Testimony on
Medicare Advantage and Medicare Part D Programs
by
America’s Health Insurance Plans
Before the
National Association of Insurance Commissioners
Subgroup on Medicare Private Plans
September 11, 2007
I. Introduction
I am Alethia Jackson, executive director of federal affairs for America’s Health Insurance Plans
(AHIP). AHIP is the national association representing approximately 1,300 health insurance
plans that provide coverage to more than 200 million Americans.
Our members serve most beneficiaries in both the Medicare Advantage and Medicare Part D
prescription drug programs. They have a long history of providing high quality health coverage
to Medicare beneficiaries and are strongly committed to the long-term success of the Medicare
Advantage and Part D programs. Our members also participate in other public programs and
offer a broad range of products in the commercial marketplace.
We appreciate the strong interest of the National Association of Insurance Commissioners
(NAIC) in the Medicare Advantage and Part D programs, as demonstrated by the establishment
of the NAIC Subgroup on Medicare Private Plans to participate in the ongoing dialogue among
policymakers about these programs. We are aware that the states have raised concerns about the
oversight of Medicare Advantage and Part D plans, and we believe there should be stronger
federal-state collaboration in certain areas without imposing duplicative and burdensome
regulatory structures on the programs. We also are working with the Centers for Medicare &
Medicaid Services (CMS) to strengthen federal program rules in areas that have been highlighted
by the states, including broker/agent conduct. Today, we are focusing our testimony on three
key areas:
Trends in the Medicare Advantage and Part D programs, including the significant value they
are delivering to beneficiaries;
Actions our industry is taking, in collaboration with CMS and other partners, to ensure that
beneficiaries are appropriately protected in the marketing process; and
Steps for further improving the regulation and oversight of the programs.
Before examining these issues, we want to briefly emphasize that Medicare Advantage plans and
Medicare Part D prescription drug plans have a number of unique characteristics that distinguish
them from other health insurance products available to Medicare beneficiaries.
Medicare is a national program intended to serve all beneficiaries under the same rules –
regardless of where they live – and provide the same beneficiary protections in all 50 states. The
Medicare Advantage and Part D programs allow individuals to receive their Medicare benefits
through private plans. Consistent with Medicare, Medicare Advantage and Part D programs
have a national focus, in that they provide Medicare benefits to beneficiaries in all 50 states. By
contrast, under Medicaid, each state establishes its own eligibility rules and benefit packages
within broad federal guidelines.
1
Another unique feature of the Medicare Advantage and Part D programs is that they are
supported by a combination of federal funds and beneficiary premiums. This differs from other
health insurance coverage that individuals may have, such as Medicaid, which is jointly funded
by the federal and state governments, and private insurance such as Medigap, where policies are
supported by beneficiary premiums without any federal or state funding. Additionally, the
Medicare Advantage and Part D programs also provide beneficiaries the option of choosing
multi-state or regional plans. Although these plans cross state lines, they offer the same benefits
and premiums for all enrollees.
II. Trends in Medicare Advantage and Part D Plan Participation
Recognizing the NAIC’s strong interest in protecting beneficiaries, we believe it is important to
closely evaluate the track record of the Medicare Advantage and Part D programs. The Medicare
Advantage and Part D programs offer Medicare beneficiaries a wide range of choices to meet
their varying needs and circumstances. Notwithstanding some fluctuation in the Medicare
Advantage market at the beginning of the program, following the enactment of the Medicare
Modernization Act of 2003 (MMA), there has been stability in plan choices and strong growth in
beneficiary enrollment.
To date, approximately 8 million beneficiaries – accounting for nearly 20 percent of all
beneficiaries nationwide – have enrolled in Medicare Advantage plans and are receiving
comprehensive, high quality, affordable coverage with benefits and innovative services that go
well beyond the coverage offered by the Medicare FFS program. Overall, the Medicare
Advantage program has experienced an enrollment increase of more than 50 percent since 2003.
Meanwhile, in the second year of the Part D program, approximately 24 million Medicare
beneficiaries are directly enrolled in Part D plans and another 7 million have prescription drug
coverage through an employer plan that is partially supported by the Part D program.
Surveys Demonstrate Beneficiary Satisfaction
Numerous surveys show that a large percentage of the Medicare population is pleased with the
new Part D program and the benefits it is delivering. The positive attitudes of Medicare
beneficiaries toward the Part D program are reflected in surveys sponsored by AHIP, the
Medicare Rx Education Network, the Washington Post/ABC News, AARP, Medicare Today, JD
Power and Associates, the Wall Street Journal, and the Kaiser Family Foundation.
Each of these surveys confirm that notwithstanding some implementation problems that occurred
in early 2006, a significant majority of Medicare Part D enrollees are having a positive
experience with their new prescription drug benefits. These surveys clearly show that most
beneficiaries are satisfied with the program, are saving money on their prescription drugs, are not
experiencing problems, and would recommend the program to others.
2
AHIP’s most recent Part D survey 1, conducted by Ayres, McHenry & Associates, found that 70
percent of self-enrolled beneficiaries would recommend that others sign up for the new Medicare
prescription drug benefit and that 88 percent have had no problems using the new benefit.
The success of the newly revitalized Medicare Advantage program is highlighted by the findings
of another AHIP survey 2, released in March 2007, regarding the important role Medicare
Advantage plans play in providing health security to Medicare beneficiaries. This survey found
that 90 percent of beneficiaries enrolled in Medicare Advantage are satisfied with their coverage
overall. Other findings show that a large majority of beneficiaries are satisfied with the quality
of care they receive (93 percent), the number of doctors from which they can choose (92
percent), the benefits they receive (89 percent), the coverage they receive for preventive care (87
percent), their out-of-pocket costs (80 percent), and the coverage they receive for prescription
drugs (76 percent).
This survey also shows that 35 percent of beneficiaries – including 62 percent of low-income
beneficiaries – enrolled in Medicare Advantage say they would skip some of the health care
treatments they currently receive if the option of choosing a Medicare Advantage plan was taken
away. Another 42 percent say they would pay higher out-of-pocket costs if the option of
choosing a Medicare Advantage plan was taken away.
The Value of Medicare Advantage to Beneficiaries
The creation of the Medicare Advantage program has provided valuable opportunities for seniors
and Americans with disabilities to benefit from the integrated systems of care, chronic care
initiatives, and other innovations that health insurance plans have developed to improve patient
care and enhance the overall quality of life for their members. The average Medicare beneficiary
is likely to have two or more chronic illnesses. Moreover, studies show that 23 percent of
Medicare beneficiaries have five or more chronic conditions and that these beneficiaries account
for two-thirds of Medicare spending. 3 Recognizing that many Medicare beneficiaries suffer
from multiple chronic conditions – such as diabetes, heart disease, cancer, asthma, and
depression – Medicare Advantage plans meet a critical need by offering care coordination and
management for diseases that commonly afflict these individuals.
This coordinated approach to health care delivery stands in stark contrast to the fragmented care
beneficiaries receive in the Original Medicare program. A study cited in a June 21 article 4 in the
Wall Street Journal noted that the typical Medicare beneficiary sees seven different doctors each
year, with those in the top 25 th percentile (i.e., those with the most chronic conditions) seeing an
average of 16 different doctors annually.
1
Tracking Survey of Seniors Who Self Enrolled in the Medicare Prescription Drug Benefit Program, Ayres,
McHenry & Associates, September 8-12, 2006
2
National Survey Of Seniors Regarding Medicare Advantage, Ayres, McHenry & Associates, Inc. and The Glover
Park Group, February 26 - March 2, 2007
3
Testimony by Gerard Anderson, Ph.D., Bloomberg School of Public Health, before Senate Special Committee on
Aging, May 9, 2007 .
4
How Many Doctors Does It Take to Treat a Patient?, Peter B. Bach, Wall Street Journal, June 21, 2007, Page A17
3
Recognizing the need for better coordination and early intervention, health insurance plans have
played a leadership role in developing strategies and programs to encourage prevention and
evidence-based care to improve patient care for persons with chronic conditions. Our members
are focused not only on ensuring that patients with chronic conditions live longer – but also
helping them live healthier lives, with fewer symptoms, so they can fully participate in the
activities they enjoy.
The effectiveness of these initiatives was highlighted in a recent report 5 by the California
Association of Physician Groups (CAPG), which states: ―It is the experience of more than 150
physician groups in California and the 59,000 physicians who are part of these groups that they
are able to provide better health care to their patients who are in Medicare Advantage plans than
those in traditional Medicare.‖ While discussing the specialized services that are needed for
patients with chronic conditions, the report states that ―these care management services are
possible only in the context of the MA program and are virtually non-existent in traditional
Medicare.‖
In addition to improving patient care for chronic illnesses, the Medicare Advantage program
provides many additional benefits that are not included in the Original Medicare Part A and Part
B benefits. According to CMS, Medicare Advantage plans are providing enrollees with, on
average, savings of $1,032 annually – through improved benefits and lower out-of-pocket costs –
compared to what they would pay in the Original Medicare program. 6 This translates into
aggregate savings of approximately $8 billion annually. Examples of the additional benefits
Medicare Advantage plans provide to beneficiaries include:
Protection against out-of-pocket costs: Ninety-three percent of all beneficiaries nationwide
have access to Medicare Advantage plans that provide protection against out-of-pocket costs
for Medicare-covered (non-drug) benefits of $2,500 or less. This protection is not available
in the Original Medicare program. In addition, 55 percent of beneficiaries nationwide have
access to plans with out-of-pocket limits of $1,000 or less.
No cost sharing for preventive screening: All Medicare beneficiaries have access to a
Medicare Advantage plan that does not require cost sharing for screenings for breast cancer,
cervical cancer, and prostate cancer.
Extra benefits not available in Original Medicare: Medicare Advantage plans are widely
available that provide hearing, vision, and other benefits that the Medicare program does not
offer. For example, all Medicare beneficiaries can choose from a Medicare Advantage plan
that covers hearing benefits. Over 98 percent of beneficiaries can enroll in a Medicare
Advantage plan offering preventive dental benefits.
5
The Experience of California Physicians in the Medicare Advantage and Traditional Medicare Programs,
Executive Summary, California Association of Physician Groups, June 2007
6
Keynote Address by CMS Administrator Mark McClellan before the AHIP Medicare Conference (September 11,
2006).
4
Comprehensive prescription drug benefits: Almost every Medicare beneficiary can
choose from a Medicare Advantage plan that provides protection in the Part D coverage gap.
Almost 90 percent of beneficiaries can choose a Medicare Advantage plan that provides Part
D benefits for no additional premium. In addition, CMS has reported that beneficiary
premiums for MA-PD plans are about $7 lower on average than for PDP plans in 2007, and
will average $11 lower in 2008.
Research studies indicate that these additional benefits are particularly important to low-income
and minority Medicare beneficiaries, especially those who fall just short of qualifying for
Medicaid. In February 2007, AHIP published a study 7 showing that Medicare Advantage plans
are the most popular option for beneficiaries with annual incomes between $10,000 and $20,000.
Beneficiaries in this income category generally are not eligible for Medicaid and are less likely
than higher income beneficiaries to have employer-sponsored retiree benefits – meaning that
Medicare Advantage may be their only option for comprehensive, affordable coverage.
Other key findings of the AHIP study include:
49 percent of Medicare Advantage enrollees in 2004 had incomes below $20,000;
among minority (non-white) beneficiaries in Medicare Advantage, 68 percent had incomes
below $20,000, while 70 percent of African-American and Hispanic Medicare Advantage
enrollees had incomes below $20,000; and
in areas where Medicare Advantage plans were offered, 40 percent of low-income Medicare
beneficiaries not enrolled in Medicaid or employer-based coverage chose a Medicare
Advantage plan.
These findings demonstrate that Medicare Advantage plans are important to many minority
beneficiaries and many low-income beneficiaries who cannot afford the high out-of-pocket costs
they would incur under the Original Medicare program. These vulnerable beneficiary
populations clearly benefit from the Medicare Advantage program and would be negatively
impacted if these options were not available to them.
The Value of Medicare Part D to Beneficiaries
Part D prescription drug plans are exceeding expectations by offering more comprehensive
benefits and lower premiums than were originally anticipated. According to CMS 8, beneficiaries
who previously did not have drug coverage saved an average of $1,200 in 2006 by enrolling in
Part D plans. For millions of Medicare beneficiaries – particularly those who have low incomes
with no other source of drug coverage – this coverage ensures that they receive the medications
they need at an affordable price.
7
Low-Income and Minority Medicare Beneficiaries in Medicare Advantage Plans, AHIP, February 2007
8
Centers for Medicare & Medicaid Services, Part D Medicare Prescription Drug Benefit Fact Sheet, January 2007
5
According to a 2007 report 9 by IMS Health, Medicare Part D enrollees who previously had no
drug coverage paid an average of 60 percent less for each prescription drug in 2006 than they
had paid the previous year. Those who previously had other drug coverage received average
savings of 17 percent on each prescription through their new Part D plans.
Plan sponsors are offering a range of prescription drug plans with high quality coverage, many of
which go well beyond the minimum requirements of the MMA. Rather than establishing a one-
size-fits-all benefits package, the Part D program creates incentives for plan sponsors to design
different benefit packages that address beneficiaries’ needs with respect to cost, coverage, and
convenience. As a result, beneficiaries in all 50 states have the option of choosing at least one
Part D plan that covers a portion of the costs in the coverage gap. In 41 states, beneficiaries have
at least one MA-PD option with coverage in the gap and a zero Part D premium 10.
Presented with these options, the vast majority of beneficiaries have selected benefit packages
that differ from the minimum requirements set by the MMA. CMS data show that the standard
defined benefit was selected by only 19 percent of beneficiaries in stand-alone prescription drug
plans and by only five percent of beneficiaries in Medicare Advantage plans with prescription
drug benefits last year8 . All other beneficiaries are choosing plans that offer enhanced benefits
or alternatives to the standard benefit.
The value offered by Part D plans also can be seen in the lower-than-expected premiums that
beneficiaries are paying. CMS recently announced 11 that the average Part D premium paid by
beneficiaries in 2008 will be approximately $25 per month. This is roughly 40 percent less than
the original estimate of $41 per month for 2008. Beneficiary premiums in 2006 ($23) and 2007
($22) also are significantly lower than the original estimates.
The Value of Competition in Medicare
In discussing the success of the Medicare Advantage and Part D programs, it is important to
recognize that the program includes incentives that generate savings for the Medicare program
and for taxpayers.
Under the competitive structure of the Medicare Advantage program, plans return 25 percent of
the savings to the federal government when they bid below the benchmark; the remaining 75
percent is used to provide beneficiaries improved cost savings and supplemental coverage.
According to CMS, the 25 percent that plans return to the government totals approximately $26
per beneficiary per month 12, or approximately $3 billion in 2007 alone.
Competition also is an important feature of the Part D program. Because beneficiaries have
multiple choices, sponsors of Part D plans are forced to compete based on their ability to offer
9
IMS Health, Medicare Part D: The First Year, 2007
10
Centers for Medicare & Medicaid Services, Part D Medicare Prescription Drug Benefit Fact Sheet, January 2007
11
CMS, Medicare Part D Plan Premiums for 2008 Show Continued Impact of Strong Competition, August 13, 2007
12
Keynote Address by CMS Administrator Mark McClellan before the AHIP Medicare Conference (September 11,
2006).
6
benefit packages that are most appealing to beneficiaries. This element of competition is
critically important in encouraging innovation and holding down costs in the Medicare Part D
program. In fact, the Congressional Budget Office (CBO) 13 announced earlier this year that the
projected costs for the Part D program over the next seven years (2007-2013) are now $136
billion lower than the original estimate. CBO reported that a major factor contributing to the
lower costs is that bids submitted by plan sponsors for 2007 under the program’s competitive
structure are about 15 percent lower than the 2006 bids.
Looking forward, we believe it is important for policymakers to preserve the competition,
choice, and innovation that have played such a crucial role in delivering savings and value to our
nation’s Medicare beneficiaries. Reforms that limit the ability of Medicare Advantage and Part
D plans to respond to consumer preferences and changes in medical science would stifle market
innovation and undermine the success plans have achieved in delivering high quality, affordable
coverage to Medicare beneficiaries.
III. Medicare Marketing Practices--Strengthening Beneficiary Protections
The NAIC and others have raised concerns about the marketing of Medicare Advantage and Part
D plans. While data indicate that a high percentage of Medicare beneficiaries are satisfied with
their coverage under the Medicare Advantage and Part D programs, AHIP and our members
believe that it is unacceptable for any beneficiary to be adversely affected by inappropriate
marketing conduct. AHIP members are strongly committed to providing clear and accurate
information to beneficiaries to assist them in making sound decisions about their options in the
Medicare Advantage and Part D programs. This includes a strong focus on continuous re-
evaluation of marketing practices and responsiveness to consumer complaints in order to ensure
that beneficiaries are well-served by brokers, agents and plan marketing staff who are involved
in Medicare marketing and sales activities.
In May 2007, AHIP’s Board of Directors adopted a set of industry principles for protecting
beneficiaries as they consider enrolling in the Medicare Advantage and Part D programs and
ensuring that brokers, agents and plan marketing staff meet new qualifications and requirements.
These initiatives build upon the extensive rules CMS already has established for marketing and
enrollment activities by plan sponsors.
The AHIP Board statement includes safeguards and protections our members are adopting in the
following areas:
Qualifications for Brokers, Agents, and Plan Marketing Staff: Plan sponsors are specifying the
qualifications that brokers and agents and plan marketing staff must meet to market Medicare
Advantage and Part D plans, clearly communicating these qualifications, and consistently
applying them. Plans are using multiple strategies for accomplishing this, including:
Performing background checks, including verification of required state licensure;
Checking applicable databases for documentation of prior serious misconduct;
13
CBO, The Budget and Economic Outlook: Fiscal Years 2008-2017, January 2007
7
Obtaining documentation substantiating that threshold test scores have been achieved on core
competency training and ensuring that continuing education credits are available for licensed
brokers, agents, and plan marketing staff. We have urged CMS to establish standards for
training that require that specific topics must be addressed in detail including:
- Medicare fee-for-service eligibility and benefits;
- Medicare health plan and Part D plan types and structure, including the key differences
between HMOs, PPOs, PFFS plans, SNPs, and Cost plans; and
- Permissible, prohibited, and required marketing practices, including non-discrimination
rules and the prohibitions against door-to-door marketing; and
Requiring brokers and agents and plan marketing staff to obtain threshold test scores on plan-
specific training that provides detailed information about the plan types and benefits offered
by the plan sponsor.
Annual Recertification and Targeted Retraining: Plan sponsors are establishing requirements for
annual recertification for brokers and agents and plan marketing staff, such as achieving
threshold scores on annual recertification tests and repeating core competency training, as
needed. Plan sponsors also will address topics requiring special attention that may arise
throughout the year through strategies such as targeted retraining and provide updated
information on an ongoing basis through a variety of mechanisms including e-mails, web sites,
or other means.
Threshold scores for annual training serve the goal of ensuring that brokers and agents and plan
marketing staff regularly demonstrate their knowledge or expertise so they can fully and clearly
inform beneficiaries about the details of their coverage options. Moreover, the targeted
retraining ensures that brokers and agents and plan marketing staff will promptly receive in-
depth information on specific issues that arise during the year.
Enrollment Safeguards: Plan sponsors are including steps in their marketing and enrollment
processes to verify beneficiaries’ intent to enroll and understanding of the plans they are electing.
Strategies for verification include:
adding to the plan’s enrollment application attestations by the beneficiary or his/her legal
representative or guardian and the broker, agent, or plan marketing staff that address the
beneficiary’s understanding of the plan structure and benefits; and
conducting oversight such as post-enrollment outbound calls from the plan sponsor to the
beneficiary or his/her legal representative for face-to-face enrollments or systematic
monitoring of recorded telephonic enrollments.
We understand that beginning this fall CMS is requiring that Medicare Advantage private fee-
for-service (PFFS) plans make calls to beneficiaries who have enrolled to verify their intent to
enroll and to ensure that they understand the coverage they have chosen. We also support
requiring the additional safeguard of adding to all plans’ enrollment applications an attestation to
be signed by the beneficiary and the broker/agent/plan marketing staff that addresses the
beneficiary’s understanding of the plan structure and benefits and how they compare to the
beneficiary’s previous Medicare coverage. Further, we support requiring post-enrollment
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outbound calls from the plan sponsor to beneficiaries selecting all products for face-to-face
enrollments and systematic monitoring of recorded telephonic enrollments. These measures will
help to avoid misunderstandings about whether beneficiaries actually intended to enroll in a plan
and to reaffirm that beneficiaries understand the coverage offered by the plan they choose.
Monitoring Compliance: Plan sponsors are establishing processes for tracking and analyzing
individual broker and agent and plan marketing staff performance in such areas as beneficiary
satisfaction, rapid disenrollments, and complaints. This ongoing process of evaluation allows
plan sponsors to promptly identify conduct that merits urgent investigation, such as provision of
incorrect, misleading, or inaccurate information; unauthorized contact or home visit; fraudulent
enrollment submission; or intimidation.
Investigating and Responding to Complaints: Plan sponsors are establishing processes for
rapidly investigating complaints and taking immediate and decisive action when complaints are
verified, including requiring inbound calls by the broker, agent, or plan marketing staff and
beneficiary before each application is completed, re-qualification, suspension, or termination.
We have strongly urged CMS to work with the NAIC to develop a uniform process and criteria
for plan sponsors to report serious misconduct by licensed brokers, agents, and plan marketing
staff in a timely fashion to state agencies overseeing broker and agent licensure.
Compensation: Compensation arrangements must comply with CMS Medicare Marketing
Guidelines, including withholding or withdrawing payment for rapid disenrollments. We have
strongly supported compensation requirements in the CMS Medicare marketing guidelines which
are designed to reward brokers and agents when beneficiaries are satisfied with their choices and
penalize brokers and agents who use marketing tactics that result in beneficiaries signing up for a
product that they do not fully understand – and then disenrolling a short time later after learning
more about the plan. We will take additional steps to ensure that beneficiaries understand the
program they have joined and that brokers and agents have correctly answered their questions.
Provider Outreach: Plan sponsors are making available to physicians, hospitals and other
providers detailed information about plan structure, benefits, rules and payment terms of the
plans they offer. Plan activities will include strategies to educate providers prior to market entry
and ongoing efforts to build and maintain relationships to serve plan members. CMS should
increase outreach to educate providers about the types of Medicare Advantage plans and expand
availability of CMS materials for providers.
On another front, last year AHIP released a new guide/workbook for helping Medicare
beneficiaries make informed decisions about their prescription drug plan options. We received
positive feedback from beneficiaries, advocates and other partners, and have released an updated
version of this guide for 2008.
This consumer-friendly guide is designed to educate beneficiaries about the Part D program, help
them examine their personal priorities and preferences, and assist them in navigating through
their options. The guide begins with a ―top 10‖ list of things beneficiaries should know about the
9
new prescription drug benefit. It then guides beneficiaries as they focus on whether stand-alone
prescription drug coverage or a Medicare Advantage health plan that combines hospital and
doctor benefits with prescription drug coverage will work better for them. The guide, available
at www.healthdecisions.org/guide, includes sections on each type of coverage, with
accompanying worksheets that encourage beneficiaries to set priorities and compare plans.
AHIP’s beneficiary guide complements a variety of resources CMS has developed – including
the Medicare.gov website – to inform beneficiaries about their plan choices in the Medicare
Advantage and Part D programs.
IV. Medicare Advantage and Part D Regulation and Oversight
We appreciate the NAIC’s strong interest in the regulation and oversight of Medicare Advantage
and Part D plans and believe that increased collaboration and communication between CMS and
the NAIC is critical as implementation continues to move forward. AHIP and our members
support a closer working relationship between federal and state regulatory agencies with respect
to Medicare issues. We also support retaining and strengthening exclusive federal oversight of
the Medicare Advantage and Part D programs.
Nationwide consistency of federal oversight: AHIP’s support for continued exclusive federal
oversight of the Medicare Advantage and Part D programs is founded on the national character
of the Medicare Advantage and Part D programs and infrastructure that is in place to strengthen
program performance. Just as Medicare beneficiaries have the assurance that the Original
Medicare program is implemented at the national level through a comprehensive system of
federal rules, we believe that Medicare beneficiaries enrolled in Medicare Advantage and Part D
plans should also have confidence that these plans are regulated through federal rules that are
interpreted and applied by the federal government throughout the country. Marketing and other
program requirements that apply nationwide to all Medicare Advantage and Part D plan sponsors
are already in place through federal regulations, contract requirements, and guidance. Ensuring
that the same standards are applied in the same way to all plan sponsors can only be achieved
through centralized oversight. Providing for interpretation of standards and enforcement by each
of the 50 states and Puerto Rico would undermine this goal and is likely to result in inconsistent
interpretation and application of standards and hinder rather than strengthen program oversight to
the detriment of beneficiaries.
Impact on multi-state stand-alone PDPs, Regional PPOs and multi-state MA organizations: We
have serious concerns about provisions of H.R. 3162, the ―Children’s Health and Medicare
Protection Act of 2007,‖ which address regulatory and administrative issues in the Medicare
Advantage program in a manner inconsistent with these principles. This bill, approved by the
U.S. House of Representatives on August 1, proposes a new regulatory approach that would
combine federal and state enforcement of program requirements and reduce the current scope of
federal preemption. We oppose this approach because, based upon past experience, we believe
that the practical consequences of these changes would be highly problematic, hindering rather
10
than improving program administration and making the program less, rather than more,
responsive to beneficiary interests.
Specifically, H.R. 3162 requires the Secretary of the U.S. Department of Health and Human
Services (the Secretary) to request that the NAIC develop model regulations addressing specific
Medicare Advantage and Part D activities and, after promulgation of the NAIC-proposed
requirements in federal regulations, provides for state as well as federal enforcement. This mix
of federal and state authority would have the unintended consequence of subjecting Medicare
Advantage and Part D plan sponsors to conflicting interpretations of their obligations. This was
the case in the past when federal and state regulators conducted reviews of Medicare+Choice
marketing materials. In some cases, Medicare+Choice organizations received conflicting
direction to revise proposed materials with the result that the production of materials was delayed
until a federal/state dialogue could take place and agreement could be reached by federal and
state officials. Such delays disadvantaged beneficiaries by hindering their access to information
needed for informed decision-making about available plan options and for understanding plan
rules.
Further, two valuable improvements that CMS has put in place to promote timely dissemination
of beneficiary materials would be jeopardized – the opportunity for Medicare Advantage and
Part D organizations to submit template materials for approval in advance of bid approvals and
subsequently insert benefit and premium information; and the opportunity for organizations to
use CMS model materials without modification and receive expedited (10 day) review. Both of
these mechanisms for maintaining oversight of the content of materials while streamlining the
approval process would become impractical if the materials are also subject to state review.
The multi-state structure of the Part D and Regional PPO programs and multi-state participation
of a number of Medicare Advantage organizations raise additional concerns about an approach
founded on both federal and state regulation. Many stand-alone PDPs and Regional PPOs are
required to offer the same benefits and premiums and provide the same beneficiary service and
protections across multi-state regions. State-by-state review has the potential to produce
differing interpretations of rules across states that could result in state-by-state variations in
beneficiary materials for the same plans and state-by-state variations in the application of other
program standards. These variations could force stand-alone PDPs and Regional PPOs to invest
substantially greater resources in achieving implementation while reducing rather than adding
value for beneficiaries by reducing the funds available to enrich benefits. Similar problems
would arise for organizations with MA contracts in multiple states that are now overseen through
a federal lead-region process that coordinates across CMS regions.
Additionally, the effective and efficient administration of these programs relies, in part, on a high
level of interaction between Medicare officials and other federal agencies such as the Social
Security Administration — which collects Part B premiums and helps identify individuals who
are eligible for the low income subsidy for Part D. The added complexity of state as well as
federal participation in the oversight process would produce challenges for all parties.
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Stronger federal requirements:
Action that has already been initiated by CMS and Medicare Advantage and Part D plan
sponsors demonstrates that a solid foundation is in place for strengthening federal program rules
and performance. AHIP and our members have taken a leadership role in responding to concerns
that have been raised about broker and agent conduct. In addition to AHIP’s detailed Board
Statement on this topic, seven Medicare Advantage plan sponsors voluntarily agreed in June to a
suspension of private fee-for-service plan marketing in order to demonstrate accelerated
implementation of additional CMS requirements that will apply to all Medicare Advantage
private fee-for-service (PFFS) plans for 2008. These requirements include:
Providing to CMS a list of all representatives marketing a PFFS product and authorizing
CMS to make that list available to State Insurance Departments upon request;
Demonstrating through passage of a written test broker and agent understanding of the
Medicare program and the product they are selling;
Including CMS-approved disclaimer language on all advertisements, enrollment materials,
and materials used at sales presentations by employees or contracted brokers and agents;
Making outbound education and verification calls to all beneficiaries requesting enrollment
in a PFFS plan to ensure that they understand the plan rules;
Providing enrollees with a complete description of plan rules, including detailed information
on a provider’s choice whether to accept plan terms and conditions of payment;
Providing to CMS lists of planned marketing and sales events sponsored by contracted
brokers and agents as well as by plan sponsors; and
Conducting provider outreach and education to ensure providers have access to plan terms
and conditions of payment and that plan staff are readily accessible to assist providers with
questions concerning the plan.
To build on these efforts, we support enactment of a number of provisions of the CHAMP Act in
the form of increased requirements for federally implemented program oversight, rather than
parameters for development of NAIC model regulations. Although several of these requirements
are included in existing CMS guidance and are already applicable to Medicare Advantage and
Part D plan sponsors or will be applicable for 2008, we believe that the importance of these
beneficiary safeguards merits making them statutory. Specifically, we support adoption of
additional requirements for federal oversight that would include:
Adding more detailed requirements for conducting Medicare Advantage and Part D plan
marketing activities including prohibiting unsolicited door-to-door marketing and prohibiting
the cross-selling of non-health care-related products;
Limiting marketing in certain settings (e.g., health care settings and educational events);
Requiring beneficiaries to sign off on specific disclosures included in the application prior to
enrolling;
Requiring plan sponsors to call beneficiaries to confirm their intent to enroll; and
Requiring brokers and agents to be trained and tested on specified content areas before
marketing plans to beneficiaries.
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In addition, AHIP is urging CMS to move forward with an initiative to make available to state
insurance commissioners information about which brokers and agents are under contract to
market Medicare Advantage and Part D plans. This initiative is focused on establishing a
standard set of data elements, a nationally uniform reporting mechanism, and making the
information available through the CMS web site to contribute to the ongoing efforts of state
insurance commissioners to oversee the conduct of licensed brokers and agents. This effort is
closely linked to our support for a collaborative initiative with CMS and the NAIC to establish
uniform processes and criteria for reporting broker, agent, and staff misconduct to state agencies.
These pro-active measures build upon the industry-wide initiatives outlined in AHIP’s May 2007
Board statement.
At the same time, we support the NAIC and CMS’ efforts to establish a national structure, based
on a Memorandum of Understanding (MOU) that numerous states have signed, to promote
information sharing between the states and CMS. Looking forward, we believe this approach
provides a strong foundation for similar cooperation between CMS and the states on other issues
of concern.
V. Conclusion
Thank you for the opportunity to testify on these important issues. AHIP and our members look
forward to continuing a dialogue with the NAIC, CMS, the broker/agent community, beneficiary
groups, and other key stakeholders on further strengthening the Medicare Advantage and Part D
programs.
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