CMS Regulates Private Health Plan Marketing Reluctantly and Inadequately, Congress Must Protect Americans with Medicare from Plan Marketing Abuse, Consumer Groups Report

Overpayments to Private Insurers at Root of Deceptive Marketing

The Bush Administration is unwilling to hold Medicare private health plans accountable for their sales representatives’ marketing practices, or to take the necessary steps to stop the plans’ widespread marketing abuse, according to a new report by California Health Advocates and the Medicare Rights Center.

Congressional action and state insurance department oversight are needed to ensure that older adults and people with disabilities do not fall prey to the unscrupulous marketing tactics of Medicare private health plan sales agents, the consumer groups report.

“It’s like the Wild West when it comes to monitoring and oversight of Medicare plans, but in this scenario, no one wants to be the sheriff,” said Clare Smith, president and CEO of California Health Advocates, a Medicare advocacy organization that coauthored the report.

After advocates, state insurance departments, the media and members of Congress reported that people with Medicare were being deceived by sales agents to enroll in private health plans, the Centers for Medicare and Medicaid Services (CMS) eventually responded with new requirements but they fall short, the consumer groups report in “The Reluctant Regulator: CMS’s Response to Marketing Misconduct by Medicare Advantage Plans.”

CMS has yet to punish any private plan through civil or monetary penalties when learning of marketing misconduct by agents, nor has the agency addressed the financial incentives, for the plans or the plans’ sales agents, which drive the marketing abuse. CMS’s efforts to address the marketing abuse became public after three Congressional hearings were recently held on the issue and it was learned that seven companies voluntarily agreed to temporarily stop marketing their private fee-for-service product.

“Overpayments to private plans undermine Medicare and should be stopped. People with Medicare are hurt, not helped, when health care dollars fail to get a dollar of care for each dollar paid,” said Robert M. Hayes, president of the Medicare Rights Center, a national consumer service organization that also authored the report.

“If we are paying private plans public dollars to deliver health coverage, older Americans are entitled to a government that protects the public interest from the exploitative conduct of certain private interests,” Mr. Hayes said.

Medicare currently pays private health plans an average of $1,000 per year more than it would cost to care for someone in the same geographic areas in Original Medicare. Overpayments to private health plans are greater, averaging 19 percent more that it would cost to care for someone in Original Medicare.

Agents have been found to lure people into Medicare private health plans when they only wanted to buy a Medicare stand-alone drug plan; “poach” people with Medicare from another private health plan or Medigap plan; and sell products to people with both Medicare and Medicaid, increasing out-of-pocket costs unnecessarily.

“The Reluctant Regulator: CMS’s Response to Marketing Misconduct by Medicare Advantage Plans” discusses CMS’s new requirements for PFFS plans such as disclaimer language on the marketing materials; outbound verification calls to new enrollees by the plan; reporting of upcoming, scheduled sales presentations; and comprehensive agent training on Medicare. The report’s authors say these requirements still do not offer enough protection. For example, they do not ensure that agents will highlight the disclaimer language or refrain from continuing to misrepresent PFFS plans as Medigap supplements, nor will outbound calls conducted by plans protect individuals with cognitive impairments. CMS’s response also focuses primarily on private fee-for-service plans but marketing abuse persists in other Medicare private health plans such as HMOs and PPOs.

California Health Advocates and the Medicare Rights Center have made the following broad recommendations to address the abusive marketing that has taken place in private health plans:

  • Congress should eliminate the overpayments to Medicare Advantage plans and put payments on par with local costs under Original Medicare.
  • Congress should rescind the statutory pre-emptions that prevent states from enforcing state laws on consumer protections and the marketing of insurance products.
  • Congress should authorize the establishment of commission comprised of representatives from CMS, the National Association of Insurance Commissioners, consumer advocates and Medicare Advantage plans to develop nationwide marketing guidelines in time for the 2008 annual election period.

Other recommendations made by the groups to enact protections concerning the marketing of Medicare private health plans and Part D drug plans include:

  • Banning the sale of PFFS plans to people with both Medicare and Medicaid unless plans can prove they offer more comprehensive benefits than those available through the state;
  • Disclosing corrective actions;
  • Standardizing broker commissions; and
  • Eliminating the lock-in provision.

“The Reluctant Regulator: CMS’s Response to Marketing Misconduct by Medicare Advantage Plans” which contains the history and types of plan marketing abuse problems, CMS’s response, and the consumer groups’ recommendations is available online at

“CMS is finally acknowledging the private plan marketing problems, but its recent actions are not nearly enough to give us confidence that our clients will be spared the harm caused by overaggressive and deceptive marketing,” said Ms. Smith.

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California Health Advocates is dedicated to Medicare beneficiary advocacy and education efforts for Californians. (

Medicare Rights Center is the largest independent source of health care information and assistance in the United States for people with Medicare (

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.