The Biden administration is cracking down on Medicare marketing

The huge rise in complaints about Medicare Advantage’s marketing has prompted the Biden administration to crack down. The Centers for Disease Control and Prevention reported more than 41,000 such complaints in 2021, double the number in 2020. Still, Medicare Advantage plans are hugely popular. More than 30 million Americans have them; about half of those eligible for Medicare.

“The Wild West” for Medicare Advantage Marketing

“In a lot of ways, it’s the Wild West when it comes to selling these products,” says David Lipschutz, associate director of the Center for Medicare Advocacy. “That leads to situations where people get enrolled [in Medicare Advantage plans] without their knowledge, without their consent, or without the proper information that should have been given to them.”

How are people enrolled in Medicare Advantage plans without consent?

They talk or meet with a third-party broker who sells the plans, they’re sold the idea that the Medicare Advantage plan they’re on is underperforming, and they end up signing up for another one. Or brokers obtain signatures inappropriately or fraudulently, says Lipschutz.

“Medicare Advantage plans engage in more competitive marketing to differentiate their offering,” said Meredith Freed, senior policy analyst for the Program on Medicare Policy at the Kaiser Family Foundation. With nearly 4,000 Medicare Advantage plans available today, she adds, “the pressure is increasing” to find new customers.

Incentives to switch and sign up

Brokers earn commissions when people purchase, renew, or switch Medicare Advantage plans (caps of up to $750 per member per year are set by the Centers for Medicare and Medicaid Services, or CMS). The sales incentives are highest when it comes to snagging entry-level players; The highest commission rates for Medicare Advantage switches and renewals are 50% of those for first-time buyers.

A study by the Commonwealth Fund research group found that although Medicare Advantage premiums fell from 2016 to 2020, agent compensation increased at a rate that outpaced inflation.

And it’s not just brokers hawking Medicare Advantage plans that are earning big from seniors. Sen. Elizabeth Warren (D-Mass.) recently released an investigative report titled “Sales Before Seniors,” which found that many Medicare Supplement or Medigap plans — purchased by people on Traditional Medicare — “offer luxury vacations and cash rewards for agents and brokers to incentivize them to direct seniors to Medigap products that may not be the best solution for their financial and care needs,” and that the incentives are undisclosed, pervasive, and minimally regulated.”

“These third-party groups have become very aggressive and creative,” said Ceci Connelly, president and CEO of the Alliance of Community Health Plans (ACHP), which primarily represents large, non-profit plans.

“During last season’s open enrollment, Medicare Advantage plans seemed to stray from fact-based marketing, and some plans were just making things up about what was covered and what wasn’t,” says Philip Moeller, author of Get what’s yours on Medicare and the Get What’s Yours columnist on Substack.

Lipschutz says his nonprofit organization has heard of savvy people calling the 800 number in a Medicare Advantage broker’s advertisement, getting registered, “and then finding out they don’t see the doctor they’ve been seeing for decades.” because that doctor is not contracted with the plan’s network.” Unlike Traditional Medicare, Medicare Advantage plans have limited networks of doctors and hospitals.

An eye-opening Senate report

Last fall, Democratic staffers on the Senate Finance Committee released a scathing report titled “Fraudulent Marketing Practices Thrive on Medicare Advantage,” in which they found that Medicare beneficiaries “are being subjected to fraudulent and misleading communications through all forms of communication (personal, television, telemarketers and robocalls).”

In some cases, the report said, people received mailings that appeared to be from the US government but were actually from Medicare Advantage plans or their agents or brokers. Others were called 20 times a day by the same agent to switch plans.

There are also TV ads featuring celebrities claiming that older Americans are missing out on benefits, including higher Social Security payments, so viewers are calling real estate hotlines.

The commercials sometimes play with FOMO, noting in disbelief that there are people who have Medicare Parts A and B (Traditional Medicare coverage for hospitals and medical bills) but not Part C. In reality, if you sign up for Traditional Medicare decide that you get Medicare Part A and B. You would only buy Medicare Part C if you wanted a Medicare Advantage plan instead of this of traditional Medicare.

The commercials usually don’t explicitly state who is sponsoring them.

“Why do you want your old clunker?”

“Some of this abusive news makes it seem like no one in their right mind would ever want Original Medicare — Original Medicare is a loser. This is the Tesla of Medicare plans. Why do you want your old bling?” says Möller. “I happen to think Traditional Medicare is a pretty good program, especially with a Medigap plan.”

Alliance of Community Health Plans agrees with Biden administration and Senate Finance report that Medicare Advantage marketing needs to be curbed, website says.

Connelly notes, “We say this because we have received so many examples from our members across the country. This is an issue that has probably been put on hold, but in the last 12 months or so it has really escalated.”

Government crackdown on Medicare Advantage marketing

Last fall, the Biden administration advised Medicare Advantage plans and brokers that it would conduct increased monitoring of marketing materials and conduct studies on “secret buyers” during the 2023 annual enrollment period.

Then it started reviewing TV ads to make sure they were compliant with CMS rules. “The plans were specifically instructed by Medicare to suppress misleading celebrity endorsements,” says Moeller. Lipschutz believes this change is “making a difference.”

In January 2023, CMS proposed rules for a comprehensive crackdown, including strengthening oversight of third-party organizations to detect and prevent the use of fraudulent marketing tactics; Limiting Use of Medicare Logo; and ending improper comparisons between Medicare Advantage and Traditional Medicare.

“There was one [ad], for example, that people could save up to $9,000 on their prescription drugs with Medicare Advantage, says Freed. “That was compared to people who don’t have any any Prescription drug coverage. So it made it seem like you were saving a lot more than you could.”

The goal of these marketing changes, according to Freed, “is to increase beneficiary protections when making plan selections and to provide them with transparent and accurate information about their Medicare choices to find coverage that meets their needs.”

Different views on the proposals

The ACHP’s Connelly was “somewhat surprised and impressed” that CMS was so quick to jump on Medicare Advantage’s marketing problems. Her group wants CMS to restructure Medicare Advantage brokerage compensation and flag agents and brokers who have opted out of many plan beneficiaries and re-enrolled them in other plans.

In a letter commenting on the government’s new proposals, the Medicare Advantage Plans Trade Group (AHIP) said some “might cause undue inconvenience to seniors and those with disabilities.” Matthew Eyles, President and CEO of AHIP, said he believes these and previous Biden administration changes would be made to Medicare Advantage marketing “create more confusion and complexity for enrollers, family members, agents/brokers and providers.”

However, Stacey Hughes, executive vice president of the American Hospital Association, told CMS, “We believe the proposed changes will go a long way in ensuring Medicare beneficiaries have equal access to medically necessary care and consumer protection.”

Moeller says that big Medicare Advantage plan providers like Humana, UnitedHealthcare, Cigna, and Aetna aren’t the most abusive of marketers. “I wouldn’t be surprised that the big players will be even bigger once the dust settles on them. They know the rules and in my experience they really try to play by the rules.”

Lipschutz expects some versions of the Biden administration’s proposed changes to go into effect this spring and into Medicare Advantage’s 2024 plan year.

“The government deserves credit for reversing regulation and starting to focus more on consumer protection in recent years,” he says. “And we will continue to push them to go further.”