Medicare Advantage Commissions

from Asclepios - Weekly Medicare Consumer Advocacy Update by the Medicare Rights Center - October 23, 2008 • Volume 8, Issue 43 Recent reports indicate that some of the major national Medicare private health plans are going to pay independent agents $500-plus per year over five years—$2,500 in total—for every new enrollee in their “Medicare Advantage” plans. The new totals are at least double the top commissions typically paid over the last couple of years—a period when people with Medicare were regularly victimized by predatory agents looking to make a quick buck. Older adults and people with disabilities were bullied or tricked into Medicare private health plans that no longer allowed them to see their doctors or that stuck them with high out-of-pocket costs when they fell ill. These new commissions are an attempt by some of the major plans to undermine efforts by the Centers for Medicare & Medicaid Services (CMS) to restrain commissions and in particular to eliminate incentives for agents to “churn”—move customers from plan to plan just to earn commissions. Many agents believe that these higher commissions actually increase incentives to churn. CMS should not allow Medicare Advantage plans to pay these commissions. The agency has broad authority, under the Medicare Improvements for Patients and Providers Act, to establish commission guidelines that create “incentives for agents and brokers to enroll individuals in the Medicare Advantage plan that is intended to best meet their health care needs.” There should be no incentive to move someone from one Medicare Advantage plan to another just to earn a higher commission. There should be no incentive to move someone from a Medigap supplemental plan to a Medicare Advantage plan just to earn a higher commission. With those twin goals in mind, CMS should establish a cap on commissions consistent with existing requirements to pay level commissions over 5 years, starting with the 2009 plan year. The cap should be set at a level that approximates current renewal rates for Medicare Advantage enrollments made in 2007 and 2008. And it should approximate Medigap renewal rates for a healthy 66-year-old, the low-cost consumer that Medicare Advantage plans target for enrollment. With those parameters, commissions would be capped at well under half the rates Medicare Advantage plans are now proposing to pay. Remember, Medicare Advantage plans are paying these commissions out of subsidies they receive from taxpayers. It is outrageous that any of these subsidies, which are supposed to pay for the health care of older adults and people with disabilities, are diverted to pay commissions to enroll people with Medicare in plans that cost taxpayers more money—$150 billion over the next ten years—than it costs to provide care under Original Medicare. Unfortunately, there is zero chance that the current administration will ban Medicare private health plans from paying commissions, just as it has opposed any effort by Congress to reduce the excessive subsidies these plans receive. For that, more comprehensive solution, we will have to wait until after the election.