is what----
Mr. Burgess. Well, shouldn't you as a company demand that
of any agent that sells policies on your behalf?
Mr. Bailey. We provide our own training not only on
Medicare but also on our particular products. But we would like
to make sure that we are just taking advantage of any best
practices and taking advantage of the expertise of CMS in
helping to develop this training program and then making it
mandatory.
Mr. Burgess. OK. Thank you. And, Mr. Chairman, I see that I
have used all of the additional time that Mr. Walden used.
Mr. Stupak. And let us go another round I think if you have
some more questions we can go a little bit more with this
panel.
Ms. Olson, you are an independent or representing the
independent insurance agents, correct?
Ms. Olson. And I am an independent insurance agent.
Mr. Stupak. So you sell more than just Medicare Advantage
policies all kinds, home, casualty, life, the whole thing.
Ms. Olson. Oh no, health insurance, life insurance.
Mr. Stupak. OK.
Ms. Olson. Long-term care.
Mr. Stupak. So what is the benefit of having an insurance
agent acting as the middle person, if you will, between an
insurance company and a consumer?
Ms. Olson. There are a number of reasons. First of all, we
know those products very well. In some cases I designed the
products that I am now selling, when I was working for the
insurance companies. So I know the products and that is why I
finally cut it down to about seven products.
Mr. Stupak. Seven products or seven companies?
Ms. Olson. Seven companies.
Mr. Stupak. OK.
Ms. Olson. I take the time, I can also translate what the
paper says into a real life situation for them. I also make
sure that all of my clients know that no matter what the
problem is if they have a problem with their health insurance,
they call me. I have trained most of the agents in our State
about Medicare so I get a lot of referrals from other agents.
And I know most of the people who work for the insurance
companies I use.
Mr. Stupak. Where is the breakdown here, Medicare Advantage
and last year we have had all these reports and that is the
reason we are having these hearing.
Ms. Olson. Right.
Mr. Stupak. I hear the company saying it is those darn
agents. On you, on behalf of the agents saying no, the
companies aren't doing it right. Where is the breakdown here?
When you, when the last panel, Mr. Harrell, says they have had
more complaints on Medicare Advantage then they do on Hurricane
Katrina claims in Mississippi so where is the breakdown?
Ms. Olson. That is outrageous. We need to have the
standardized training. Standardized training for all agents who
are selling Medicare-related products. And that is what the
National Association Health Underwriters and the American
Health Insurance plans has put together. CMS has already
approved it to be used.
Mr. Stupak. Well, it is a guideline. What CMS is suggesting
so far has been guidelines. Where is the enforcement of a
guideline? What happens if you violate the guidelines?
Ms. Olson. Refuse to appoint agents who have not taken that
training.
Mr. Stupak. All right. And then the company should pay for
the training then I take it?
Ms. Olson. Not necessarily.
Mr. Stupak. You want CMS to pay for the training?
Ms. Olson. No, I would pay for it.
Mr. Stupak. OK.
Ms. Olson. I have paid for it.
Mr. Stupak. Well, all right. Let me ask you this, one
policy you said you received no money, then one policy you said
you received $4 a month and you spent a lot of time. You said
you have never been to Vegas.
Ms. Olson. Well, I have been to Vegas, but I haven't been
paid to go to Vegas.
Mr. Stupak. Then maybe that is where you make a living
because I see one policy with no money and another one $4 a
month. To even qualify for that plasma TV at $1,400 you would
have to, at $4 a month, you would have to go 360 months and
that is 30 years. If you sell it to a person who is 62 you have
to make sure they live to 92. Is that right?
Ms. Olson. Exactly. Right.
Mr. Stupak. So doesn't these incentives like tab No. 8
about the plasma TV, isn't it really incentives for agents to
cut corners to get that commission to move things along faster?
Ms. Olson. I certainly hope not.
Mr. Stupak. But isn't that the purpose of it really?
Ms. Olson. I am sure it can be interpreted that way.
Mr. Stupak. Well, do you really think that it is the gift
of deadlines. No, I didn't think so either. The seven companies
you sell for do you get prizes? Do you qualify for prizes and
trips?
Ms. Olson. Sometimes they are available I just never get
there.
Mr. Stupak. OK.
Ms. Olson. I don't do enough business with one company to
qualify for something like that.
Mr. Stupak. Well, what other suggestions are there other
then--let me ask you this. CMS rules currently allow cross-
selling. Would you support a rule banning cross-selling?
Ms. Olson. Cross-selling?
Mr. Stupak. Of policies met, I go from Mr. Bailey's to Mr.
Soistman's, I am cross-selling two different insurance
products.
Ms. Olson. Well, only during enrollment or if you moved out
of the service area could you do that.
Mr. Stupak. Well, I don't know. That is why we are trying
to see if this cross-selling is a good idea or not. It is two
different products.
Ms. Olson. You mean to voluntarily move a client's
insurance so that you get like the big first year commission or
bonus?
Mr. Stupak. Commission, yes.
Ms. Olson. Well, that is extremely unethical.
Mr. Stupak. Well, so you wouldn't----
Ms. Olson. Not if it wasn't right for the client.
Mr. Stupak. If we banned it that would be OK?
Ms. Olson. For me it would be fine.
Mr. Stupak. OK. Because it is that first year where you
make your money, right?
Ms. Olson. Not necessarily. If you are just going to make
$4 a month for the life of the contract you just want them to
live a long time.
Mr. Stupak. Sure, but aren't some of them set-up that if
you switch over in the first year there is a pretty good bonus?
You are not aware of that?
Ms. Olson. It has to be the right thing for the client.
Mr. Stupak. Right, I realize all that. I am saying what is
the reward for doing it in cross-selling? Isn't that the
benefit, you get a----
Ms. Olson. It can be very definitely.
Mr. Stupak. OK. Thank you.
Mr. Whitfield, questions?
Mr. Whitfield. Just one other question.
Ms. Olson, obviously there are some unscrupulous sellers
out there and that has been demonstrated quite clearly. But you
are a professional in Oregon and you have a reputation of
selling health insurance plans for people and I am sure you
have experienced some situations where you sold a plan that
turned out not to be the right plan and a person came back and
you have to deal with that to dis-enroll and so forth. So as a
person who is in the community and a part of that community, I
mean you have every incentive to be sure that they get the
right plan, don't you?
Ms. Olson. Absolutely.
Mr. Whitfield. I would think it would be a major headache
to sell somebody the wrong plan and they don't have the
coverage, I mean they would be pretty upset.
Ms. Olson. Very definitely. It saves me a lot of time to do
it right the first time.
Mr. Whitfield. Right. And what we have to be sure of from
our next panel is that CMS is providing the tools to make sure
that everyone has the incentive to do it right the first time,
so, thank you.
Mr. Stupak. Nothing? All right. Then we will move on to our
third panel. Thank this panel for their time and efforts and
testimony today and answers. Thank you.
Our third panel is Ms. Abby Block, director of the Center
for Beneficiary Choices at the CMS Centers for Medicare and
Medicaid Services, the Honorable Kim Holland, commissioner at
Oklahoma Insurance Department, and Mr. Jim Poolman,
commissioner at the North Dakota Insurance Department. We will
have those witnesses come forward in a minute here.
It is the policy of this subcommittee to take all
testimony under oath. Please be advised, witnesses have the
right under the rules of the House to be advised by counsel
during testimony. Do any of our witnesses wish to have counsel
present during their testimony? Ms. Block? No. Ms. Holland? Mr.
Poolman? OK.
All right. Then I will have you rise and raise your right
hand and take the oath, please.
[Witnesses sworn]
Mr. Stupak. Let the record reflect the witnesses have
indicated in the affirmative. They are now under oath. We will
start with opening statements. We will start with Ms. Block, if
you would please for your opening statement.
STATEMENT OF ABBY BLOCK, DIRECTOR, CENTER FOR BENEFICIARY
CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES
Ms. Block. Mr. Chairman and members of the subcommittee, I
am pleased to be here today to discuss oversight issues related
to Medicare Advantage organizations, particularly with regard
to marketing.
As you know, Medicare Advantage offers an affordable, high-
value choice in comprehensive health care coverage for all
Medicare beneficiaries. I am also pleased to report that this
year beneficiaries selecting an MA plan are receiving on
average $1,032 per year in benefits over and above what
original Medicare provides.
Enrollment in growth in one type of MA plan, the Private
Fee-for-Service plan, has increased precipitously since the
Medicare Prescription Drug Improvement and Modernization Act of
2003. In fact, more than 500,000 beneficiaries have enrolled in
Private Fee-for-Service plans from August 2006 to February
2007.
However, specific features of the Private Fee-for-Service
product are unfamiliar to many beneficiaries and providers and,
therefore, a certain level of confusion with this product is
coming to light as more people enroll. Responding to emergent
concerns, CMS is building on lessons learned and information
gathered during 2006, to strengthen its oversight of Private
Fee-for-Service plans, and all Medicare organizations in 2007
and forward into 2008, ensuring beneficiaries' protections
begins early. Before a plan sponsor is allowed to participate
in the MA program it must submit an application and secure CMS
approval. CMS conducts a comprehensive review of all
applications to verify compliance with a broad range of
important protections. Any deficiencies in these areas must be
cured before a plan is able to go to the next step of benefit
and bid review.
Second, upon successful completion of the application or
renewal process, plans submit benefit packages and bids for CMS
review and negotiation. Through the bid review process CMS
assesses MA benefit packages to ensure that they are not
discriminatory against certain classes of beneficiaries. In the
CMS actuarially equivalence test on the benefit packages and
cautionary arrangements reviews, benefit packages must be
valued as equal to or better than Medicare Fee-for-Service.
Once plans have secured application and bid approval, CMS
continually collects and analyzes performance data submitted by
plans' internal systems and beneficiaries. The recently
released 2008 call letter to plans serve as a central guidance
document to help plans implement new CMS policies and
procedures. Baseline measures for performance measures outlined
in the call letter will be used for the MA plan report card
available this fall, in time for the next open enrollment
period. And, by the way, we monitor, and those report cards
will include information on wait times at call centers, at plan
call centers. All of that is very carefully monitored and there
are requirements in place. CMS' monitoring of the performance
metrics is supplemented by routine and targeted audits of MA
plans which is outlined in more detail in my written testimony.
In addition to regularly scheduled audits, a new contract,
a risk assessment tool, will be available in the fall of 2008,
and will be used to identify organizations and program areas
representing the greatest compliance risks to Medicare
beneficiaries and the Government in order to focus audits in
the highest risk areas.
On May 21, 2007, to further support compliance efforts, CMS
issued a proposed rule strengthening its current oversight
requirements and penalties for Medicare Advantage plans and
part D prescription drug plans. Among other things, CMS
proposed new steps to help expose potential fraud or misconduct
through mandatory self-reporting of compliance violations as
well as modifications to the current rules to expedite our
ability to take compliance actions, including non-renewal of
contracts.
On May 25, 2007, CMS released guidelines that include
specific policies for Private Fee-for-Service MA plans designed
to protect beneficiaries from inappropriate sales tactics.
Those guidelines say that Medicare Advantage organizations must
monitor the activities of employees and contractors engaged in
the marketing of plans to potential enrollees to ensure that
their activities comply with applicable Medicare and other
Federal health care laws.
We are working with State insurance department officials
and the National Association of Insurance Commissioners to
address problems with marketing. Part of this effort includes a
Memorandum of Understanding that allows States and CMS to share
information more easily.
As an update to the number in my written testimony, I am
happy to say that to date 27 States, Puerto Rico, and the
District of Columbia, have signed the MOU. These agreements are
critically important because State insurance departments,
indeed, retain jurisdiction over licensed brokers and agents in
their States. And CMS requires that plans use only licensed
agents.
Therefore, States can act on information they receive from
CMS or any source to control any inappropriate or illegal
marketing practices of their licensees.
We are particularly concerned about reports of marketing
schemes designed to confuse, mislead or defraud beneficiaries
and have taken very vigorous action to address these issues.
Ninety-eight Medicare Advantage plans are on a corrective
action plan to fix identified problems and allow enhanced
monitoring of their conduct.
In a further step to target marketing violations, CMS
recently announced that seven health care organizations have
agreed to voluntarily suspend the marketing of Private Fee-for-
Service plans. CMS will certify that a given plan is ready to
resume marketing when the plan has demonstrated to us that it
has the systems and management controls in place to meet all of
the conditions specified in the CMS marketing guidance I
mentioned earlier.
Again, this guidance includes strong measures such as
verification of the beneficiaries intent to enroll, documented
training of marketing agents and brokers, and inclusion of a
clear disclaimer statement in all Private Fee-for-Service
marketing materials that tells beneficiaries what a Private
Fee-for-Service plan is and what it is not.
We are putting in place a rigorous process to review
organizations' actions to determine when CMS can certify that
the plan is ready to resume marketing. Violations after plans
resume marketing will be subject to the full range of available
penalties which include suspension of enrollment, suspension of
payment for new enrollees, civil monetary penalties, and
termination of the plan's participation in the Medicare
Program.
This voluntary suspension action is meaningful and
precedent-setting and indicates how important good practices
are to both CMS and the industry. The organizations included in
the voluntary suspension represent 90 percent of Private Fee-
for-Service enrollment. Their willingness to forego significant
enrollment opportunities indicates their determination to work
with CMS to root out problems and do the right thing for
beneficiaries.
CMS has also developed Standard Operating Procedures to
implement our long-standing policy that any beneficiary who
believes he or she was enrolled in a plan without consent, or
through misinformation may contact 1-800-MEDICAR to request
prospective dis-enrollment assistance, or work through a CMS
regional office to request assistance with retroactively dis-
enrolling from the plan, and returning to original Medicare, if
desired. CMS is committed to taking whatever steps are
necessary to ensure that people with Medicare are not misled or
harmed by MA plans or their agents. As evidenced by our recent
actions, we are putting beneficiaries first and we will
continue to do so.
Thank you and I look forward to taking any questions.
[The prepared statement of Ms. Block follows:]
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Mr. Stupak. Ms. Holland, opening statement, please.
STATEMENT OF KIM HOLLAND, COMMISSIONER, OKLAHOMA INSURANCE
DEPARTMENT
Ms. Holland. Thank you, Mr. Chairman, distinguished
members. My name is Kim Holland and I am the Oklahoma State
insurance commissioner. I appreciate the opportunity to speak
to you today about an issue for which I care deeply, the safety
and security of our citizens promised by the availability of
quality insurance products and services. I want people to want
to be insured.
Since the roll-out of Medicare Part D the Oklahoma
Insurance Department has responded to an unacceptable number of
complaints caused by the inappropriate and sometimes fraudulent
marketing of Medicare Part C and part D products by certain
insurance companies and their agents. We have received hundreds
of complaints from confused, unhappy and frightened citizens
who have been misled or deceived during a sale.
The creation of new and affordable programs under Medicare
Part C and D means that many of our Nation's seniors no longer
have to choose between a meal or their medication. But it is
this reality of pressing demand for coverage and a growing
supply of available plans, 54 in Oklahoma alone, that
necessitates adequate regulatory oversight. Yet, the MMA's
preemption of State's authority to oversee the licensure,
market conduct and financial solvency of Medicare Part D,
agents and carriers, and the marketing practices of Medicare
Advantage insurers has allowed insurers to exploit this
exemption from regulatory oversight.
Our seniors are plagued by aggressive and frequently
misleading advertising, agent high-pressure sales tactics, and
a lack of responsiveness if not outright neglect from their
insurance companies. A letter I received just this month from a
senior caregiver offers a poignant illustration of the
problems. I quote directly from her correspondence. ``WellCare
employees are stationed on every other corner in the
neighborhood. They are approaching people in the street
including our residents to sign them up for WellCare services.
They do this in a very aggressive manner. They do this without
establishing the care needs of the current providers of the
patients.'' She writes that 90 percent of their residents
suffer from chronic illnesses and that their ability to form
competent judgments is impaired. She also writes that she sent
a letter expressing her concerns to WellCare in October 2006,
and has received no response. She told me personally that
WellCare is not facilitating dis-enrollment in a timely manner,
that patient care is being denied, and that her CMS regional
offices manager did not know how to address the problem.
We recently completed a targeted market conduct examination
of Humana, one of America's largest providers of Medicare
Advantage plans in response to an escalation in number and
nature of unresolved complaints involving the sales tactics of
agents selling their products. When finally completed the
examination exposed chronic and blatant disregard for State
regulation and for senior policyholders and the inadequacy of
Federal oversight. That examination focused on the current
limits of our authority regarding Medicare Advantage and part D
products, insurers' obligation to properly license their sales
agents.
However, the full scope of market conduct oversight
customarily performed for the benefit of insurance consumers
goes well-beyond licensing. Insurance departments monitor
compliance of an insurer's handling of complaints, claims
practices, marketing and sales materials and advertising,
producer licensing as well as appointed agent training and
conduct, underwriting and rating practices, policyholder
service, and company operations and management. Our rigorous
examination standards ensure that consumer protections are kept
at the forefront of an insurer's enterprise, equally balanced
with their profit motives.
Our inability to assert this balance has resulted in a
travesty of security for Medicare beneficiaries. Since my
recent testimony to the Senate, I have met with Humana
executives who outlined new processes and heightened compliance
oversight of their Medicare business stream. Well, we are still
in disciplinary discussions with the company and will continue
to monitor their activities closely. I am somewhat encouraged
by their actions to devote increased resources to assist and
protect their Medicare plan policyholders.
However, the problems identified with Humana are certainly
not unique to them but rather a glaring example of what is
occurring on a regular basis as companies pursue market share
in an unregulated environment. Insurance departments across the
Nation are receiving complaints of a similar nature from
seniors, their families and caregivers against many insurers,
including other dominant players such as WellCare, Coventry,
Secure Horizons and Pyramid Life.
While I applaud CMS for their recent efforts to compel
insurer's to refrain from marketing activities while they
attempt to address the issues I raised in my Senate testimony,
their efforts are simply no substitute for the 136 years of
State-based insurance regulation that has resulted in our
sophisticated and expansive and incomparable understanding of
insurance company financials, operations and marketing.
Congressmen, we put this expertise to use everyday acting
promptly and judiciously on behalf of the industry and the
consuming public. Given our seniors chronic and continuing
complaints against insurers why are State insurance departments
vast resources being denied those in need to their continued
peril?
I opened my remarks by telling you that I want people to
want to be insured. It is a challenging proposition but an
important goal in insuring the financial security of Oklahomans
and the future prosperity of my State. But I can tell you that
my progress is severely impeded when my public is fearful that
their insurer or their insurance product is bad. When they
begin to question whether going without coverage is safer and
less costly then simply going without.
Today I ask again that Congress un-encumber me from the
unproductive, unnecessary and dangerous preemptions that expose
my citizens to the neglect and abuse I have described, and let
me do my job. I am not interested in territorial squabbling or
finger-pointing. I am interested in working together for the
benefit of my folks back home. If government cannot protect our
most vulnerable, our children, our frail, our disadvantaged and
our elderly, of what use are we? Let us do our job.
Thank you very much.
[The prepared statement of Ms. Holland follows:]
Statement of Kim Holland
Good morning Mister Chairman and members of the Committee.
My name is Kim Holland and I am the Oklahoma State Insurance
Commissioner, an elective office I have held since January
2005. I appreciate the opportunity to speak to you today about
an issue for which I care deeply: the safety and security of
our citizens promised by the availability of quality insurance
products and services. I want people to want to be insured.
The primary obligation of my agency is to protect our
insurance consuming public. I, and my staff of over 150
dedicated individuals, take this obligation very seriously. Our
office fields over 60,000 calls to our consumer assistance
division each and every year, plus an additional 12,000 calls
to our federally funded SHIP program. We license and regulate
the activities of over 80,000 agents, monitor the financial
solvency and market conduct of over 1,600 insurance companies
and my twelve member law enforcement team responds to more than
700 insurance fraud and abuse allegations each year. We act
swiftly and aggressively on behalf of all policyholders against
any carrier, agent or broker that has acted unlawfully or
otherwise not delivered on their promise to policyholders.
Since the roll-out of Medicare Part D in November of 2005,
the Oklahoma Insurance Department has responded to an
unacceptable number of complaints caused by the inappropriate
and sometimes fraudulent marketing of Medicare Part C and Part
D products by certain insurance companies and their sales
producers. We have received hundreds of complaints from
confused, unhappy and frightened citizens who have been mislead
or deceived during a sale.
The passage of the Medicare Modernization Act has made
access to affordable medications possible for 20 percent of
Oklahoma's population, a large measure of whom depend solely on
social security for their livelihood. The creation of new and
affordable programs under Medicare Parts C and D means that
many of our Nation's seniors no longer have to choose between a
meal or their medication. But it is this reality--a pressing
demand for coverage and a growing supply of available plans (54
in Oklahoma alone!)--that necessitates adequate regulatory
oversight.
Yet the MMA's preemption of states' authority to oversee
the licensure, market conduct and financial solvency of
Medicare Part D agents and carriers and the marketing practices
of Medicare Advantage insurers has allowed them to exploit this
exemption from regulatory oversight. Our seniors are plagued by
aggressive and frequently misleading advertising, agent high
pressure sales tactics, and a lack of responsiveness if not
outright neglect from their insurance company. A letter I
received just this month from a senior care-giver offers a
poignant illustration of the problems. I quote directly from
her correspondence: ``WellCare employees are stationed on every
other corner in the neighborhood. They are approaching people
in the street, including our residents, to sign them up for
WellCare Services. They do this is a very aggressive manner.
They do this without establishing the care needs or the current
providers of the patients''. She writes that 90 percent of
their residents suffer from chronic illness and that their
ability to form competent judgments is impaired. She also
writes that she sent a letter expressing her concerns to Well
Care in October of 2006 and has received no response. She told
me personally that her CMS regional office's regional manager
did not know how to adequately address the problem. While the
sales activities have relented somewhat, she says that WellCare
is not facilitating disenrollment in a timely manner and
patient care is being denied.
As you are aware, we recently completed a targeted market
conduct examination of Humana, one of America's largest
providers of Medicare Advantage plans, in response to an
escalation in number and nature of unresolved complaints
involving the sales tactics of agents selling their products.
When finally completed, the examination exposed chronic and
blatant disregard for state regulation and for senior
policyholders, and the inadequacy of Federal oversight.
That examination focused on the current limits of our
authority regarding Medicare Advantage and Part D products--
insurers' obligation to properly license their sales agents.
However, the full scope of market conduct oversight customarily
performed for the benefit of insurance consumers goes well
beyond licensing. Insurance Departments monitor compliance of
an insurer's handling of complaints; claims practices;
marketing and sales materials and advertising; producer
licensing as well as appointed agent training and conduct;
underwriting and rating practices; policyholder service; and
company operations and management. Our rigorous examination
standards ensure that consumer protections are kept at the
forefront of an insurers' enterprise--equally balanced with
their profit motives. Our inability to assert this balance has
resulted in a travesty of security for Medicare beneficiaries.
Since the presentation of my testimony in May, I have met
with Humana executives who outlined new processes and
heightened compliance oversight of their Medicare business
stream. While we are still in disciplinary discussions with the
company and will continue to monitor their activities closely,
I am somewhat encouraged by their actions to devote increased
resources to assist and protect their Medicare plan
policyholders.
However, the problems identified with Humana are certainly
not unique to them, but rather a glaring example of what is
occurring on a regular basis as companies pursue market share
in an unregulated environment. Insurance Departments across the
Nation are receiving complaints of a similar nature from
seniors, their families and caregivers against many insurers,
including other dominant players WellCare, Coventry, Pacificare
and Pyramid Life.
While I applaud CMS for their recent efforts to compel
insurers to refrain from marketing activities while they
attempt to address the issues I raised during my testimony to
the Senate Special Committee on Aging, their efforts are simply
no substitute for the 136 years of state based insurance
regulation that has resulted in our sophisticated and expansive
and incomparable understanding of insurance company financials,
operations and marketing. Congressmen, we put this expertise to
use every day, acting quickly and appropriately on behalf of
the industry and the consuming public. Given our seniors'
chronic and continuing complaints against insurers, why are
State Insurance Department's experience, assistance and
protections being denied those in need at their continued
peril.
I opened my remarks telling you I want people to want to
be insured. It's a challenging proposition, but an important
goal in ensuring the financial security of Oklahomans and the
future prosperity of Oklahoma. But I can tell you that my
progress is severely impeded when my public is fearful that
their insurer or their insurance product is bad; when they
begin to question whether going without coverage is safer and
lest costly than simply going without.
So today I ask again, that Congress unencumber me from the
unproductive, unnecessary, and dangerous preemptions that
expose my citizens to the neglect and abuse I have described
and let me do my job. Allow me to fully deploy the substantial
and immediate resources of my office to protect the interests
of all policy-holders, regardless of their age and regardless
of the private health plan they purchase. I am not interested
in territorial squabbling or finger-pointing. I am interested
in working together for the benefit of my folks back home. If
government cannot protect our most vulnerable--our children,
our frail, our disadvantaged, our elderly--of what use are we?
Let's do our job. Thank you.
----------
Mr. Stupak. Thank you for your testimony.
Mr. Poolman, the North Dakota insurance commissioner, your
opening statement please, sir.
STATEMENT OF JIM POOLMAN, COMMISSIONER, NORTH DAKOTA INSURANCE
DEPARTMENT
Mr. Poolman. Thank you, Mr. Chairman, and good afternoon
and good afternoon, Mr. Whitfield, and members of the
committee. I am pleased to appear before you today and truly
appreciate the opportunity to articulate my concerns about MMA
and specifically abuse in the Medicare Advantage plan
marketing. And thanks also for, hopefully, taking action. My
name is Jim Poolman. I am the elected commissioner in the State
of North Dakota. I took office in January 2001, and given that
length of tenure in office of seeing firsthand the
implementation of the Medicare Modernization Act, I sit before
you today to urge you to restore the regulatory authority over
these programs and consider using the current Medigap insurance
regulatory model as the model going forward.
And I do want to say that I believe in Medicare
Modernization Act and I believe in what you folks have done to
get prescription drugs under part D to the citizens across the
country. I have about 105,000 out of 640,000 that are eligible
for Medicare. Not, what I am trying to tell you is the North
Dakota experience that we have gone through in the
implementation of Medicare Modernization.
From the earliest days of the roll-out we saw widespread
confusion and frustration on the part of seniors in North
Dakota. As the roll-out progressed it became increasingly clear
that the Centers for Medicaid and Medicare Services was ill-
equipped to adequately address the conflicts that arose for
this vulnerable population. For example, our contact with
customer service staff at Medicare is typically unproductive.
Not only do they lack the answers or information we need but
they are also inadequately trained and on occasion CMS staff
members have simply hung-up the phone on beneficiaries or those
folks in our SHIP program who are trying to help beneficiaries.
Companies and agents have capitalized on the confusion
associated with the new products by using aggressive sales
practices that in my estimation are misleading at best, and
fraudulent at worst. I have examples of tactics ranging from
agents refusing the leave people's homes or giving them
misleading information to actually sending money to an
insurance company on behalf of that potential policyholder that
was not their money. We even have seniors who were switched
from traditional Medicare to an MA plan simply because they
signed their name on the entrance of a mass enrollment event.
In addition, we have an example of a woman who was switched
from one plan to another plan without consent only to find that
she does lack coverage but the company she was switched to had
no record of her enrollment. The back story is incredible. CMS
confused her with another person of the same name who may have
switched plans. This woman has made multiple complaints to CMS
and to the company and still her situation is not resolved. She
is paying for her drugs out-of-pocket on a very limited Social
Security check. That is not the goal of Congress when setting-
up MMA.
Even though CMS has long been aware of the conflicts and
bugs in the system they have not been resolved and they are
worse. Instead of becoming more responsive, CMS has adopted a
``do not call us'' attitude. That requires us to spend
countless hours on the telephone with them only to be referred
to the company, specifically, for help.
The ramifications of this situation are varied. From a
State senior health insurance counseling program standpoint my
staff has fielded over 3,800 client contacts. And of those
contacts, 75 percent of them are dealt with enrollments or dis-
enrollments of Medicare Advantage plans. The data tells us
this, nine out of 10 clients that contact our SHIP program were
the result of some type of problem with the Medicare
Modernization Act, either part D or Medicare Advantage. Only
one out of ten client contacts are basic Medicare/Medigap,
prescription assistance, long-term care, Medicaid questions
that are SHIP staff or SHIP counselors were answering prior to
MMA. Three out of four problem-type calls involved Medicare
Advantage plans that are related to enrollments or dis-
enrollments, strongly suggested inappropriate sales and/or
inefficient administration of the policies. By comparison, one
out of three problem calls involving part D plans are related
to enrollments or dis-enrollments.
From our perspective the situation in untenable, it becomes
difficult to do the good work that we desire to help our senior
population. As insurance commissioner my main duty is to
protect insurance consumers. However, under the current
circumstances seniors in North Dakota are being shortchanged by
CMS and the current MMA. Clearly, these companies need more
rigorous oversight and CMS is not prepared or seemingly unable
to do the job. With all due respect, I find it highly unlikely
based on our experience during this situation that CMS will be
able to do better as Ms. Norwalk suggests in a recent press
release.
Today I again urge you to restore and expand State
insurance regulatory oversight over these programs and consider
the regulation of Medicare Supplement insurance as a potential
model. By adopting the Medigap model consumers will still have
a variety of plans to choose from that will be standardized.
Competition will remain strong as in the current Medigap market
of which I believe in. State regulators would be able to
adequately safeguard consumers.
The bottom line is if State insurance regulatory is
restored all of the stories you have heard about abuse of
marketing tactics would be prohibited by State law, monitoring
questions by State insurance regulators, and controlled by
State-based insurance regulation. By restoring State authority
you, in fact, untie my hands and allow me to take whatever
steps appropriate to safeguard the seniors in my State.
Mr. Chairman and members of the subcommittee thank you
again for holding this hearing and this issue is one that
affects not only seniors in my State but obviously all of your
States. And I hope that the information that I have shared with
you and that the information that we will share in a give and
take on questions will be helpful. Together, Mr. Chairman, we
can work together to fill in the gaps that will protect seniors
across the country.
[The prepared statement of Mr. Poolman follows:]
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Mr. Stupak. Thank you and thank you for your testimony.
Now, we will go to questions now. Ms. Block, if I may start
with you. I would assume that CMS does not approve what
happened at Judiciary House as best practices, correct?
Ms. Block. We totally, totally disapprove.
Mr. Stupak. OK. Then I know you have worked with industry
but has CMS taken any steps to alert Medicare beneficiaries of
potential deceptive sales practices. Alabama is talking about
putting together a fraud alert. Ms. Healey testified about
that. But has CMS thought about doing that?
Ms. Block. Actually, we have put together fraud alerts and
we----
Mr. Stupak. But sent them to the beneficiaries?
Ms. Block. Those alerts, yes, those alerts are sent out.
They are sent out through the SHIPs and through other outreach
programs. So, yes, we have alerted beneficiaries.
But in addition to that I would say that it is really
incumbent upon us working in collaboration with the States and
I would really like to stress that CMS appreciates the
opportunity to work collaboratively with the States. We value
what the States have to----
Mr. Stupak. Well, these two commissioners would like
Congress give them the authority through CMS to regulate the
policies within their own States. Do you have any objection to
that?
Ms. Block. Yes, I do.
Mr. Stupak. You object to that?
Ms. Block. Yes, I absolutely do.
Mr. Stupak. Why would you object to that?
Ms. Block. I object to that because this is a Federal
program funded by Federal money.
Mr. Stupak. Right, Medicare, Medigap----
Ms. Block. Unlike Medigap which is privately paid for, each
beneficiary pays their premium, Medicare Advantage is highly
subsidized, it is a Federal program and it needs uniform
consistent standard Federal oversight.
Mr. Stupak. Then why don't we have standards in the
policies that can be offered and for practice for the agents
who sell these? Why don't we have that Federalized and standard
so the policy whether it is in Oklahoma or North Dakota are the
same and beneficiaries would know exactly what they are
receiving then?
Ms. Block. That is a question that has been debated from a
policy perspective for many years. I used to run the Federal
Employees Health Benefit.
Mr. Stupak. Right. I am well aware of that.
Ms. Block. I did that for many years. We in that
organization looked carefully and at one time considered
proposing standardized benefits. We decided after careful
analysis that that was not the best way to run a consumer
choice program. And I don't believe that it is the best way to
do it in the Medicare Program either.
Mr. Stupak. How many insurance companies are selling these
Medicare Advantage policies? Do you know?
Ms. Block. In terms of the total number of insurance
companies, I always have trouble with this number because there
are plans and then there are sponsoring organizations.
Mr. Stupak. OK. Is there about 150, is that about right?
Ms. Block. Yes, I would say that, that is probably about
it.
Mr. Stupak. OK. One 150 and you said you have 98 corrective
actions going right now with these 150 companies? That is like
two-thirds.
Ms. Block. There are significant numbers of corrective
actions but not all of them, by the way, are marketing-related
by any means. Corrective actions can be put in place for many
different reasons.
Mr. Stupak. But there is a concern that CMS is looking at
two-thirds of these 150 companies that are selling policies
about the delivery of the product, right?
Ms. Block. Well, again, many of those corrective action
plans come about through routine audits, through focused
audits, and they cover the whole range of compliance with all
of CMS' requirements. And, in fact, the fact that we have that
many corrective action plans in place, means that we are
carefully monitoring these plans----
Mr. Stupak. Or it means it is not----
Ms. Block. That there is oversight----
Mr. Stupak. Or it means they aren't working real well.
Mr. Stupak. Right or it also could mean that it doesn't, it
is not working as well as intended to be.
Let me ask you this, has CMS ever imposed a monetary
penalty on a plan for any marketing abuses?
Ms. Block. Not for marketing abuses specifically----
Mr. Stupak. So the civil penalties that suggest----
Ms. Block. Sanctions against plans for marketing abuses.
Mr. Stupak. Well what are the sanctions? What would be a
sanction?
Ms. Block. A sanction would be freezing marketing, freezing
enrollment. We did impose those penalties against a plan in
Florida.
Mr. Stupak. OK. So if you freeze it they still are allowed
to get the benefits of that monthly payment and things like
this, correct?
Ms. Block. For existing members, yes.
Mr. Stupak. Well, where is the penalty then?
Ms. Block. Well, the penalty is that they can't increase
their membership.
Mr. Stupak. You imposed a penalty because they did
something wrong and if I have a captive audience here and I am
frozen, I am still being rewarded for my deceptive practices
because I have this group here that has the problems, right? So
where is the penalty here?
Ms. Block. Let me say this. The ability to impose penalties
and the penalties that can be imposed range depending upon the
offense, and so----
Mr. Stupak. Sure. My problem is I never see CMS issue a
penalty.
Ms. Block. When you impose civil monetary penalties you
need to demonstrate very specifically, and by the way those
penalties have to be approved by the Justice Department.
Mr. Stupak. Sure.
Ms. Block. You have to be able to demonstrate real harm to
beneficiaries so you don't impose those kinds of penalties, you
can't impose them for what would be considered to be
administrative-type violations. And that is where corrective
action plans are used. In order to impose a civil monetary
penalty and we did that by the way for the late delivery of
ANOX. We imposed civil monetary penalties on a number of plans
and we did that because we believed that there was, in fact,
and could justify to the Justice Department that there was
direct harm to beneficiaries because by not receiving the
information they needed timely they could not make an
appropriate decision in terms of their choice of plan for the
next year.
Mr. Stupak. Civil monetary penalties are not approved by
the Department of Justice. Department of Justice just really
checks to see if they might interfere with their open
investigation, right? You don't have to get Justice Department
approval?
Ms. Block. My understanding is I have to go through the
Department of Justice every time I want to impose that kind of
penalty.
Mr. Stupak. To make sure you are not interfering with a----
Ms. Block. That is a time-consuming process.
Mr. Stupak. Oh, I agree.
Ms. Block. What I want to do, believe me, is fix these
problems just as quickly as I possibly can. I want to address
every problem and I want to fix it and I want to fix it right
now.
Mr. Stupak. Well, but let us be clear here. Justice
Department doesn't approve or have to approve the civil
penalties. All Justice Department wants to know is whether or
not you are interfering with an ongoing investigation.
Ms. Block. I am sorry but if I want to be exact they have
to review them.
Mr. Stupak. OK. Are there any enforcement in the so-called
guidelines you are putting forth, CMS putting forth, these
guidelines? What is going to be the sanction if you violate
these guidelines?
Ms. Block. The sanctions will be appropriate to violations
and I guarantee you that they will be appropriate to the
violations if there are violations.
Mr. Stupak. Any sanctions on the company that Judiciary
House here that we had today? Are you considering any sanctions
against that company?
Ms. Block. That company is under a corrective action plan.
All of those corrective action plans remain in place and
further, by the way, all investigations also remain in place.
Mr. Stupak. My questions was sanctions.
Ms. Block. Criminal action against any of those agents,
those things are in no way impeded and there are criminal
penalties that can be taken against agents who are----
Mr. Stupak. Judiciary House, the one we heard from today,
any sanctions, any criminal penalties, any recommendations made
by CMS on that example we had today?
Ms. Block. We have learned very recently of that particular
incident and the plan as far as I know did everything it needed
to do. It terminated its relationship with those unscrupulous
agents. That is what you would expect would happen. The
relationship was terminated. Those people are no longer working
for that organization.
Mr. Stupak. OK. My time is way over but, what would you do,
Mr. Poolman and Ms. Holland, if Judiciary House occurred in
your State and if you had the authority? What would you do?
What sanctions do you have?
Mr. Poolman. Well, clearly, what would happen is we would
go after the agent which I think happened in the District of
Columbia, but the interesting thing about this is that there is
a contractual relationship between an agent and a company and
if the regulatory process was set-up just like any other
company. Let us say it is a life insurance company selling an
annuity and somebody was duped into buying an annuity we could,
therefore, go back and make the company make the transaction
right to begin with. And that is the authority we don't have
right now. We don't have any market conduct authority to hold
those companies accountable. If we did, then the company would
be held accountable in making the transaction right, getting
that particular person or persons in this case, dis-enrolled
from the program and enrolled in the right kind of program and
holding that company accountable in doing so.
Mr. Stupak. Thank you. Ms. Holland. Sure.
Ms. Holland. If I may add something to that, I referred to
in my testimony an exam that we conducted on Humana because of
people's complaints.
Mr. Stupak. Right.
Ms. Holland. We actually found that in the course of that
examination that there were 68 agents selling products in our
State who were not licensed. They had no appointments but again
as Commissioner Poolman indicated that we were unable to
address that with them other than to tell them we expected
their agents to be appointed. The examination actually
identified numerous other failures on the part of the company,
things that we would have addressed immediately had we had the
authority.
And so I brought that examination to Ms. Block personally
in March. I was interested to hear today that she indicated
that they require agents to be licensed by their companies, so
we certainly will be pursuing those agents, and I hope now that
I know that CMS will be pursuing actions against those
companies, Humana, specifically, for permitting 68 agents to be
selling products in my State without a license.
Mr. Stupak. Thank you. I am way over on my time.
Mr. Whitfield, for questions.
Mr. Whitfield. Ms. Holland and Mr. Poolman, both of you in
your testimony made it quite clear that you did not feel that
CMS was adequate in protecting the citizens of Oklahoma and
North Dakota, respectively as it relates to Medicare products.
But Ms. Block, in her testimony talked about these Memorandums
of Understanding with, I think she said 26 States and Puerto
Rico. Has North Dakota entered into a Memorandum of
Understanding with CMS and Oklahoma also? And in her testimony
she, maybe I didn't hear her correctly but I understood her to
say that this Memorandum of Understanding gives the States the
complete authority to go in and deal with problems with
insurance agents. Is that not correct?
Mr. Poolman. Congressman, no, that is not correct. Being
very frank it is basically as I understand it an information
sharing agreement. There is no absolute downside to signing a
Memorandum of Understanding with CMS when we have a
responsibility in my State, a constitutional responsibility to
protect the people of North Dakota. So to share information and
in getting that information is incredibly important to us.
Mr. Whitfield. All right.
Mr. Poolman. To be able to effectively regulate the agents
out of it, it gives us no authority on the company side to be
able to hold those folks accountable.
Mr. Whitfield. Ms. Holland.
Ms. Holland. Yes, just as an example the MOU came about it
because of our concerns about being able to address agents
within our jurisdiction. It was the NAIC that really initiated
the conversation with the MOU. That sat on the desk of,
completed on the desks of CMS until I called and said I had an
examination report and I would not deliver it until I had that
MOU. And that spawned the delivery of the MOUs for the States
that received them. But up until that time we had been waiting
for some months for that MOU which the States had signed, those
that participated, and still had not received that information.
But again all it does is, as Commissioner Poolman said is
agrees to an exchange of information.
Mr. Whitfield. Well, you heard the commissioner from or
deputy commissioner from Mississippi saying that in his State
it was unclear whether or not they had the legal authority to
terminate a license. What about in North Dakota and Oklahoma,
what is your decision on that?
Mr. Poolman. Because we do not have authority over the
product, if you were to pull a license for the sale of a
product that you don't have regulatory authority over there is
some confusion. And if we pull a license, Congressman, there is
an appeals process that those folks can go through, in fact,
they can go to the district court and then the Supreme Court to
appeal that. So we have to have very solid legal ground.
In some of the cases that you have heard today I think we
could eventually go after those folks and we are in North
Dakota, by they way. We have open investigations in going after
those agents that are unscrupulous in this regard. And we think
we have the authority when it comes to agents but it has not
been tested yet, and we want to make sure it is very clear
authority.
Mr. Whitfield. And you, same thing, Ms. Holland.
Ms. Holland. We are pursuing it aggressively. Quite frankly
I have an anti-fraud unit on, actually a law enforcement team
on staff and I send my law enforcement team out to pursue any
misbehavior, certainly.
Mr. Whitfield. Well, Ms. Block, you have heard these
concerns expressed by the insurance commissioners in these
States, do you feel like they do not have a right to terminate
the licensing of these insurance agents?
Ms. Block. I believe they have an absolute right. We
strongly encourage them to do that and we would like to work
collaboratively with them to identify and track-down and pursue
everyone who is acting inappropriately or illegally in any
State.
Mr. Whitfield. OK. So then what is the problem, why have we
not been able to work together? Or have we been able to work
together? Mr. Poolman.
Mr. Poolman. Well, Congressman, it is not a matter of not
working together, it is a matter of where does the authority
lie to protect the people in my State and other States? And as
I have said to you before we believe we have authority when it
comes to agents, but the problem is, is making the consumer
right and whole in the end of a transaction that has gone
wrong. And if we have the ability to regulate from a market
conduct standpoint, from a advertising standpoint, those types
of things, we then have some leverage with the company to make
them market right in our State.
Mr. Whitfield. You and Ms. Holland then would be objecting
to the preemption of the State's authority in this area? Do you
interpret that the Federal act that established these Medicare
Advantages preempts State law in this regard?
Mr. Poolman. Congressman, before Medicare Modernization Act
we had regulatory authority over benefits, appeals processes,
rates, all of those types of things. Now we have basically
regulatory authority over some licensing and solvency, and that
is it. Nothing related to market issues.
Mr. Whitfield. So your authority has been diminished
significantly in your view.
Mr. Poolman. Yes, sir.
Mr. Whitfield. OK.
Ms. Holland. And I think an example of that was one of the
gentlemen today when you--from the carrier that was defending
his--the agent population say, reminding everybody that those
were independent agents not his agents, which I thought was
such a disingenuous comment because quite frankly an agent is
always an agent of the company by licensure, by contract. But
under the MMA, appointments, that critical link that actually
creates that contract, have been discontinued.
So indeed we have free agents out there where we can
address the agent but if it is an unlicensed agent I can't find
that person unless I do an examination on the company.
And if I try an examination on the company, like I did
with Humana, they are digging their heels in and screaming
preemption every opportunity they get.
They have. It was through our persistence and insistence.
Mr. Whitfield. Yes. Well, normally I think the American
people when they think about authority, they fear Federal
authority more than State authority. You take the IRS, the FBI,
the Justice Department, but in this instance it appears that
CMS is either not being aggressive in dealing with this, the
fear is not there, in this particular instance. But with that
my time has expired, Mr. Chairman.
Ms. Holland. Well, may I just respond to that in one
respect because I have all due respect for Ms. Block and her
comment about really wanting to do something. I think that is
sincere. I think it is a reality of resources. I don't have a
CMS representative in my State. If one of my beneficiaries
calls from Tahlequah, OK and needs help I can send one of my
law enforcement officers out there in an hour to see what is
going on. I have to call CMS and they are not going to come to
Tahlequah, OK and deal with my senior population.
I think that is what we are trying to suggest to you is
that we have got the resources on the ground that have been
there. We have been dealing with these issues on these
products, health care, whatever the products are, for again,
136 years. What has changed? The idea of it being Federal
dollars is another area that appears disingenuous to me it is
taxpayer dollars. And those seniors are paying those taxes and
those seniors are paying premiums. And I am paying those taxes.
So we should all be working together.
Mr. Stupak. Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman. Ms. Block, let me
just ask you the statement was made by, I don't remember which
commissioner, it may have been, in fact, made by both
commissioners that it seemed that CMS was unable or unwilling
to do the job as far as enforcement. How would you respond to
that statement?
Ms. Block. CMS is perfectly willing to do the job and has
every intention of doing the job. And again I will suggest that
the best way to do the job is through a partnership of the
Federal Government and the States that have a critical role to
play and we would like to strengthen that partnership and do
the job effectively together.
Mr. Burgess. I think we just heard in some of the very last
statements made by the commissioner from Oklahoma about, they
are there. They are on the ground. They have the enforcement
officials who are on duty and at their beck and call, so I
guess I would ask the question why not use their offices as a
force multiplier for CMS in order to reign in unscrupulous
behavior.
Ms. Block. But we do. I don't know how I can stress to this
committee that the States have jurisdiction over the licensed
agents in their States. And to address the issue that Ms.
Holland raised we absolutely require that all agents be
licensed and where there is a violation of that we have
mechanisms to deal with that with the sponsoring organization.
Mr. Burgess. Now, can anyone on the panel provide this
committee with documentary evidence where that licensing
authority did not exist, an enforcement action followed as a
result of that? Or that those licensing obligations were
abrogated and an enforcement action was taken on behalf of
either CMS or the State Department of Insurance?
Ms. Holland. No, I think we acted within our authority to
address the licensure issues but licensure, the specific
licensure of any one agent is intrinsically tied to their
relationship with the company. And the current MMA has severed
that tie at least in terms of our ability to tie that agent
back to the company and compel the company, through sanctions
and otherwise, for getting the behavior that we want.
Mr. Burgess. Ms. Block, you are nodding your head, you
agree with that statement?
Ms. Block. Yes, I am. Ms. Holland is addressing an issue
that is generally referred to as appointments.
Mr. Burgess. I am sorry.
Ms. Block. And I thoroughly understand the issue.
Ms. Holland. Appointments.
Ms. Block. Appointments and what we are proposing, and we
would hope to move very quickly, in order to be able to deal
with this, is that we will require every plan selling Medicare
Advantage products, particularly Private Fee-for-Service
products, to provide to CMS the names of all of their licensed
agents and all of their agents need to be licensed. We will
then in turn make those names available to every State on
request so that we will develop a centralized, presumably, Web
site access. That would be the easiest way of doing it, to put
it on a Web site so that every State insurance commissioner
will be able to look at that Web site and will be able to see
the name of every agent who is working for every company
selling in their State. That is something, it is not in place,
yet.
Mr. Burgess. It is not, OK.
Ms. Block. But it is going to be in place very soon, I
guarantee.
Mr. Burgess. All right. Well, it has been 2\1/2\ years
since, I guess a year and a half, since the implementation of
the part D program and it is probably time that that occurred.
How is the Medicare Advantage Program different from say
the multi-state insurance company that would be governed under
the ERISA statutes. Is it a similar situation with the
preemption? Is it a parallel universe that the Medicare
Advantage plans occupy? How does that work?
Ms. Block. They are not governed under ERISA, they are
governed under Medicare statute and regulation, and that is
why, in my oral statement and I believe I go into even more
detail in my written statement, I describe the very rigorous
review process that every plan and every plan's benefit package
goes through at CMS because CMS has the authority to oversee
these plans and before a plans benefit package is accepted, it
is reviewed by CMS and would go through that process every
single year.
Mr. Burgess. Let me just interrupt you because the chairman
is not going to be nearly as indulgent with me going over as he
is with other members of the committee.
Do you have similar problems, let me just ask the
commissioners do you have similar problems with ERISA plans
that you have with the Medicare Advantage plans?
Mr. Poolman. Congressman, I think that is a great question
and it is a great point. Let me give you an example, if a
consumer calls my office and they are under a self-funded plan
that has been created by a business and they can't get their
claim paid? I have to essentially refer them to the Department
of Labor who administers ERISA. I have no authority to go
enforce that company or force the insurance company that is
administering that plan to pay that claim even if it was right
to be paid. It is very similar to what is happening here. And
it is a black hole of regulation because those folks get no
response from the DOL either.
Mr. Burgess. Yes, I think I fell into that black hole as a
practitioner once.
Mr. Poolman. Yes, you did.
Mr. Burgess. But do we see the abuses in the ERISA system
that we have been talking about here this afternoon?
Mr. Poolman. As, Congressman, as more companies are getting
away from fully insured plans because of the standardization of
those plans and creating their own benefit plans we are seeing
more abuses in that regard and we are having to shuffle them
off to the Federal Government and they are essentially calling
you.
Mr. Burgess. Is there, and that is fine, I will take those
calls. Is there a risk of a learning curve with people
observing what is happening with the Medicare Advantage plans
that are having a spill-over effect to the ERISA plans, the
race to the bottom, if you will?
Mr. Poolman. The difference, Congressman, is that ERISA
plans are created by business owners and I would sense a much
less vulnerable population then the folks buying typical
Medicare Advantage plans because they are seniors that are in
many cases duped. On the ERISA side it is a business owner
setting-up a plan and they are far more sophisticated
purchasers when buying a self-funded plan for their business.
Mr. Burgess. OK. Let me just ask one last question now I
know in the State of Texas, I believe the insurance
commissioner is an appointed position by the governor, and you
are both elected, is that correct? If I were to want to vote
for either one of you in the primary election would I vote in
the Democratic or Republican primary?
Ms. Holland. One of each, Congressman.
Mr. Burgess. One of each.
Mr. Poolman. You have a bipartisan representation here. I
am a Republican and my colleague is a Democrat.
Mr. Burgess. I was just trying to figure out a way to ask
that question delecately.
Mr. Poolman. I am very open with that and that, well, I
will let it go at that.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Stupak. Ms. Holland, Mr. Poolman, when Ms. Block was
talking about this Web site with the insurance agents on it, is
that going to solve the problems here?
Ms. Holland. I think there is a couple of things here.
First of all, the National Association of Insurance
Commissioners maintains a National Insurance Producer Registry,
the NIPR.
Mr. Stupak. It is already there.
Ms. Holland. It has every licensed agent on it, it is
notified of terminations and so forth. It is accessible to
companies and regulators. It is not accessible to the general
public, however, anyone can call us and we can access that
information. We all share information through State-based
regulatory systems, as well, which requires companies to send
us an appointment, when they appoint an agent.
Mr. Stupak. Right.
Ms. Holland. An appointment is necessary to get a license.
If that appointment is cancelled for any reason the company has
to report that and why. In the absence of that appointment
process again, we won't have that information.
Mr. Stupak. And the Medicare Modernization Act took away
the appointments, right?
Ms. Holland. Right, it does not require an appointment, no.
The problem and the only thing that I would suggest in the
example that Ms. Block gave is the 68 agents who were doing
business in my State wouldn't be on her report, and I still
wouldn't know about them. It was only through the process of my
investigation and examination of that company that that came to
light.
Mr. Stupak. But if we put the appointment rule back in.
Ms. Holland. That would work. It would help tremendously.
Mr. Stupak. And would that also give you some jurisdiction
or control over these policies that are being sold? It doesn't,
it is only the agents, right?
Ms. Holland. Well, no, it does allow us to hold the company
accountable for that.
Mr. Stupak. For their agent which you cannot do right now.
So really to solve this issue, you really need, No. 1, the
appointment rule back so you have some control over the agent
with company. Second, you have to have some control over
product being sold.
Ms. Holland. Indeed.
Mr. Stupak. If CMS put forth a Web site that listed oh,
corrective actions, and Ms. Block mentioned corrective action
plans that they are looking at right now for 98 companies,
complaints, dis-enrollment data, would that be helpful?
Ms. Holland. I think any information about company
activities and actions is helpful to regulators. We are always
interested.
Mr. Poolman. Mr. Chairman, I think any of that information
as Commissioner Holland said is important. We have some
questions about the corrective action plans and the oversight
function of CMS and who is going to make sure that are they
going to report back to anybody that who has taken what steps
to make sure and what happens if they are not? What is the
process that they are going to go through? That will come
through some communication, I am sure, with CMS, but we are
hoping that there is vigorous enforcement of self-corrective
action plans that is out there. And if not, what is the, then
the flip side of that in terms of punitive intentions against
the company that is not following their own corrective action
plan?
Mr. Stupak. So, Ms. Block, why wouldn't CMS put this
information, CMS currently pulls information on nursing homes,
home health agencies, so beneficiaries and their families have
the information about staffing levels, health outcome measures,
and sanctions have been post. So why doesn't CMS then put the
corrective action plans on the Web site, complaints, dis-
enrollment and this information available and not just for
these insurance commissioners but for all seniors? Why wouldn't
we do the same thing?
Ms. Block. We are in the process of doing that, sir, as we
speak.
Mr. Stupak. All right. That would be a good first step. How
about this idea about the appointment rule, would you be
opposed to giving them back they appointment rule on their MMA,
that the commissioners asked for?
Ms. Block. There has been a great deal of discussion about
that and it is still under discussion, but let me say I need to
clarify because I think what I am proposing was not completely
understood. What I am proposing is that we would post the name
of every agent who is selling attached to the name of the
company for whom they are selling. So, Ms. Holland would be
able to make the connection between John Jones and WellCare or
Humana or whatever other companies John Jones is selling for.
So she would have that information and she would know that John
Jones, if she is having a problem with him, is an agent for a
particular company. That is the information that we are talking
about making available.
Mr. Stupak. Would that solve the problem, Ms. Holland?
Ms. Holland. Well, an independent agent can sell product
from any number of companies.
Mr. Stupak. Sure.
Ms. Holland. If you are not required to obtain an
appointment and then subsequently not licensed, they could be
carrying out a portfolio of any number of companies and have no
attachment to any one company until such time as they presented
an application for processing. At that time, that is backwards.
Mr. Stupak. OK.
Ms. Block, will you make available those 98 action plans
that you are currently under right now that you have proposed?
Ms. Block. Yes.
Mr. Stupak. OK. And you will make them available to the
committee then forthwith?
Ms. Block. Yes, sir.
Mr. Stupak. OK. Mr. Whitfield, did you have some questions?
Mr. Whitfield. Mr. Chairman, I don't have any questions,
but Mr. Poolman, in his testimony, enclosed some letters that
were sent to Humana regarding a specific issue and in order to
just complete the record we have copies of the response from
Humana to Mr. Poolman and just ask Humana's consent that they
be placed in the record to complete the record.
Mr. Stupak. OK. My only concern, Humana, in the letter is
that dated June 2, 2006, said they only had 44 residents of
North Dakota and Commissioner Poolman's testimony on page 6, I
believe, you mention there are 130 seniors from North Dakota.
So I am just trying to figure out the discrepancy.
Mr. Whitfield. Well, I am not speaking for the truthfulness
of the document.
Mr. Stupak. Oh.
Mr. Whitfield. I am simply saying that he asked the
question and we are putting the document in so that people
could.
Mr. Stupak. You don't mind that it goes on record.
Mr. Poolman. Mr. Chairman, that is fine with me.
In all due fairness to the company they deserve the
opportunity to respond. In this case there were two separate
privacy incidents, in breach of privacy, and I think my
testimony refers to the aggregate not both instances
separately.
Mr. Stupak. Very good. OK. Without objection then that will
be entered in the record.
Any other questions for this panel? If not, let me thank
the panel, the commissioners and Ms. Block, for their time and
their testimony and their answers to our questions are very
enlightening. I ask for unanimous consent that the hearing
record will remain open for 30 days for additional questions
for the record. Without objection the record will remain open.
I ask unanimous consent that exhibits 1 through 19 from our
document binder be entered into the record. Without objection,
documents will be entered in the record. That concludes our
hearing. Without objections the meeting of the subcommittee is
adjourned.
[Whereupon, at 1:52 p.m., the subcommittee was adjourned.]
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