This Editorial was published May 21, 2008 in the New York Times.
The Bush administration has proposed welcome new regulations to curb the deceptive, hard-sell tactics often used to foist private Medicare policies on unwary consumers. Unfortunately, it has been unwilling to eliminate the root cause of the problem: the high subsidies that prop up these plans and make them so attractive to high-pressure marketers.
The worst abuses have been committed by predatory marketers selling the comprehensive policies known as Medicare Advantage plans. The government pays these plans 13 percent more, on average, than the same services would cost in the traditional Medicare program. The subsidies are even more egregious — averaging 17 percent above cost — for the so-called private fee-for-service plans within Medicare Advantage. All told, the unjustified subsidies will cost the government more than $50 billion from 2009 to 2012.
Small wonder that plans use high-pressure tactics to market these lucrative policies. In the worst cases, sales agents have masqueraded as Medicare officials, forged the signatures of elderly clients, switched people from traditional Medicare into private plans that don’t include their doctors and barged into homes to pressure semiliterate people into signing.
The administration is to be commended for taking aggressive steps over the past year to combat abuses. The new regulations could still fall short of what is needed, unless the states are also given greater powers to enforce them.
The rules, which would apply to private plans that offer comprehensive coverage or a stand-alone prescription-drug benefit, would prohibit door-to-door marketing, cold calling and accosting beneficiaries in doctors’ waiting rooms or outside apartment buildings or senior centers. Commissions would be regulated to discourage agents from churning people from one plan to another. Insurers could not offer free meals to potential customers, and promotional gifts would be limited.
The problem is that the states — which have many more investigators on the ground to police the industry — have very little authority to regulate the marketing of private Medicare plans. Under a law passed when the Republicans controlled Congress, states cannot hold health plans responsible for the acts of their agents. That deprives consumers of an important layer of protection.
Congress will need to assess whether the new rules will be sufficient to curb abuses and should grant the states the power to enforce rules and respond to consumer complaints. Congress also must eliminate the subsidies granted to private Medicare Advantage plans.
Those subsidies help private plans woo beneficiaries away from the traditional program. And they create a big incentive for insurers to maximize sales through aggressive, sometimes unscrupulous, marketing.