Turn Off the Spigot

Asclepios Your Weekly Medicare Consumer Advocacy Update - Medicare Rights Center December 4, 2008 • Volume 8, Issue 48 The Centers for Medicare & Medicaid Services (CMS) has now issued three successive sets of regulations on the commissions that Medicare private health plans pay their agents. The result: Major insurance companies will be paying $500 or more for each new Medicare Advantage enrollee in 2009, followed by five years of renewal commissions worth at least $250 per year. That means about half the average annual overpayment a Medicare Advantage plan receives per enrollee—the amount taxpayers pay in excess of what it would cost to provide care under Original Medicare—will be paid out to agents for each enrollment they secure. In 2008, the excess payment per enrollee is estimated at $986. In the past two years, it has topped $1,000. To recap: Taxpayers are paying more in subsidies to insurance companies--$8.5 billion in 2008—so that insurance companies can pay agents commissions to enroll more people with Medicare in private plans that cost taxpayers more money. Make sense? CMS’ efforts to restrain agent commissions and regulate marketing practices are akin to trying to fix a broken pipe without first turning off the water. It doesn’t work and you make a big mess. Next year Congress needs to eliminate the excessive subsidies paid to Medicare Advantage plans. President-elect Barack Obama has already targeted these excess payments as waste that needs to be cut. Congress and the new administration also need to decide how much of the subsidies paid to insurance companies should go to marketing and how much should go to medical care. One way to address that question is to require companies to use a minimum percentage of the subsidies they receive for medical benefits. CMS can also set an overall cap on the amount that Medicare Advantage plans spend on marketing. Plans that have a poor record in improving health outcomes, for example, should not be devoting taxpayer dollars toward enticing more people into plans that provide lousy care. CMS needs to set minimum benefit standards for plans, including mandating that all plans provide a comprehensive out-of-pocket limit on medical expenses. Right now, agents can earn more commission selling plans that do not offer such protection, or that set a high limit and exclude key services, than for selling plans with a low, comprehensive out-of-pocket limit. That creates perverse incentives to sell low-quality plans, even for agents who want to do the right thing.