Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
B R
ENEFICIARIES  EMAIN 
 
V   S A 
ULNERABLE TO  ALES  GENTS  
 
M M
ARK  ETING OF  EDICARE 
 
A P  
DVANTAGE  LANS
 
   
 
 
 
Daniel R. Levinson  
Inspector General 
 
March 2010 
OEI-05-09-00070     
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
(1) To examine selected Medicare Advantage (MA) plan sponsors 
compensation of sales agents. 
(2) To determine whether selected MA plan sponsors ensured that their 
sales agents were qualified. 
(3) To compare the number and topics of Medicare beneficiaries 
complaints about sales agent marketing before and after 
implementation of sales agent marketing regulations. 
BACKGROUND 
The Centers for Medicare & Medicaid Services (CMS) contracts with 
private companies, known as plan sponsors, to provide health insurance 
plans under MA.  Plan sponsors may market their MA plans through 
independent sales agents, who may market on their own or through a 
field marketing organization (FMO), or by employing their own sales 
agents.   
Between June 2007 and June 2008, Congress held three hearings 
examining sales agents marketing of MA plans.  During these hearings, 
witnesses testified that sales agents had marketed without licenses, 
portrayed themselves as Medicare employees, and misled Medicare 
beneficiaries about plan benefits.  These types of aggressive, deceptive, 
and fraudulent marketing practices could result in Medicare 
beneficiaries enrolling in plans that do not meet their health care needs.  
Several members of Congress raised concerns about sales agents 
marketing to Medicare beneficiaries to the Office of Inspector General 
(OIG); one specifically requested that OIG examine the marketing 
practices of MA plans. 
In July 2008, Congress enacted the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA), which prohibited or limited certain 
marketing activities by sales agents and plan sponsors.  In 
September 2008, CMS published regulations implementing the MIPPAs 
marketing provisions, including limiting sales agent compensation to 
independent sales agents.  In addition, CMS regulations required that 
all sales agents be trained and tested annually and be State licensed.   
To examine selected MA plan sponsors compensation of sales agents 
and determine whether the selected plan sponsors ensured that their 
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sales agents were qualified, we reviewed compensation, testing, and 
licensure data for a random sample of sales agents.  We purposively 
selected the plan sponsors based on their size and the rate of marketing 
complaints they received.  We also compared complaints regarding sales 
agent marketing reported to CMS from 2008 and 2009 to determine 
whether the number and topics of Medicare beneficiaries complaints 
changed after implementation of the sales agent marketing regulations. 
FINDINGS 
All five plan sponsors using independent sales agents had 
compensation practices that resulted in inappropriate financial 
incentives.  Five selected plan sponsors compensation practices may 
have led sales agents to enroll Medicare beneficiaries in MA plans that 
did not best meet Medicare beneficiaries health care needs.  Three of the 
five selected plan sponsors that used independent sales agents made 
payments to sales agents in excess of their CMS-approved compensation 
schedules.  In addition, three of the five selected plan sponsors made 
payments to FMOs that may have created inappropriate financial 
incentives to market their MA plans.  One plan sponsor did both.   
Five of the six selected plan sponsors did not ensure that all sales 
agents were qualified under CMSs regulations.  Five of the 
six selected plan sponsors used unqualified sales agents who either had 
not passed the marketing test for 2009 or were not licensed at the time 
they took Medicare beneficiaries enrollment applications.  In our 
random sample of 30 sales agents per plan sponsor, there were 
12 unqualified sales agents, the majority of whom had not passed the 
marketing test for 2009.  Despite a requirement that MA plans have 
systems in place to confirm that enrolled Medicare beneficiaries are 
aware of their enrollment in the plans and that the Medicare 
beneficiaries understand the plans rules, no plan sponsor had a policy 
to contact Medicare beneficiaries enrolled by an unqualified sales agent 
to ensure that they knew of their enrollment or understood the plans 
rules. 
The number and topics of sales agent marketing complaints 
remained unchanged after implementation of sales agent marketing 
regulations.  About 13,000 sales agent marketing complaints were 
reported to CMS during each of the 2008 and 2009 annual enrollment 
periods.  For both years annual enrollment periods, these complaints 
represented less than 10 percent of all complaints reported to CMS.  For 
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both years, sales agent marketing complaints referenced one or more of 
the same three broad topics:  (1) providing misleading information about 
plan benefits, (2) enrolling Medicare beneficiaries without their consent, 
and (3) engaging in aggressive sales tactics.  
RECOMMENDATIONS 
Each of the six selected plan sponsors did not follow at least one of the 
marketing regulations concerning sales agent compensation and 
qualifications.  Any such instances represent gaps in plan sponsors 
oversight and implementation of the sales agent marketing regulations.  
In addition, results from CMSs oversight of plan sponsor marketing 
activities after implementation of the sales agent marketing regulations 
indicate that compliance concerns are not limited to the six selected 
plan sponsors.  Therefore, we recommend that CMS: 
  take appropriate actions regarding the specific instances of 
noncompliance documented in this report, 
  audit plan sponsors and include an assessment of the 
vulnerabilities identified in this report,   
  issue additional regulations concerning FMO payments, 
  issue regulations requiring plan sponsors to contact all new 
enrollees to ensure that they understand plan rules, and 
  issue guidance clarifying that plan sponsors should terminate 
unlicensed sales agents immediately upon discovery. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our first recommendation.  CMS concurred in part 
with our second recommendation, stating that it would conduct audits 
or other oversight activities of plan sponsors posing the greatest risk to 
Medicare beneficiaries.  As such, we have amended the wording of the 
recommendation.  CMS did not concur with our final three 
recommendations.  We continue to recommend that CMS issue 
additional regulations and guidance to protect Medicare beneficiaries 
from inappropriate sales agent marketing.  However, we have modified 
the wording of two of the recommendations to reflect alternative 
approaches that are consistent with CMSs comments. 
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 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
All five plan sponsors using independent sales agents had 
compensation practices that resulted in inappropriate financial 
incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
Five of the six selected plan sponsors did not ensure that all          
sales agents were qualified under CMSs regulations. . . . . . . . . . 17 
The number and topics of sales agent marketing complaints     
remained unchanged after implementation of sales agent 
marketing regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
   
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 
Agency Comments and Office of Inspector General Response . . . 24 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 
A:  Medicare Improvements for Patients and Providers Act of 
2008 Provisions Concerning Sales Agents. . . . . . . . . . . . . . . . 27 
  B:  Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 
C:  Estimates and Confidence Intervals for Samples From the    
Centers for Medicare & Medicaid Services Complaint       
Tracking Module. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 
D:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38     
 I N T R O D U C T I O N  
OBJECTIVES 
(1) To examine selected Medicare Advantage (MA) plan sponsors 
compensation of sales agents. 
(2) To determine whether selected MA plan sponsors ensured that their 
sales agents were qualified. 
(3) To compare the number and topics of Medicare beneficiaries 
complaints about sales agent marketing before and after 
implementation of sales agent marketing regulations. 
BACKGROUND 
The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) replaced the Medicare + Choice program with the MA 
program and made qualified prescription drug coverage available to 
Medicare beneficiaries.1, 2  The Centers for Medicare & Medicaid 
Services (CMS) contracts with private companies, known as plan 
sponsors, to provide health insurance plans under MA.  Plan sponsors 
may offer multiple MA plans.   
Between January 2008 and September 2009, enrollment in MA plans 
increased from 9.2 million Medicare beneficiaries to over 11.2 million, or 
nearly a quarter of the more than 45 million Medicare beneficiaries.3  
For each Medicare beneficiary enrolled in MA in 2009, the Medicare 
Payment Advisory Committee (MedPAC) projected that Medicare pays 
 
1 MMA, P.L. 108-173  201, 42 U.S.C.  1395w-21 note. 
2 MMA, P.L. 108-173 101, Social Security Act,  1860D-1 et seq., 42 U.S.C.  1395w-101 
et seq. 
3 CMS, Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract 
Report - Monthly Summary Report (Data as of January 2008).  Available online at  
http://www.cms.hhs.gov/MCRAdvPArtDEnrolData/Downloads/Contract Summary - 
January 2008.zip.  Accessed on October 16, 2009.  CMS, Medicare Advantage, Cost, PACE, 
Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Data as of 
September 2009).  Available online at 
http://www.cms.hhs.gov/MCRAdvPArtDEnrolData/Downloads/Contract Summary - 
September 2009.zip.  Accessed on October 16, 2009.  CMS, Medicare Enrollment: National 
Trends 1966  2008.  Available online at 
http://www.cms.hhs.gov/MedicareEnRpts/Downloads/HISMI08.pdf.  Accessed on 
September 24, 2009. 
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MA plan sponsors 14 percent more than if a Medicare beneficiary 
remains in fee-for-service Medicare.4 
Medicare beneficiary complaints about MA plan marketing raised 
concerns in Congress and with CMS.  Between June 2007 and June 
2008, Congress held three hearings examining MA plan marketing in 
response to complaints of aggressive, deceptive, and fraudulent 
marketing practices reported by Medicare beneficiaries and consumer 
advocates.  During these hearings, witnesses testified that sales agents 
had marketed without licenses, portrayed themselves as Medicare 
employees, and misled Medicare beneficiaries about plan benefits.5    
After discussions with CMS, in June 2007, seven MA plan sponsors 
agreed to suspend their marketing of specific MA plan types that were 
the subject of many complaints.   
Protecting Medicare beneficiaries from inappropriate sales agent 
marketing practices is critical to ensuring that Medicare beneficiaries 
enroll in plans that meet their health care needs.  In 2008, several 
members of Congress raised concerns about sales agents marketing to 
Medicare beneficiaries to the Office of Inspector General (OIG).  This 
study is in response to a request from Congressman Fortney Pete 
Stark that OIG examine the marketing practices of MA plans. 
Marketing MA Plans To Enroll Medicare Beneficiaries 
Plan sponsors market through advertisements and sales agents to 
attract Medicare beneficiaries to enroll in their plans.  CMS allowed 
plan sponsors to begin marketing activities on October 1, 2008, for the 
2009 plan year.6  A plan year begins January 1 and ends December 31. 
Medicare beneficiaries may choose to enroll in MA when they are first 
eligible for Medicare and then annually thereafter between 
November 15 and March 31 (hereinafter referred to as the annual  
 
4 MedPAC, A Data Book: Healthcare Spending and the Medicare Program, June 2009, 
p. 155.  Available online at http://www.medpac.gov/chapters/Jun09DataBookSec10.pdf. 
Accessed on September 30, 2009.   
5 42 U.S.C.  1320b-10. 
6 CMS, 2009 Call Letter, March 17, 2008, p. 7.  Available online at  
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf.  Accessed 
on April 1, 2009. 
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enrollment periods).7  Aside from their initial eligibility and the annual 
enrollment periods, most Medicare beneficiaries may not change plans 
and must remain enrolled in their chosen plans throughout the plan 
year.8   
Marketing MA Plans Through Sales Agents 
Plan sponsors may contract with independent sales agents or employ 
sales agents to market their plans to Medicare beneficiaries.  
Independent sales agents may contract with one or more plan sponsors.   
Independent sales agents may market MA plans on their own or as 
employees of field marketing organizations (FMO).  When sales agents 
market MA plans as FMO employees, FMOs typically provide sales 
agents with enrollment leads and marketing assistance.  Plan sponsors 
pay sales agents directly or through an FMO.  
Laws and Regulations Governing Sales Agent Marketing of MA Plans 
In July 2008, Congress enacted the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA).9  In the MIPPA, Congress 
prohibited or limited certain sales and marketing activities by sales 
agents and plan sponsors.  For instance, the MIPPA required CMS to 
issue guidance limiting sales agent compensation and requiring sales 
agents to be trained and tested annually and be State licensed.10   
More than half of the limitations on sales agent and plan sponsor 
activities codified in the MIPPA had been previously released as 
guidance in 2006.  For example, in previous guidance, CMS directed 
 
7 Technically, there are two separate enrollment periods with slightly different rules.  
From November 15 to December 31, Medicare beneficiaries may enroll in, or disenroll from, 
MA plans as often as they like.  From January 1 to March 31, Medicare beneficiaries may 
enroll in, or disenroll from, MA plans only once.  CMS, Medicare Managed Care Manual 
(MMCM), Pub. 100-16, ch. 2,  30.1, 30.3.  Available online at 
http://www.cms.hhs.gov/MedicareMangCareEligEnrol/Downloads/2009MAenrollmentguida
nce.pdf.  Accessed on February 18, 2009. 
8 MMCM, ch. 2,  30.  CMS allows certain Medicare beneficiaries more flexibility to 
change plans.  Medicare beneficiaries eligible for Medicaid may enroll in or switch MA plans 
at any time.  In addition, CMS provides special enrollment periods for Medicare 
beneficiaries whose plans terminate, who change residence, or who meet exceptional 
conditions.    
9 MIPPA, P.L. 110-275. 
10 MIPPA,  103(b)(1) and (d)(1), Social Security Act,  1851(j) and (h), 42 U.S.C. 
 1395w-21(j) and 1395w-21(h). 
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plan sponsors to reasonably compensate sales agents in line with 
industry standards and to use State-licensed sales agents.11      
CMS published regulations implementing the MIPPAs sales agent 
marketing provisions on September 18, 2008, 2 months before the 
annual enrollment periods for the 2009 plan year began.12  Appendix A 
lists the sales agent marketing provisions in the MIPPA and associated 
CMS guidance for implementing the MIPPA's provisions and indicates 
whether CMS addressed the provisions in its previous 2006 guidance. 
Sales agent compensation.  In September and November 2008, CMS 
issued regulations implementing the MIPPA provision concerning sales 
agent compensation.13  These regulations are intended to ensure that 
sales agents enroll Medicare beneficiaries based on the plan that best 
meets their health care needs.14  They govern compensation of 
independent sales agents, including those employed by FMOs.  These 
regulations do not cover sales agents that are plan sponsor employees.15     
CMS defines compensation as the monetary or nonmonetary payment 
for the sale or renewal of a plan policy (i.e., the initial enrollment of a 
Medicare beneficiary into an MA plan or the renewal of a Medicare 
beneficiarys enrollment), including but not limited to commissions, 
bonuses, gifts, prizes, awards, and finders fees.  In its definition of 
compensation, CMS does not include fees for complying with State laws; 
training, certification, and testing costs; or reimbursement for mileage 
and actual costs associated with sales appointments.16  Thus, plan 
sponsors may pay for these items in addition to any compensation for 
the sale or renewal of a plan policy. 
CMS requires a 6-year compensation cycle for sales agents, whether 
paid by a plan sponsor directly or through FMOs, consisting of two types 
of compensation:  initial-year compensation and renewal-year 
 
11 CMS, Medicare Marketing Guidelines for:  Medicare Advantage Plans, Medicare 
Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans, 
pp. 128138 (2nd revision, July 25, 2006).  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/FinalMarketingGuidelines.
pdf.  Accessed on June 26, 2009. 
12 73 Fed. Reg. 54208 and 54226 (Sept. 18, 2008). 
13 73 Fed. Reg. 54226 (Sept. 18, 2008); 73 Fed. Reg. 67406 (Nov. 14, 2008). 
14 73 Fed. Reg. 54226, 54237 (Sept. 18, 2008); 73 Fed. Reg. 67406, 67407 (Nov. 14, 2008). 
15 42 CFR  422.2274 (as of Nov. 14, 2008).  All subsequent citations in this report to 
42 CFR pt. 422 are to the regulation as amended in September and November 2008.   
16 Ibid. 
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compensation.  Plan sponsors must pay sales agents an initial-year 
compensation rate for a Medicare beneficiarys initial year of enrollment 
into an MA plan.  Plan sponsors must pay sales agents a renewal-year 
compensation rate, equal to 50 percent of the initial-year compensation 
rate, each year for 5 years after a Medicare beneficiarys initial year of 
enrollment so long as the Medicare beneficiary remains enrolled.17   
For 2009, CMS required plan sponsors to submit compensation 
schedules for sales agents and FMOs.18  This submission included plan 
sponsors compensation schedules for sales agents and FMOs from the 
past 3 years and their proposed schedule for the 2009 plan year.19   
CMS used the compensation schedules to determine market rate limits 
for sales agents.  For 2009, CMS set the market rate limit for 
initial-year compensation at $400, with exceptions for certain States.20  
Accordingly, for 2009 the maximum renewal-year rate for most States is 
$200.  CMS required plan sponsors to resubmit their sales agent 
compensation schedules for approval if they were out of compliance with 
the market rate limit.   
CMS stated that administrative difficulties with the enrollment process 
would prevent CMS from distinguishing between initial- and 
renewal-year enrollments at the time of enrollment.21  Thus, for 2009, 
CMS instructed plan sponsors to pay sales agents the renewal-year 
compensation rates until CMS notified them that enrollments were 
eligible for initial-year compensation.22  CMS did permit plan sponsors 
to pay initial-year compensation for individuals newly eligible for 
Medicare.23    
 
17 42 CFR  422.2274(a)(1). 
18 73 Fed. Reg. 67406, 67410 (Nov. 14, 2008). 
19 Ibid.; CMS, Release of Centers for Medicare & Medicaid Services 4138-IFC2 and 
Clarification of guidance on agent/broker compensation, November 10, 2008. 
20 CMS, January 16, 2009 replacement of the December 24, 2008 memo: 2009 Medicare 
Advantage and Prescription Drug Program Agent and Broker Compensation Structures 
(January 2009 Replacement Memorandum), January 16, 2009.  Available online at 
http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/CompStructureRepMemo_ 
011609.pdf.  Accessed on June 30, 2009.  For Connecticut, Pennsylvania, and the District of 
Columbia, the initial-year compensation rate could be as high as $450 for MA plans.  For 
California and New Jersey, the initial-year compensation rate could be as high as $500.   
21 73 Fed. Reg. 67406, 67408 (Nov. 14, 2008). 
22 Ibid.; 42 CFR  422.2274(a)(1)(iii). 
23 42 CFR  422.2274(a)(1)(iii). 
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Beginning in May 2009, CMS identified enrollments for which sales 
agents should have been paid the initial-year compensation rate.  CMS 
requires plan sponsors to retroactively adjust sales agent compensation 
to the initial-year compensation rate if CMS identifies the beneficiary as 
new to MA or newly eligible for Medicare in 2009.24 
The regulations also address payments to FMOs for ancillary services, 
such as training, material development, customer service, direct mail, 
and agent recruitment.  CMS did not establish limits for such payments.  
Rather, the regulations state that plan sponsors must pay FMOs for 
services at fair-market value and each plan sponsors payment must not 
exceed an amount commensurate with what that plan sponsor paid 
FMOs in each of the prior 2 years.25  The regulations also do not state 
that plan sponsors must pay FMOs for ancillary services using a 6-year 
compensation cycle.     
Sales agent qualifications.  In September 2008, CMS also issued 
regulations implementing the MIPPA provisions requiring plan 
sponsors to ensure that sales agents meet certain qualifications.26  
First, plan sponsors must ensure that all sales agents are trained and 
that they pass an annual written or electronic test on Medicare 
(hereinafter referred to as the marketing test) with a score of 85 percent 
or    better.27, 28  CMS does not specify the content of the training or the 
test or the number of times a sales agent may attempt the test.  
Training and testing may be provided in person or online. 
Second, plan sponsors must use only State-licensed sales agents to 
market their plans.29, 30  The process for attaining licensure is 
determined by each State.  State licenses may be valid for as little as 
1 year or may not expire at all. 
 
24 42 CFR  422.2274(a)(1)(iii). 
25 42 CFR  422.2274(a)(1)(iv). 
26 73 Fed. Reg. 54208 and 54226 (Sept. 18, 2008). 
27 42 CFR  422.2274(b) and (c). 
28 CMS, Guidance for regulations in CMS 4131-F and CMS 4138-IFC, September 15, 
2008, p. 23.  Available online at 
http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/MIPPA_Imp_memo091208Fin
al.pdf.  Accessed on September 9, 2009. 
29 42 CFR  422.2272(c).   
30 California does not require sales agents who market Health Maintenance 
Organization (HMO) plans to be licensed.  Knox-Keene Health Care Service Plan Act of 
1975, Cal Health & Saf Code  1359. 
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Plan sponsor reporting of terminated sales agents.  CMS regulations also 
require plan sponsors to report the termination of licensed sales agents 
to the applicable State.31  If State laws require, plan sponsors must also 
include the reasons for sales agent terminations.  In addition, plan 
sponsors must make their reports of sales agent terminations available 
to CMS upon request.32  However, CMS regulations and guidance do not 
specify circumstances under which plan sponsors should terminate sales 
agents. 
CMS and Plan Sponsor Oversight of Sales Agent Marketing 
In September 2008, CMS announced an oversight strategy to ensure 
that plan sponsors comply with sales agent marketing regulations.33  
CMS staff stated that they visited more than 1,500 marketing events 
unannounced and reviewed 1,300 advertisements during the 
2009 annual enrollment periods.  CMS staff noted that they expanded 
oversight activities to include monitoring of sales agents in 
one-on-one settings.  In addition, in the summer of 2009, CMS staff 
audited one plan sponsor to ensure compliance with the sales agent 
marketing regulations.  CMS staff indicated that they plan to conduct 
more compliance audits in the future. 
As part of CMSs oversight strategy, CMS staff also assessed complaints 
reported to the 1-800-MEDICARE hotline or Medicare Drug Integrity 
Contractors (MEDIC).34  CMS registers complaints reported to either 
source in its Complaint Tracking Module.  CMS assigns each complaint 
to one of several categories.  One category, marketing, is for 
complaints about plan sponsor marketing.  Within the marketing 
category, CMS includes a marketing misrepresentation subcategory.  
For the 2009 annual enrollment periods, CMS staff stated that hotline 
employees were instructed to place all sales agent marketing complaints 
in the marketing misrepresentation subcategory.   
 
31 42 CFR  422.2272(d). 
32 CMS, Medicare Marketing Guidelines for:  Medicare Advantage Plans, Medicare 
Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans, p. 141.  
Available online at 
http://www.cms.hhs.gov/ManagedCareMarketing/Downloads/R91MCM.pdf.  Accessed on 
January 5, 2010. 
33 CMS, Final Marketing Provisions and CMS Marketing Surveillance, September 26, 
2008.   
34 MEDICs are responsible for managing reports about fraud, waste, and abuse in the 
prescription drug program and working with CMS, plan sponsors, and others to protect 
Medicare beneficiaries. 
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Because of its oversight activities, CMS sent warning letters to 92 plan 
sponsors regarding 1 or more of the following issues:  (1) a high number 
of sales agent marketing complaints, (2) noncompliance with a sales 
agent marketing regulation detected at marketing events or through 
advertisement reviews, (3) deficiencies in plan sponsors implementation 
of the sales agent marketing regulations, or (4) poor customer service.  
Of the 92 warning letters, 84 referenced 1 or more of the first 3 issues 
related to marketing. 
Plan sponsors must also monitor compliance with sales agent marketing 
regulations.  Specifically, CMS requires plan sponsors to monitor sales 
agents to ensure that they comply with all applicable laws, CMS 
policies, and marketing guidelines.35  In addition, CMS requires that 
plan sponsors have a meaningful procedure for receiving and resolving 
complaints reported to plans.36 
State Departments of Insurance Oversight of Sales Agents 
State Departments of Insurance oversee and license sales agents 
employed in their States.  Like CMS, the Departments of Insurance 
receive complaints from Medicare beneficiaries and use them to oversee 
and discipline sales agents whose actions violate State laws or 
regulations.  
CMS has signed Memorandums of Understanding with all Departments 
of Insurance to allow the exchange of complaint data involving sales 
agents and plan sponsors.  In addition, CMS holds quarterly 
teleconferences with all State Departments of Insurance to exchange 
information about sales agent and plan sponsor marketing.   
Related Office of Inspector General Work 
In 2006, OIG published a report assessing CMS oversight of MA 
marketing materials.  OIG found that some MA marketing materials 
lacked CMS-required information essential for Medicare beneficiaries to 
make informed choices.  For instance, plan sponsors advertisements did 
not include operating hours for their customer service numbers, did not 
state that the 1-800-MEDICARE line is available 24 hours a day and 
7 days a week, or did not clearly identify resources for Medicare 
 
35 CMS, Marketing Guidelines, p. 130. 
36 42 CFR  422.564. 
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beneficiaries with special needs.  Furthermore, some marketing 
materials used unclear and technical language.37   
METHODOLOGY 
To examine selected MA plan sponsors compensation of sales agents 
and determine whether the selected plan sponsors ensured that their 
sales agents were qualified, we reviewed compensation, testing, and 
licensure data for a random sample of sales agents.  We also compared 
complaints regarding sales agent marketing reported to CMS from 
2008 and 2009 to determine whether the number and topics of Medicare 
beneficiaries complaints changed after implementation of the sales 
agent marketing regulations.  See Appendix B for a more detailed 
description of our methodology. 
Scope 
We reviewed plan sponsors offering MA plans.  We did not review plan 
sponsors that offered only prescription drug plans and no MA plans.  
According to CMS staff, plan sponsors offering only prescription drug 
plans account for a small number of sales agent marketing complaints. 
This study is designed to identify whether selected plan sponsors have 
problems associated with the compensation or qualifications of their 
sales agents.  It does not project the extent of any problems for MA plan 
sponsors.  Because of the intensity of the review, we focused our 
analysis on a purposive sample of six plan sponsors that used sales 
agents to market to Medicare beneficiaries.   
We limited our analysis of plan sponsors to 3 of the marketing 
provisions in the MIPPA:  (1) compensation of sales agents, (2) annual 
training and testing of sales agents, and (3) use of State-licensed sales 
agents.  These three marketing provisions are critical to protecting 
Medicare beneficiaries because they address sales agents financial 
motivation and their qualifications to market MA plans.  See 
Appendix A for a complete list of the marketing provisions in the 
MIPPA. 
In addition, we limited our analysis of plan sponsors compliance with 
sales agent marketing regulations to dates between October 1, 2008, 
 
37 OIG, Medicare Advantage Marketing Materials for Calendar Year 2005, 
OEI-01-05-00130, August 2006. 
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when marketing began for the 2009 annual enrollment periods, and 
March 31, 2009, the end of the 2009 annual enrollment periods.  Most 
Medicare beneficiary enrollment occurs during this timeframe.38    
Finally, we did not determine whether plan sponsors' payments 
complied with the Federal antikickback statute.39  A legal analysis of 
whether plan sponsor payments violated the Federal antikickback 
statute was beyond the scope of this study. 
Examining Sales Agents Compensation and Qualifications 
To examine sales agents compensation and qualifications, we collected 
data from 6 of the 266 plan sponsors offering MA plans in 2009.  From 
three strata of plan sponsors, we purposively selected six plan sponsors 
with the highest rate of marketing complaints per enrolled Medicare 
beneficiary.  We selected one plan sponsor from a stratum of plan 
sponsors with small enrollment, two from a stratum with medium 
enrollment, and three from a stratum with large enrollment.  These six 
plan sponsors represented approximately 7 percent of MA enrollment at 
the time of our review.  They are geographically dispersed and three of 
the six plan sponsors offered their plans nationally.  
Within each plan sponsor, we randomly sampled 30 sales agents.  We do 
not project our findings to all sales agents from the six plan sponsors or 
to the universe of MA plan sponsors.   
We conducted site visits at each of the selected plan sponsors during 
April 2009.  During each site visit, we conducted structured interviews 
of plan sponsor representatives and collected data on the random 
sample of 30 sales agents.  For each sampled sales agent, we collected 
all enrollment applications, compensation, and testing data.  While 
onsite, we verified the accuracy and completeness of these data.   
We determined whether five of the six selected MA plan sponsors followed 
CMSs compensation regulations regarding sales agent compensation.  We 
dropped one plan sponsor from this analysis because it did not use 
independent sales agents.  Only independent sales agents are subject to 
the compensation regulations.  For each of the 5 plan sponsors, we 
compared the payments made to each of the 30 sampled sales agents to the 
plan sponsors CMS-approved compensation schedules.   
 
38 MMCM, ch. 2,  30. 
39 42 U.S.C  1320a-7b. 
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II NN TT RR OO DD UU CC TT II OO NN   
We also compared payments made to FMOs on a per enrollment basis to 
each of the plans sponsors CMS-approved compensation schedule.  For 
this analysis, we did not determine whether these payments comply with 
CMS regulations.  In particular, we did not determine whether FMO 
payments were fair-market value or whether payments exceeded the 
amounts that plan sponsors paid FMOs for similar services in the previous 
2 years.  
We determined whether selected plan sponsors ensured that their sales 
agents were qualified by checking whether sales agents were 
appropriately trained and licensed at the time they enrolled Medicare 
beneficiaries.  To determine whether their sales agents for the 
6 selected plan sponsors were trained, we reviewed the date on which 
each of the 30 sampled sales agents passed the marketing test.  For 
each sampled sales agent, we compared the date the sales agent passed 
the marketing test to the Medicare beneficiarys signature date on each 
enrollment application submitted by that sales agent. 
We determined whether 5 the 6 selected plan sponsors used licensed 
sales agents by checking whether each plan sponsors 30 sampled sales 
agents had licenses in the States at the time they generated enrollment 
applications.  We dropped one plan sponsor from this analysis because it 
operated as an HMO in California and California does not license sales 
agents to market HMOs.  For the five selected plan sponsors, we 
compared the Medicare beneficiaries signature dates to the licensure 
dates for all sales agents available on State Department of Insurance 
Web sites or through the National Insurance Producer Registry 
database.40   
Medicare Beneficiary Complaints Regarding Sales Agent Marketing 
Number of sales agent marketing complaints.  To determine the number of 
sales agent marketing complaints reported to CMS, we selected 
2 stratified random samples of 400 complaint records from the Complaint 
Tracking Module from October 1, 2007, to April 30, 2008, and from 
October 1, 2008, to April 30, 2009.  We chose these periods because they 
capture complaints from when plan sponsors may begin marketing for the 
plan year to 1 month after the end of the annual enrollment periods.  We 
 
40 Two States licensure information is not available on their Department of Insurance 
Web sites.  For these States, we used the National Insurance Producer Registry, a private 
compilation of current licensure information. 
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stratified the complaint records by those that are categorized as 
marketing misrepresentation and those that are not.  We selected 
100 complaint records from the marketing misrepresentation stratum 
and 300 complaint records from the other stratum for each period in case 
some sales agent marketing complaints were placed under an incorrect 
category. 
We manually reviewed all sampled Complaint Tracking Module 
complaint records.  We used each complaints categorization and 
description to determine whether the complaint concerned sales agent 
marketing.  We projected the number of sales agent marketing 
complaints to the total number of complaints for the 2008 and 
2009 annual enrollment periods.  See Appendix C for a list of 95-percent 
confidence intervals for all statistical projections. 
Topics of sales agent marketing complaints.  To determine the nature of 
complaints in the Complaint Tracking Module, we analyzed sales agent 
marketing complaints from the marketing misrepresentation stratum 
only.  The proportion of sales agent marketing complaints we found in 
the marketing misrepresentation stratum is large enough to make 
valid projections between periods.  We then compared the proportion of 
complaints by type between the 2008 and 2009 annual enrollment 
periods.   
To determine the nature of sales agent marketing complaints reported 
to other sources during the 2009 annual enrollment periods, we 
collected data from the Departments of Insurance, MEDICs, and the 
six selected plan sponsors.  From the Departments of Insurance, we 
requested the types of complaints they received.  From the MEDICs and 
the six selected plan sponsors, we requested actual complaints.  We 
compared the Complaint Tracking Module complaints to those collected 
from other sources.   
Data Limitations  
We were unable to verify the accuracy and completeness of some 
compensation data from one plan sponsor.  While we were able to assess 
the accuracy and completeness of payments to the sampled sales agents 
for that plan sponsor, we were not able to verify the completeness and 
accuracy of other payments, such as finders fees.  Because this plan 
sponsors payments to sales agents were accurate and complete and 
because none of the other plan sponsors provided inaccurate 
compensation data, we included these unverified data in our analysis. 
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The number of sales agents we report as unqualified under CMS 
regulations and the number of enrollment applications they generated 
are conservative.  Representatives from some selected plan sponsors 
stated that they were unable to find a small number of enrollment 
applications associated with our sampled sales agents.  These 
enrollment applications could have had problems; however, we could not 
determine this because they were missing. 
We use the number of sales agent marketing complaints reported to 
CMS as a way to identify potential concerns with sales agent marketing 
tactics.  However, some of these complaints may have been unjustified, 
resulting in a potential overstatement of concerns with sales agent 
marketing tactics.  
Standards  
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of Inspectors General on Integrity 
and Efficiency.
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 F I N D I N G S  
All five plan sponsors using independent sales  All five of the plan sponsors using 
agents had compensation practices that resulted  independent sales agents had 
compensation practices that 
in inappropriate financial incentives  
resulted in inappropriate financial 
incentives for sales agents or may have created inappropriate financial 
incentives for FMOs to market their MA plans.  The plan sponsor that 
did not use independent sales agents is not included in this analysis of 
compensation practices because only independent sales agents are 
governed by CMS compensation regulations.   
Three of five selected plan sponsors using independent sales agents 
made payments to sales agents in excess of their CMS-approved 
compensation schedules.  In addition, three selected plan sponsors made 
payments to FMOs that may have created inappropriate financial 
incentives to market their MA plans.  One plan sponsor did both.   
Inappropriate financial incentives for sales agents and FMOs may affect 
Medicare beneficiary enrollment.  Sales agents and FMOs may 
encourage Medicare beneficiaries to enroll in MA plans that pay more 
than other MA plans without regard to whether those MA plans best 
meet Medicare beneficiaries health care needs.  Once enrolled, 
Medicare beneficiaries have limited opportunities to switch MA plans 
before the next annual enrollment periods begin. 
Three of the selected plan sponsors made payments in excess of their 
CMS-approved compensation schedules, resulting in inappropriate financial 
incentives 
Payment of administrative fees in excess of compensation rate.  One 
selected plan sponsor paid in excess of its CMS-approved compensation 
schedule by paying additional flat administrative fees to sales agents in 
our sample.  For each enrollment, this plan sponsor paid flat 
administrative fees of $50 to sales agents.  These payments were in 
addition to its CMS-approved compensation payments.  Including the 
flat administrative fees, a sales agents compensation would total 
$250 per enrollee, exceeding the plan sponsors renewal year 
compensation rate of $200. 
CMS allows plan sponsors to pay fees, in addition to CMS-approved 
compensation, if these fees are for actual costs related to sales 
appointments.  However, the plan sponsors flat administrative fees do 
not appear to reflect payments for actual costs because these payments 
never varied; the plan sponsor always paid sales agents $50.  In 
addition, the plan sponsor stated that these fees were payments for 
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costs related to enrollments rather than costs related to sales 
appointments.   
Since implementing its practice of paying additional flat administrative 
fees, this plan sponsor experienced enrollment growth that exceeded 
overall MA enrollment growth throughout its region.  Between 
November 1, 2008, and June 1, 2009, this plan sponsors enrollment 
increased nearly 47 percent.  During the same period for the same 
region, MA enrollment grew by 8 percent, excluding this plan sponsors 
enrollment. 
Payments of excessive compensation rates.  One selected plan sponsor 
paid sampled sales agents in excess of its CMS-approved compensation 
schedule by paying the initial-year compensation rate, which is twice 
the renewal-year compensation rate, for enrollees it believed to be new 
to MA.  The regulations are clear that for 2009, plan sponsors may pay 
the initial-year compensation rate only for enrollees new to Medicare.  
For all other Medicare beneficiaries, including beneficiaries new to MA, 
plan sponsors must pay sales agents the renewal-year compensation 
rate until CMS notifies them otherwise.     
This plan sponsor may have gained a competitive advantage over plan 
sponsors that followed CMSs regulations.  Even if sales agents would 
have eventually received the full initial-year compensation rate, they 
received payment of the full initial-year compensation rate as much as 
5 months earlier than they otherwise would have.    
Plan sponsor representatives stated that they paid the initial-year 
compensation rate for Medicare beneficiaries new to MA to remain 
competitive with other plan sponsors in their area.  According to plan 
sponsor representatives, they hired a contractor to determine whether 
each new enrollee was new to MA after learning that other MA plan 
sponsors in their area were paying the initial-year compensation rate 
for new MA enrollees.  Compensation data from two selected plan 
sponsors that marketed in the same area show that these plan sponsors 
paid the renewal-year compensation rate.  These data do not support 
the claim that competitors paid the initial-year compensation rate.  
Regardless of its competitors compensation practices, this plan sponsor 
should have followed CMSs compensation regulations for 2009.  
A second selected plan sponsor paid in excess of its CMS-approved 
compensation schedule by paying a sales agent an additional payment, 
on top of his compensation rate, that it would have otherwise paid to the 
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FMO.  This sales agents compensation totaled as much as $375 per 
enrollment, exceeding the plan sponsors CMS-approved renewal-year 
compensation rate of $200.  A plan sponsor representative stated that in 
2006, the FMO requested that the plan sponsor pay the sales agent the 
additional amount because this sales agent was a top seller. 
Payment of finders fees in excess of compensation.  One plan sponsor 
exceeded its CMS-approved compensation rate by paying finders fees.  
This same plan sponsor also paid sales agents initial-year compensation 
rates as described previously.  The plan sponsor paid a $25 finders fee 
for referrals in addition to the sales agents compensation.  CMS 
specifically noted that such fees must be deducted from the sales agents 
compensation.41  The total compensation for an enrollment, including 
finders fees, may not exceed the plan sponsors approved compensation 
rate.  Plan sponsor representatives reported that they intend to expand 
this practice. 
Three of the selected plan sponsors payments to FMOs may have created 
inappropriate financial incentives to market their MA plans  
Variations among plan sponsors' payment to FMOs raised concerns 
about inappropriate financial incentives.42   Three plan sponsors 
payment practices may have created inappropriate financial incentives 
for FMOs to market their MA plans.  Three of the five selected plan 
sponsors paid what they deemed to be an initial-year compensation 
rate to FMOs for 2009 enrollments, whereas two of the five selected 
plan sponsors paid what they deemed to be a renewal-year 
compensation rate.  The compensation regulations intend that 
Medicare beneficiaries be enrolled in MA plans that best meet their 
health care needs.43  If some plan sponsors paid an initial-year 
compensation rate for 2009 enrollments and others did not, FMOs had 
a financial incentive to encourage their sales agents to enroll Medicare 
beneficiaries in plans that paid more rather than those that met 
Medicare beneficiaries health care needs.     
 
41 CMS, Memorandum:  Payment of Referral Fees, February 24, 2009. 
42 As previously stated, we did not determine whether these payments comply with CMS 
regulations about FMO payments or the antikickback statute.  Therefore, it is possible for 
there to be additional issues associated with these payments that are not explored in this 
study.  
43 73 Fed. Reg. 54226, 54237 (Sept. 18, 2008). 
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The three selected plan sponsors compensation practices also may have 
the potential for plan sponsors to gain a competitive advantage through 
FMO compensation after 2009.  If the three plan sponsors continue to 
pay FMOs an initial-year compensation rate for each year of a 6-year 
compensation cycle while the other two pay a renewal-year 
compensation rate, the former will continue to have a competitive 
advantage over the latter.  Paying FMOs an initial year compensation 
rate for each year of a 6-year compensation cycle would significantly 
increase the total payment an FMO would receive.  For example, if one 
of these plan sponsors paid its initial year compensation rate during 
the 5 renewal years, the plan sponsor would pay the FMO $1,050 over 
the course of 6 years as compared to a plan sponsor that paid its 
renewal-year compensation rate during the 5 renewal years for a total 
of $615 over the 6 years.   
Five of the six selected plan 
Five of the six selected plan sponsors did not 
sponsors used sales agents who 
ensure that all sales agents were qualified 
were unqualified under CMS 
under CMSs regulations 
regulations because they either 
had not passed the marketing test 
for 2009 or were not licensed at the time they took Medicare 
beneficiaries enrollment applications.  Two of the five selected plan 
sponsors used sales agents who had not passed the marketing test and 
who were unlicensed.  In our random sample of 30 sales agents per plan 
sponsor, there were 12 unqualified sales agents.  While unqualified, 
these 12 sales agents took 44 enrollment applications from Medicare 
beneficiaries.  Because we assessed only the qualifications of a sample of 
sales agents, the 12 sales agents represent the minimum number of 
unqualified sales agents from the 6 selected plan sponsors.      
Four selected plan sponsors used sales agents who took enrollment 
applications from Medicare beneficiaries before passing the marketing 
test for 2009.  These 4 plan sponsors had 10 sales agents submit 
38 enrollment applications for Medicare beneficiaries before passing the 
marketing test for 2009.  On average, the 10 sales agents took 
enrollment applications 17 days before passing the marketing test for 
2009.  These sales agents took enrollment applications as little as 1 day, 
and as many as 63 days, before passing the marketing test for 2009.   
In addition, three selected plan sponsors used unlicensed sales agents.  
These plans sponsors used at least three sampled sales agents who 
generated enrollments while unlicensed.  One unlicensed sales agent 
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also took enrollment applications before passing the marketing test for 
2009.  These unlicensed sales agents took six enrollment applications 
from Medicare beneficiaries.  One of the sales agents took an enrollment 
application 1 year and 8 months after his license had expired.  Another 
sales agent took four enrollment applications, on average, 25 days after 
his license had expired.  The other sales agent took one enrollment 
application in a State for which we found no evidence that he had ever 
been licensed. 
In spite of their application review processes, four selected plan sponsors 
did not identify enrollment applications taken by unqualified sales agents  
Our selected plan sponsors all used an application review process to 
ensure that only qualified sales agents submitted enrollment 
applications.  Under the application review process, plan sponsors 
review each enrollment application to determine that a sales agent has 
passed the annual marketing test and is licensed, among other things. 
In spite of their application review processes, four plan sponsors did not 
detect enrollment applications taken by unqualified sales agents.  
Four selected plan sponsors did not detect 37 out of 43 enrollment 
applications taken by unqualified sales agents in our sample.  In these 
cases, plan sponsors paid the sales agents for the enrollments.  The 
fifth plan sponsor detected the only enrollment application submitted by 
an unqualified sales agent to the plan.  
Two selected plan sponsors could not always identify the sales agent 
responsible for enrollment applications 
A plan sponsors application review processes cannot determine whether 
sales agents are unqualified under CMS regulations if the plan sponsor 
cannot identify the responsible sales agent.  Two selected plan sponsors 
could not identify the sales agents responsible for more than 
6,000 enrollment applications out of approximately 112,000 enrollment 
applications submitted for the 2009 annual enrollment periods. 
One of these plan sponsors kept a record only of the responsible FMO 
when they could not identify the responsible sales agent.  Thus, when 
we sampled sales agents, 6 of the 30 sales agents we selected were 
actually FMOs.  Because the plan sponsor could not identify the sales 
agents for these enrollment applications, the plan sponsor could not 
verify during its application review process that the sales agent was 
tested or licensed. 
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F I N D I N G S  
None of the selected plan sponsors contacted Medicare beneficiaries 
enrolled by unqualified sales agents   
Plan sponsors detected at least seven enrollment applications taken by 
sales agents who either had not passed the marketing test for 2009 or 
were not State licensed.  In these cases, plan sponsors reported that 
they did not pay the sales agents their compensation, but still processed 
the Medicare beneficiaries enrollments.   
Plan sponsors are required to have processes to confirm that Medicare 
beneficiaries are aware of their enrollment in MA plans and that they 
understand the MA plans rules.44  Plan sponsors have discretion as to 
the process or mechanism they put into place.  For example, plan 
sponsors may call new members or conduct marketing audits to ensure 
that Medicare beneficiaries enrollments were based on complete and 
accurate information and that MA plan rules were completely 
explained.  By calling to confirm whether Medicare beneficiaries 
enrollments were based on complete and accurate information, plan 
sponsors could correct any incorrect or misleading information given to 
Medicare beneficiaries by unqualified sales agents. 
No plan sponsor that we reviewed had a policy to contact Medicare 
beneficiaries enrolled by an unqualified sales agent to ensure that those 
Medicare beneficiaries were aware of their enrollment or that they 
understood the MA plans rules.  During interviews, representatives 
from several selected plan sponsors stated that they must enroll an 
applicant unless the Medicare beneficiary is not eligible or the 
enrollment application is incomplete.  They stated that they do not have 
enough time to follow up with Medicare beneficiaries whose enrollment 
applications had been taken by unqualified sales agents because they 
must submit the enrollment applications to CMS within 7 days of 
receipt.45 
The number and topics of sales agent marketing  During the 2009 annual 
complaints remained unchanged after  enrollment periods, which began 
after CMS implemented the sales 
implementation of sales agent marketing 
agent marketing regulations, 
regulations 
approximately 13,000 sales agent 
marketing complaints were reported to CMS.  Similarly, approximately 
 
44 42 CFR  422.2272(b). 
45 MMCM, ch. 2,  40.3. 
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F I N D I N G S  
13,000 sales agent marketing complaints were reported to CMS during 
the 2008 annual enrollment periods, before implementation of the sales 
agent marketing regulations.  For both years annual enrollment 
periods, sales agent marketing complaints represented less than 
10 percent of all complaints reported to CMS. 
For both 2008 and 2009, sales agent marketing complaints referenced the 
same three broad topics   
Sales agent marketing complaints from the Complaint Tracking 
Modules marketing misrepresentation subcategory for both 2008 and 
2009 referenced one or more of the same three broad topics:  
(1) providing misleading information about plan benefits, (2) enrolling 
Medicare beneficiaries without their consent, and (3) engaging in 
aggressive sales tactics.  Complaints reported to the Departments of 
Insurance, MEDICs, and the six selected plan sponsors for the 
2009 annual enrollment period also referenced these same three broad 
topics.   
Misleading information about plan benefits.  For both the 2008 and 
2009 annual enrollment periods, the majority of sales agent marketing 
complaints reported to CMS referenced sales agents providing 
misleading information.  A typical complaint regarding a sales agent 
providing misleading information alleged that the sales agent told the 
Medicare beneficiary that an MA plan supplemented traditional 
Medicare or otherwise misled the Medicare beneficiary about an MA 
plans benefits.  For example, one complaint in the Complaint Tracking 
Module alleged that a sales agent was to enroll a Medicare beneficiary 
in a plan that would supplement her health care coverage.  The sales 
agent stated that the new plan would not include prescription drug 
coverage because the Medicare beneficiary already had prescription 
drug coverage.  After enrolling, the Medicare beneficiary learned that 
the MA plan supplanted rather than supplemented her previous health 
care and prescription drug coverage and did not cover the prescription 
drugs she was taking.  
Although the three broad topics did not change between 2008 and 2009, 
the proportion of complaints to CMS alleging sales agents provided 
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misleading information decreased from 85 percent to 64 percent.  This 
difference is statistically significant at the 95-percent confidence level.46   
Enrolled without consent.  Typically, complaints alleging that Medicare 
beneficiaries were enrolled without their consent stated that the 
Medicare beneficiaries were unaware of how they had been enrolled.  
For example, one complaint in the Complaint Tracking Module stated 
that a Medicare beneficiary asked the sales agent to return with more 
information on the MA plan before submitting his enrollment 
application.  The sales agent did not return but the Medicare 
beneficiary was enrolled in the MA plan.     
Aggressive sales tactics.  Generally, complaints of sales agents using 
aggressive sales tactics alleged that sales agents inappropriately and 
inaccurately discussed the Medicare beneficiaries current plans or 
contacted Medicare beneficiaries at their residences.  For example, one 
complaint in the Complaint Tracking Module alleged that a sales agent 
called the Medicare beneficiary claiming to be from Medicare.  The sales 
agent stated that the Medicare beneficiarys current plan would no 
longer provide Medicare coverage and that he would need to enroll in a 
new plan.  The Medicare beneficiary enrolled but called the 
1-800-MEDICARE hotline to disenroll upon learning that this 
information was false.   
 
46 There was no statistically significant change between the 2008 and 2009 annual 
enrollment periods for complaints of sales agents enrolling Medicare beneficiaries without 
their consent and using aggressive sales tactics.  Because Medicare beneficiaries could 
reference one or more of the three broad topics in each complaint, a decrease in the 
proportion of complaints referencing misleading information is independent of any change 
in the proportion of complaints referencing the other two topics. 
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 R E C O M M E N D A T I O N S  
We reviewed six plan sponsors to determine whether MA plan sponsors 
complied with regulations concerning the compensation and 
qualifications of sales agents during the first plan year after these 
regulations were implemented.  Each of the six selected plan sponsors 
did not follow at least one of the marketing regulations concerning sales 
agent compensation and qualifications.  Five selected plan sponsors 
compensation practices resulted in inappropriate financial incentives for 
sales agents or may have created inappropriate financial incentives for 
FMOs to market their MA plans.  In addition, five of the six selected 
plan sponsors did not ensure that all sales agents were qualified.  
Finally, the number and topics of complaints regarding sales agents 
reported to CMS did not change after CMS implemented the sales agent 
marketing regulations.  
Although, in some cases, the instances of plan sponsors noncompliance 
may not have involved large numbers of sales agents or Medicare 
beneficiaries, in other cases the vulnerabilities were systemic.  In 
particular, some of the compensation practices were standard operating 
procedures for plan sponsors, although they did not follow CMSs 
compensation regulations.  Any instances of noncompliance with sales 
agent marketing regulations represent gaps in plan sponsors oversight 
and a failure to fully implement the sales agent regulations.   
While this study was limited to six plan sponsors, compliance with sales 
agent marketing regulations is a larger concern.  During the course of 
CMSs oversight activities, it identified 84 plan sponsors, including 5 of 
the 6 plan sponsors in this review, as either having deficiencies in their 
implementation of sales agent marketing regulations or noncompliance 
with a sales agent marketing regulation. 
In light of these concerns, we recommend that CMS: 
Take appropriate actions regarding the specific instances of noncompliance 
documented in this report 
Each of the six selected plan sponsors made payments in excess of their 
CMS-approved compensation schedules or enrolled beneficiaries 
through unqualified sales agents.  We have forwarded the specific 
instances of noncompliance documented in this report to CMS for 
followup. 
 
 
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Audit plan sponsors and include an assessment of the vulnerabilities 
identified in this report 
In addition to following up on specific instances of noncompliance 
identified in this report, CMS should oversee plan sponsors compliance 
with sales agent marketing regulations through onsite compliance 
audits.  CMS staff conducted a compliance audit of one plan sponsor 
during the summer of 2009 and indicated that they plan to conduct 
more audits to ensure compliance with sales agent marketing 
regulations.  We encourage CMS to expand its oversight efforts through 
compliance audits.  We suggest that CMS incorporate an assessment of 
the specific vulnerabilities identified in this report into its audit 
protocol, such as the inappropriate payment of administrative fees and 
finders fees.  In addition, we encourage CMS to consider using 
complaint rates from the Complaint Tracking Module to focus audits or 
select plan sponsors for audits in future years. 
CMS staff also indicated that as part of these audits, CMS will assess 
plan sponsors oversight of sales agents.  Our review indicates that plan 
sponsors are not always able to identify enrollment applications from 
unqualified sales agents.  For this reason, we encourage CMS to review 
the systems plan sponsors have in place to review enrollment 
applications from sales agents. 
Issue additional regulations concerning FMO payments 
CMS regulations lack specificity concerning payments to FMOs.  As a 
result, plan sponsors may have created financial incentives that could 
lead FMOs to encourage sales agents to enroll Medicare beneficiaries in 
plans that do not meet their health care needs.  Because FMOs, like 
sales agents, may influence Medicare beneficiaries enrollment in MA 
plans, CMS should issue additional regulations more clearly defining 
how and how much FMOs should be paid for their services.  In the 
meantime, CMS should issue guidance to plan sponsors clarifying 
appropriate payments to FMOs.   
Issue regulations requiring plan sponsors to contact all new enrollees to 
ensure that they understand plan rules  
CMS regulations require sales agents to pass a marketing test on 
Medicare regulations annually and be State licensed.  Requiring sales 
agents to pass the annual marketing test and to be State licensed 
supports an environment where sales agents have the knowledge 
necessary to help Medicare beneficiaries enroll in MA plans that meet 
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R E C O M M E N D A T I O N S  
their health care needs.  Yet, no plan sponsor had a policy to contact 
Medicare beneficiaries enrolled through unqualified sales agents.   
In August 2009, CMS issued revised marketing guidance instructing 
plan sponsors to contact all new enrollees to ensure that Medicare 
beneficiaries understand plan rules.  To protect Medicare beneficiaries 
and ensure that they understand their new plans rules, we recommend 
that CMS codify this guidance in regulations.   
In addition, if a Medicare beneficiarys enrollment is discovered to have 
been inappropriate, the plan sponsor should also be required to alert 
CMS.  If necessary, CMS should grant a special enrollment period to 
Medicare beneficiaries enrolled in plans that do not best meet their 
health care needs.  
Issue guidance clarifying that plan sponsors should terminate unlicensed 
sales agents immediately upon discovery  
Sales agent marketing regulations stipulate that plan sponsors must 
employ licensed sales agents.  Yet, we found instances in which 
unlicensed sales agents enrolled Medicare beneficiaries in plans offered 
by three of the six plan sponsors.  CMS should issue guidance clarifying 
that plan sponsors should immediately terminate any sales agent found 
to be unlicensed while conducting marketing activities.  In addition, 
CMS should collect reports of terminated sales agents during its audits 
of plan sponsors.  Pursuant to its Memorandums of Understanding with 
State Departments of Insurance, CMS should then notify the applicable 
States of instances in which plan sponsors terminated unlicensed sales 
agents.    
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our first recommendation.  CMS concurred in part 
with the second recommendation, stating that it would conduct audits 
or our oversight activities of plan sponsors posing the greatest risk to 
Medicare beneficiaries.  We agree with this approach and we have 
amended the wording of the recommendation in the report.  CMS did 
not concur with our final three recommendations.   
Specifically, CMS did not concur with our recommendation for more 
specific regulations concerning FMO compensation payments.  CMS 
stated that regulations at 42 CFR  422.2274(a)(1)(iv) apply to FMO 
payments and therefore it is unnecessary to issue regulations 
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concerning FMO payments.  However, we found that the lack of 
specificity in the compensation regulations allowed plan sponsors to 
create financial incentives that may lead FMOs to encourage sales 
agents to enroll Medicare beneficiaries in plans that pay more.  We 
continue to think that CMS should clearly define how and how much 
FMOs should be paid for their services.  However, we have broadened 
our original recommendation to allow CMS latitude in designing the 
best approach in regulating FMO payments. 
CMS also did not concur with our recommendation to issue regulations 
requiring plan sponsors to contact all new enrollees to ensure that they 
understand plan rules.  CMS responded that new regulations are 
unnecessary because CMS has already used existing regulations as the 
basis for new guidance which requires outbound enrollment verification 
calls to make sure that newly enrolled Medicare beneficiaries 
understand plan rules.  If CMS guidance is sufficient to ensure that 
plan sponsors conduct outbound enrollment verification calls, we agree 
that it has met the intent of our recommendation.   
However, we are concerned that guidance may not be sufficient to hold 
plan sponsors accountable.  CMS should reconsider formalizing the 
guidance as regulations after monitoring plan sponsors implementation 
of outbound enrollment verification calls.  If CMS determines that 
stronger oversight authority is necessary to ensure that outbound 
enrollment verification calls are occurring, it should formalize the 
guidance in regulations. 
Finally, CMS did not concur with our recommendation to issue 
regulations requiring plan sponsors to report unlicensed sales agents to 
State Departments of Insurance.  CMS responded that it does not have 
the authority to require that plan sponsors report unlicensed sales 
agents to State Departments of Insurance.  CMS stated that the statute 
gives CMS the authority to require plan sponsors to report only 
terminations of licensed sales agents to States.  We agree that the 
statute mentions plan sponsors only reporting terminated sales agents.  
However, we do not think that the statute limits CMSs authority to 
require the reporting of all terminated sales agents, both licensed and 
unlicensed.   
In light of CMSs comments, we have modified our original 
recommendation to reflect an alternative approach for ensuring that 
plan sponsors report unlicensed sales agents to State Departments of 
Insurance.  We now recommend that CMS issue guidance requiring 
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plan sponsors to terminate all unlicensed sales agents immediately 
upon discovery.  During its audits of plan sponsors, CMS should collect 
reports of terminated sales agents and then make the names of 
terminated unlicensed sales agents available to the appropriate States 
pursuant to its Memorandums of Understanding with State 
Departments of Insurance. 
For the full text of CMSs comments, see Appendix D.   
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Medicare Improvements for Patients and Providers Act of 2008 
Provisions Concerning Sales Agents 
Table A-1:  MIPPA* Provisions Concerning Sales Agent Marketing  
Addressed in  
Associated Centers for Medicare & Medicaid Services** Guidance for Implementing the MIPPA 
MIPPA Provisions  2006 CMS 
Provisions 
Guidance 
Plan sponsors should pay sales agents an initial-year compensation rate for a sale and a 
Compensation of sales 
renewal-year compensation rate for 5 subsequent years of enrollment.  Compensation includes  x 
agents 
payments such as commissions, bonuses, gifts, prizes, awards, and finders fees. 
Plan sponsors must ensure that sales agents are trained and tested annually on Medicare rules 
Annual training and testing of 
and on plan details.  Sales agents must receive a score of at least 85 percent after   
sales agents 
September 18, 2008. 
Plan sponsors must use State-licensed sales agents.  Plan sponsors also must comply with 
Use of State-licensed sales 
State laws requiring plans to give States information about sales agents marketing their  x 
agents 
Medicare Advantage (MA) plans. 
Reporting terminated sales  Effective January 1, 2009, plan sponsors must report terminated sales agents, and the reasons 
x 
agents to States  for termination, to the States in which the sales agents were contracted to sell insurance.  
Sales agents may not conduct certain types of solicitation, such as initiating marketing activities 
Unsolicited direct contacts 
with potential plan enrollees; calls to former enrollees; and approaching Medicare beneficiaries  x 
with Medicare beneficiaries 
in common areas, unless requested. 
Scope of appointment 
Sales agents must document, either in writing or recorded by phone, the scope of their 
agreements with Medicare   
appointments with Medicare beneficiaries prior to the appointments. 
beneficiaries 
Cross-selling 
non-health-care-related  Sales agents may not market any non-health-care-related products during an MA sales activity.   
products 
Sales and marketing in health  Sales agents may not conduct sales activities in health care settings except in common areas.  
care settings and educational  Sales agents may not conduct sales activities, such as the distribution of marketing materials or  x 
events  plan enrollment applications, at educational events. 
Nominal value of gifts to  The nominal value of gifts is defined as an item worth $15 or less, based on the retail purchase 
x 
Medicare beneficiaries  price of the item.  
Providing meals to Medicare  Sales agents may not provide or subsidize meals.  Sales agents are allowed to provide light 
 
beneficiaries  snacks and refreshments. 
Sources:  Office of Inspector General analysis of:  (1) MIPPA; (2) CMS marketing guidance issued on September 15, 2008; and (3) Medicare Marketing Guidelines for 
MA Plans, Medicare Advantage Prescription Drug Plans, Prescription Drug Plans, and 1876 Cost Plans revised on July 25, 2006.    
       *Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). 
       **Centers for Medicare & Medicaid Services (CMS). 
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   A P P E N D I X ~ B  
DETAILED METHODOLOGY 
Examining Sales Agents Compensation and Qualifications 
To select a purposive sample of plan sponsors, we first created a 
sampling frame targeting Medicare Advantage (MA) plan sponsors that 
used sales agents to market to Medicare beneficiaries.  First, we 
identified all plan sponsors offering plans for 2009 using 2009 plan-level 
enrollment data from the Centers for Medicare & Medicaid Services 
(CMS).  Next, we identified those plan sponsors that offered MA plans.  
From these plan sponsors, we selected those that CMS identified as 
using sales agents.  We then selected only plan sponsors with more than 
100 enrollees.   
Finally, we selected plan sponsors that received at least one complaint 
in the Complaint Tracking Module marketing category between 
October 1, 2008, and February 28, 2009.  We selected plan sponsors 
with high rates of marketing complaints to test whether they may have 
also had underlying marketing issues.  We identified 73 plan sponsors 
for our sampling frame.  Table B-1 provides the number of plan 
sponsors that met each step of our sampling frame criteria.      
Table B-1:  Sampling Frame of MA Plan Sponsors for 
2009  
Number of Plan 
Sampling Criteria for Plan Sponsors 
Sponsors 
Plan sponsor for Medicare  281 
Offered MA plans  266 
Marketed through sales agents  109 
Had more than 100 enrollees  106 
Had at least one complaint in Complaint Tracking 
Module  73 
Source:  Office of Inspector General (OIG) analysis of CMS plan-level enrollment data 
and Complaint Tracking Module data, 2009. 
 
Purposive sample of plan sponsors.  For each of the 73 plan sponsors, we 
calculated the complaint rate using complaints in the Complaint 
Tracking Modules marketing category between October 1, 2008, and 
February 28, 2009.  We used the broader marketing category because 
we found sales agent marketing complaints in the marketing category 
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and not only in the marketing misrepresentation subcategory.  We 
found 6,498 marketing complaints in the marketing category during 
this period, only some of which identified plans or plan sponsors.  Of 
these complaints, 2,781 were associated with the 73 plan sponsors from 
our sampling frame.  Using the 2,781 complaints, we then calculated 
the complaint rates per 1,000 Medicare enrollees for the 73 plan 
sponsors within our sampling frame.       
To ensure the representation of different-sized plan sponsors in our 
selection, we stratified the 73 plan sponsors by small, medium, and 
large enrollment.  We determined the total enrollment for each plan 
sponsor using 2009 CMS plan-level enrollment data available on CMSs 
Web site.  From each of the three strata, we selected the plan sponsors 
with the highest complaint rates.  We selected one plan sponsor from a 
stratum of plan sponsors with small enrollment, two from a stratum 
with medium enrollment, and three from a stratum with large 
enrollment.47  Table B-2 provides the number of plan sponsors selected 
for each of the three strata as well as enrollment ranges.    
Table B-2:  Strata of Plan Sponsors 
Number of  Overall 
Range of 
Selected Plan  Number of Plan 
Plan Sponsor Size  Enrollment per 
Sponsors per  Sponsors per 
Stratum 
Stratum  Stratum 
Small enrollment  1  24  1,50015,999 
Medium enrollment  2  25  16,00063,999 
Large enrollment  3  24  64,0006,000,000 
Source:  OIG analysis of CMS plan-level enrollment data and Complaint Tracking Module data, 2009. 
 
Random sample of sales agents.  For each selected plan sponsor, we 
requested a list of sales agents who enrolled at least one Medicare 
 
47 We excluded the two plan sponsors with the highest complaint rates in the stratum of 
small plan sponsors.  The plan sponsor with the highest complaint rate in this stratum did 
not receive applications for enrollment from any of its sales agents for the 2009 plan year 
enrollment period.  The second plan sponsor was owned by another plan sponsor in our 
sample.  In addition, we excluded one plan sponsor with the second highest complaint rate 
from the large enrollment strata because it was under Federal investigation at the time of 
our data collection. 
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A P P E N D I X   ~   B  
 
beneficiary in an MA plan for 2009.  From this list, we selected a 
random sample of 30 sales agents for that plan sponsor.   
Two of the selected plan sponsors could identify only the field marketing 
organization (FMO), rather than the sales agent, in some instances.  
When we requested a list of sales agents who enrolled at least one 
Medicare beneficiary, the lists included FMOs as well as individual 
sales agents.  As a result, for 1 selected plan sponsor, our random 
sample resulted in a selection of 6 FMOs and 24 sales agents.  We 
identified 14 sales agents for the 6 FMOs from enrollment applications 
and obtained compensation, testing, and licensure data for the 14 sales 
agents.  This resulted in a sample of 38 sales agents for this plan 
sponsor. 
Data collection.  To gather data, we conducted site visits to each selected 
plan sponsor.  From each selected plan sponsor, we requested the 
following information 48 or 72 hours before the site visit:  (1) copies of 
all 2009 MA enrollment applications generated by the sampled sales 
agents; (2) documentation of payments made to the sampled sales 
agents and to other individuals or entities associated with enrollments 
generated by the sampled sales agents (i.e., commissions, bonuses, gifts, 
prizes, awards, and finders fees) from January 1, 2009, through our site 
visits in April 2009; and (3) testing dates and test scores for the sampled 
sales agents for 2009.   
Data verification.  During the site visits, we verified the accuracy and 
completeness of all requested data.  To validate the data for each of the 
sampled sales agents, we compared the data the plan sponsors provided 
us to those data in their data systems.   
We were able to validate the compensation data we collected for five of 
the six selected plan sponsors.  For one plan sponsor, compensation data 
were unverifiable because its systems for collecting compensation data 
had no search function across the various systems that could link all 
payments for a particular enrollment application.  Our analysis for this 
plan sponsor is based on the unverified data provided by the plan 
sponsor. 
Structured interviews.  In addition to collecting and verifying data, we 
conducted structured interviews with each of the six selected plan 
sponsors.  We asked plan sponsor representatives about their oversight 
activities concerning sales agent marketing.  We also asked how they 
had implemented the sales agent marketing provisions detailed in the 
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Medicare Improvements for Patients and Providers Act of 2008.  We 
collected documentation, such as policies, procedures, and 
communications with sales agents, to verify their statements. 
Medicare Beneficiary Complaints Regarding Sales Agent Marketing 
The Complaint Tracking Module is a central repository of complaints 
related to MA and prescription drug coverage received in the CMS 
regional office or central office or through 1-800-MEDICARE.  For the 
2008 and 2009 annual enrollment periods, we analyzed complaints 
concerning MA plan sponsors that CMS received from October through 
April of the next year.  We chose these periods because they capture 
complaints when marketing for the annual enrollment periods begins in 
October through 1 month after the marketing period ends in March.  
Our collection period extends 1 month beyond the end of the annual 
enrollment periods because Medicare beneficiaries may not realize that 
they are enrolled in inappropriate plans until after they have attempted 
to access benefits.  According to our analysis of Complaint Tracking 
Module data since 2005, the majority of marketing complaints were 
reported to CMS between October and April of the next year. 
Number of sales agent marketing complaints.  To identify the number of 
sales agents marketing complaints to CMS for the 2008 and 2009 annual 
enrollment periods, we selected 2 stratified random samples of 
400 complaint records from the Complaint Tracking Module.  We stratified 
the complaint records by those that are categorized as marketing 
misrepresentation and those that are not.  We selected 100 complaint 
records from the marketing misrepresentation stratum and 
300 complaints from the other stratum for each period.  We sampled 
complaints from two strata because CMS staff expressed concerns that not 
all sales agent complaints were correctly categorized.  Our sampling 
strategy enabled us to estimate the percentage of sales agent complaints 
for each time period with expected absolute precision of +/- 6 percent at the 
95-percent confidence level.   
To verify whether a complaint in the Complaint Tracking Module was a 
sales agent marketing complaint, we reviewed all sampled complaints.  
If a complaint was placed in the marketing misrepresentation 
subcategory, we considered it a sales agent marketing complaint as long 
as there was not information to the contrary.  If the complaint was not 
categorized as marketing misrepresentation by CMS, we considered it 
a sales agent marketing complaint if the complaint summary included a 
direct or indirect reference to certain keywords and there was no 
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contradictory evidence.  The keywords we used included "agent", 
"broker", "mislead", or "misrepresent".  We had three separate reviewers 
confirm and agree that a complaint should be categorized as sales agent 
marketing.  Some complaints lacked enough detail to understand the 
situation being reported.  When this was the case, we relied on CMS's 
classification ofeach complaint.  Table B-3 provides for each stratum 
the overall number of complaints in the Complaint Tracking Module, 
the number of complaints sampled, and the number ofverified sales 
agent complaints. 
Table B-3:  Strata of Complaints 
Overall  Number of  Number of 
Complaint Tracking Module 
Year  Number of  Sampled  Verified 
Subcategory 
Complaints  Complaints  Complaints 
Marketing misrepresentation  7,219  100  85 
2008 
Other  183,226  300  11 
Marketing misrepresentation  11,146  100  89 
2009 
Other  152,193  300  6 
Source: OIG analysis of CMS plan-level enrollment data and Complaint Tracking Module data, 2009. 
Nature ofsales agent marketing complaints.  To determine the nature of 
complaints, we read each verified complaint in the "marketing 
misrepresentation" category for common topics.  We then organized the 
common topics into broader themes that were apparent in their 
complaint descriptions.  We also read complaints related to each 
broader theme to determine what these complaints typically alleged. 
Finally, we selected examples ofcomplaints to provide insight into the 
details of sales agent marketing.  We compared the proportion of 
complaints for each theme between the 2008 and 2009 annual 
enrollment periods.  We were able to produce yearly estimates of 
proportions of complaints for the different complaint types with absolute 
precisions of +/- 6 percent at the 95-percent confidence level. 
We also collected complaint data from Medicare Drug Integrity 
Contractors (MEDIC), the Departments ofInsurance, and the 
six selected plan sponsors to understand how the nature of complaints 
they received compared to those CMS received.  From the two MEDICs, 
we requested complaints related to sales agents received between 
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October 1, 2008, and March 31, 2009.  We chose these periods to match 
the periods from our analysis of Complaint Tracking Module complaints 
as closely as possible while remaining timely with our analysis.  To 
avoid duplication of complaints that MEDICs entered in the Complaint 
Tracking Module, we requested only complaints that were not entered 
in the Complaint Tracking Module. 
In addition to collecting data from MEDICs, we surveyed the 
Departments of Insurance for each State and U.S. territory to determine 
the types of sales agents marketing complaints they received.  
Fifty-one of the fifty-six Departments of Insurance surveyed responded.  
We had identified complaint themes from our Complaint Tracking 
Module analysis and asked whether the Departments of Insurance had 
received these types of complaints.  We also gave the Departments of 
Insurance the opportunity to comment on other types of complaints they 
had received. 
Finally, we requested a record of all complaints received by the selected 
plan sponsors.  We requested complaints related to sales agents 
received between October 1, 2008, and February 28, 2009, shortly before 
we contacted the plan sponsors.  We read each complaint to determine 
whether it concerned sales agent marketing and common topics.  We 
then organized the common topics into broader themes.   
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 A P P E N D I X ~ C  
Estimates and Confidence Intervals for Samples From the Centers 
for Medicare & Medicaid Services Complaint Tracking Module  
Table C-1:  Estimates of the Number of Sales Agent Marketing Complaints Reported 
in the Complaint Tracking Module for the 2008 and 2009 Annual Enrollment Periods 
Number of Projected Sales 
95-Percent 
Enrollment Period  Sample Size  Agent Marketing 
Confidence Interval 
Complaints 
2008   400  12,854  8,91016,799 
2009  400  12,964  10,44815,479 
Source:  Office of Inspector General (OIG) analysis of Complaint Tracking Module, 2009. 
Table  C-2:  Types of Sales Agent Marketing Complaints Categorized as Marketing Misrepresentation for 
the 2008 and 2009 Annual Enrollment Periods 
 95-Percent 
Point   95-Percent   Point 
Sample Size  Sample Size  Confidence 
Estimate for  Confidence  Estimate for 
Types of Sales Agent  for 2008  for 2009  Interval for 
2008  Interval for 2008  2009 
Marketing Complaints  Enrollment  Enrollment  2009 
Enrollment  Enrollment  Enrollment 
Periods*  Periods*  Enrollment 
Periods  Periods   Periods 
Periods 
Providing misleading information  85  89  84.7%  75.4%90.9%  64.0%  53.5%73.4% 
Enrolling without consent  85  89  14.1%  8.2%23.3%  24.7%  16.8%34.8% 
Engaging in aggressive tactics  85  89  14.1%  8.2%23.3%  21.3%  14.0%31.1% 
Source:  OIG analysis of Complaint Tracking Module, 2009.  
*Sample sizes are based on the number of verified sales agent marketing complaints within the marketing misrepresentation strata only. 
 
Table  C-3:  Estimates for Comparisons of Types of Sales Agent Marketing Complaints  
Categorized as Marketing Misrepresentation for the 2008 and 2009 Annual 
Enrollment Periods 
Sample Size 
Point Estimate For 
for 2008 and   95-Percent  
Types of Sales Agent  Difference Between 
2009  Confidence  P-Value 
Marketing Complaints  2008 and 2009  
Enrollment  Interval  
Enrollment Periods 
Periods 
Providing misleading 
information  174  20.7%  8.0%33.3%  .0015* 
Enrolling without consent  174  10.6%  -1.1%22.3%  .0752 
Engaging in aggressive tactics  174  7.2%  -4.1%18.6%  .2103 
Source:  OIG analysis of Complaint Tracking Module, 2009. 
*Statistically significant at the 95-percent confidence level. 
 
 
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A  P  PEN  D  D 
Agency Comments 
DEPARTMENT OF HEALTH & HUMAN SERVICES  Canters lor Medicare & Medicaid Services 
RECf.\\1 F.8 
Administrator 
20090EC '8  PM 3: 18  Washington. DC 20201 
OI'l'iCi;G~~t\~:~)~C T C 
DEC  1 7 2009
DATE: 
TO: 	 Daniel R. Levinson 
Inspector General 
.FROM: 	 Charlene Frizzera 
Acting Administrator 
SUBJECT: 	 Office ofInspector General (OIG) Draft Report:  "Beneficiaries Remain 
Vulnerable to Sales Agents' Marketing of Medicare Advantage Plans," (OEI-05
09-00070) 
Thank you for the opportunity to comment on the OIG Report: "Beneficiaries Remain 
Vulnerable to Sales Agents' Marketing of Medicare Advantage Plans." The Centers for 
Medicare & Medicaid Services (CMS) recognizes the importance of taking the appropriate 
compliance and enforcement actions against Medicare Advantage (MA) sales agents who 
inappropriately market to Medicare beneficiaries. 
The CMS has continued to take steps to ensure that beneficiaries are protected from deceptive 
and inappropriate actions taken by sales agents and brokers who sell MA plans. CMS takes 
immediate action when complaints of inappropriate marketing are reported.  We have effectuated 
a comprehensive marketing surveillance initiative designed to detect and respond to incidents of 
inappropriate marketing.  This includes secret shopping ofpublic sales events and individual 
sales appointments conducted by MA organizations, review of marketing advertisements for 
inappropriate content and other surveillance activities. CMS takes immediate action when 
marketing violations are uncovered, including issuance of compliance letters requiring MA 
organizations and Prescription Drug Plan spOLL~ors to implement corrective measures, which has 
the direct impact of protecting Medicare beneficiaries. 
In llddition, eMS issued regulations in l&te 2008 to establish limits on commission rates paid to 
agents seIling both MA and Prescription Drug plans in order to prevent beneficiaries moving 
inappropriately between plans. Earlier this year, we issued additional guidance to strengthen 
those rules that established fair market value limits for initial and renewal compensation and 
provided further guidance on payment ofreferral fees to ensure that compensation amounts paid 
to agents do not exceed the fair market value limits identifiep by CMS. Given the new MIPP A 
marketing requirements were released late in the contract year CMS expeets to see 
improvements as organizations implement additional internal controls and improve oversight to 
ensure compliance with these requirements. 
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 A C K N O W L E D G M E N T S  
This report was prepared under the direction of Ann Maxwell, Regional 
Inspector General for Evaluation and Inspections in the Chicago 
regional office, and Thomas Komaniecki, Deputy Regional Inspector 
General.   
Mark Stiglitz served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Chicago regional 
office who contributed include Mara Werner, Margarita Rodriguez, 
Erica Fleischer, Brooke Isham, Melissa Baker, Laura Kordish, and Beth 
McDowell; central office staff who contributed include Rita Wurm and 
Kevin Farber. 
  
 
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Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others.  
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations.  OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS.  
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.