HHS Investigates Medicare HMO Enrollment
The HHS Office of Inspector General has launched an investigation into whether health insurers are using "high-pressure sales tactics to push" Medicare beneficiaries into HMOs under the new prescription drug benefit, instead of basic prescription drug plans, the Chicago Tribune reports. Beneficiaries can sign up for stand-alone prescription drug coverage or Medicare Advantage plans that offer coverage for all Medicare services as well as drugs. Medicare Advantage HMOs have the added benefit of providing extra services and more coverage, but they also can restrict beneficiaries' choice of providers, according to the Tribune.
For health insurers offering the drug benefit, enrolling a Medicare beneficiary in an MA plan "can mean several times the revenue per senior than a typical drug plan," the Tribune reports. For example, in the Chicago area, Medicare pays MA plans between $700 and $800 per beneficiary per month, compared with $110 per senior per month for stand-alone drug plans, according to the Tribune.
Rep. Pete Stark (D-Calif.) said health plans are using illegal sales tactics to persuade beneficiaries to enroll in MA plans instead of stand-alone drug plans. His office said health insurers convince beneficiaries to enroll in an HMO when the seniors call to enroll in a stand-alone plan, and some seniors have said they were enrolled in an HMO when they signed up for a stand-alone plan. Stark said, "Beneficiaries are already overwhelmed trying to navigate the new law. They should not be subject to bait-and-switch tactics or other misleading marketing ploys once they have made a decision to enroll in the plan."
In response to Stark's concerns, Daniel Levinson, inspector general at the HHS OIG, said in a Feb. 8 letter to Stark that his office will work with CMS to "monitor and resolve this situation." He added that the HHS OIG will investigate "any beneficiary complaints about scenarios in which their wishes regarding participation in any plan were not followed."
According to the Tribune, the investigation is focusing on Kentucky-based Humana, which is paying sales representatives "more than double the commission" if they enroll beneficiaries in MA plans instead of stand-alone drug plans, according a recent BusinessWeek story, Starks' office said.
A spokesperson for Stark said that communications between the HHS OIG and his office have named Humana, but the investigation is targeting the entire industry.
Tom Noland, vice president of corporate communications at Humana, said the company's commission structure complies with Medicare's marketing rules, noting that commissions are based on a percentage of the premium. He added, "In each case, we explain fully the structure and benefits of the plan."
Mohit Ghose, a spokesperson for America's Health Insurance Plans, said members have ensured that brokers and agents are complying with the "marketing and compensation guidelines set forth in the regulations." CMS did not comment on the investigation (Japsen, Chicago Tribune, 2/24).
In related news, the Wall Street Journal on Friday examined how the Democratic and Republican parties are seeking to use the Medicare drug benefit to their advantage. According to the Journal, Democrats this week planned to hold more than 100 forums across the U.S. to discuss problems with the benefit "in an effort to turn what was once viewed as a major Republican health care victory into a political liability."
In addition, Democrats in close congressional races are planning to focus on the drug benefit to challenge Republican lawmakers who voted for it. The strategy is part of an effort to "tie troubles with the drug benefit to broader campaign themes that the Republicans are too cozy with big industries and that the Bush administration stumbles when responding to crises," the Journal reports.
Democrats also are focusing their efforts on changing the drug benefit to allow the government to negotiate directly with pharmaceutical companies, to legalize the reimportation of medications from abroad and to eliminate the financial penalty for beneficiaries who sign up for coverage after the May 15 enrollment deadline. At the same time, Republicans are "planning a blitz of events and mailings" in anticipation of the deadline, the Journal reports.
The Senate Republican Conference provides supportive commentary in "Daily Medicare Updates," and House Republicans are circulating newspaper articles written after Medicare's creation in 1966 highlighting problems similar to those experienced with the launch of the drug benefit this year (Lueck, Wall Street Journal, 2/24).
The New York Times on Friday examined a study released by Credit Suisse First Boston on Wednesday that found the federal government will pay the largest companies in the U.S. about $4 billion over the next four years to retain their retiree prescription drug coverage.
According to the Times, 331 of the nation's 500 largest companies currently offer retiree health plans, and the subsidy is proving "popular with big employers." The company that is expected to benefit the most from the subsidy on a percentage basis is Genuine Parts, a distributor of auto replacement parts and office profits.
The company is expected to receive $6 million in subsidies over the next four years, reducing its overall health care obligations to retirees by 62%, according to the study (Williams Walsh, New York Times, 2/24).