PREDATORY SALES PRACTICES IN

MEDICARE ADVANTAGE

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 26, 2007

Serial No. 110–60

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43–431 PDF 2008

PREDATORY SALES PRACTICES IN

MEDICARE ADVANTAGE

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 26, 2007

Serial No. 110–60

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov

PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE

COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

BUD ALBRIGHT, Minority Staff Director

(II)

(III)

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

BART STUPAK, Michigan, Chairman

DIANA DeGETTE, Colorado

CHARLIE MELANCON, Louisiana

Vice Chairman

HENRY A. WAXMAN, California

GENE GREEN, Texas

MIKE DOYLE, Pennsylvania

JAN SCHAKOWSKY, Illinois

JAY INSLEE, Washington

JOHN D. DINGELL, Michigan (ex officio)

ED WHITFIELD, Kentucky

Ranking Member

GREG WALDEN, Oregon

MIKE FERGUSON, New Jersey

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

JOE BARTON, Texas (ex officio)

(V)

C O N T E N T S

Page

Hon. Bart Stupak, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 1

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth

of Kentucky, opening statement ......................................................................... 4

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 5

Hon. Gene Green, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 7

Hon. Jan Schakowsky, a Representative in Congress from the State of Illinois, opening statement ....................................................................................... 8

Hon. Michael C. Burgess, a Representative in Congress from the State of

Texas, opening statement .................................................................................... 9

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 10

WITNESSES

David Lipschutz, staff attorney, California Health Advocates ............................ 12

Prepared statement .......................................................................................... 14

Kathleen Healey, director, State Health Insurance Assistance Program, Alabama Department of Senior Services ................................................................. 39

Prepared statement .......................................................................................... 41

Lee Harrell, deputy commissioner, Mississippi Insurance Department ............. 46

Prepared statement .......................................................................................... 49

Brenda Clegg-Boodram, Judiciary House .............................................................. 63

Accompanied by Mary Royal, Grady Hammonds, Edith Williams, and Jennifer Mezey, supervising attorney, Legal Aid Society of the District of

Columbia

Prepared statement .......................................................................................... 65

Francis Soistman, executive vice president, government and individual plans,

executive vice president, health plan operations, Coventry Health Care,

Incorporated .......................................................................................................... 84

Prepared statement .......................................................................................... 87

Peggy Olson, Healthwise Insurance Planning, LLC ............................................. 104

Prepared statement .......................................................................................... 106

Gary Bailey, vice president, Medicare operational performance, Wellcare

Health Plans, Incorporated ................................................................................. 112

Prepared statement .......................................................................................... 113

Abby Block, director, Center for Beneficiary Choices, Centers for Medicare

and Medicaid Services ......................................................................................... 133

Prepared statement .......................................................................................... 136

Answers to submitted questions ...................................................................... 238

Kim Holland, commissioner, Oklahoma Insurance Department ......................... 147

Prepared statement .......................................................................................... 149

Jim Poolman, commissioner, North Dakota Insurance Department ................... 150

Prepared statement .......................................................................................... 153

SUBMITTED MATERIAL

‘‘Medicare Private Fee-for-Service Plans: A Market Driven Blueprint for Enhancing Value,’’ by John Gorman and Jean LeMasurier .................................. 191

James S. Theiss, chief privacy officer, Human, Incorporated, letter of June

2, 2006 to Mr. Jim Poolman ................................................................................ 195

Humana, Incorporated news release of June 5, 2006 ........................................... 213

Page

VI

‘‘After the Goldrush: the Marketing of Medicare Advantage and Part D

Plans,’’ California Health Advocates, January 2007 ......................................... 215

‘‘Methods Used by Insurers Are Questioned,’’ by Robert Pear, the New York

Times, May 7, 2007 .............................................................................................. 234

Subcommittee exhibit binder .................................................................................. 257

(1)

PREDATORY SALES PRACTICES IN MEDICARE

ADVANTAGE

TUESDAY, JUNE 26, 2007

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC.

The subcommittee met, pursuant to call, at 10:03 a.m., in room

2123 of the Rayburn House Office Building, Hon. Bart Stupak

(chairman) presiding.

Members present: Representatives Stupak, Green, Schakowsky,

Inslee, Dingell, Whitfield, Walden, Murphy, Burgess, and Barton.

Staff present: Kristine Blackwood, Joanne Royce, Paul Jung,

John Sopko, Scott Schloegel, Voncille Hines, Kyle Chapman, Peter

Spencer, Alan Slobodin, Matt Johnson, and John Stone.

OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. STUPAK. This hearing will come to order. Today we have a

hearing entitled ‘‘Predatory Sales Practices in Medicare Advantage

Programs.’’ Each Member will be recognized for 5 minutes for an

opening statement. I will begin.

Our hearing will examine the program known as Medicare Advantage which provides insurance options for Medicare beneficiaries. One of its primary objectives was to provide Medicare

beneficiaries a wide array of managed-care choices. However, the

proliferation of private Medicare insurance plans has come at a

price. Investigators for this committee have verified countless stories of deceptive sales practices by insurance agents who prey upon

the elderly and disabled to sell them expensive and inappropriate

private Medicare plans. These shameful marketing practices targeting our most fragile and vulnerable citizens are the subject of

today’s hearing.

As often happens in the process of our investigation, usually just

before this subcommittee holds a hearing, those being investigated

make changes in their practices to appear as though they are addressing the problems at hand. On June 15, seven major health insurance companies, two of which are represented here today, voluntarily agreed to stop marketing one type of Medicare Advantage

plan, the Private Fee-for-Service plan, in response to complaints

about deceptive sales practices including forged signatures and enrollment of dead people.

Today we will explore how CMS and the insurance industry

reached the point where they had to call a moratorium on marketVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
2

ing the Private Fee-for-Service Medicare Advantage plans. We will

also hear about the real life consequences of fraudulent marketing

practices. Unfortunately, many seniors are coaxed into plans that

don’t adequately meet their health care needs. They don’t understand that if they sign up for Medicare Advantage they no longer

have the benefits of traditional Medicare coverage.

In some instances the Private Fee-for-Service plans being sold to

these individuals result in reduced coverage and higher out-of-pocket expenses that seniors on a fixed income cannot afford. And what

most people realize about the Medicare Prescription Drug Improvement Modernization Act of 2003, MMA as it is referred to, is that

it created part D of Medicare and launched prescription drug plans

run by insurance companies.

But what MMA also did was boost the payments to insurance

companies operating managed care alternatives to traditional

Medicare and called the private plans Medicare Advantage. Before

MMA the Government was paying the private plans 95 percent of

the cost of traditional Medicare. Now the Government is paying

them 112 to 119 percent of traditional Medicare.

Medicare Advantage is aptly named. It is richly funded to outcompete or privatize traditional Medicare. The launching of part D

in combination with the boost in payments to Medicare Advantage

plans has resulted in a dizzing array of choices for seniors and disabled persons.

In Houghton, MI, one of the small towns in my district in the

Upper Peninsula, Medicare beneficiaries have 54 prescription drug

plans to choose from, plus 14 Medicare Advantage plans. And that

is nothing compared to other parts of the country. For instance, in

Miami there are at least 57 prescription drug plans and 55 Medicare Advantage plans available. A May 2006 report by AARP documented the problems faced by seniors sorting through this maze

showing wide-spread confusion and even anxiety over the new

Medicare Advantage and prescription drug plans.

At what point does consumer choice become meaningless? When

seniors and their families sit down at a kitchen table to figure out

what health care program grandma or grandpa need, they should

not have to hire an accountant to help make the right choice for

them. Now we have a glut of private plans that end up dispatching

fleets of sales agents racing each other to get to the local retirement community, assisted living facility or senior center first. We

have telemarketers and insurance agents competing for commissions, prizes and trips to Las Vegas based on who sold the most

policies in the shortest time.

These abusive practices under Medicare Advantage are very

similar to the rampant sales problems witnessed with the launch

of the Medigap Insurance in the 1980s. The regulatory model

which eliminated Medigap sales fraud should be applied to Medicare Advantage. As with Medigap plans, MA plans should be

standardized, States should be able to regulate Medicare Advantage companies and agents, and insurers should be held accountable for their agents’ actions.

Our first panel will explore the extent of the problem and the

consequences of deceptive sales. We will hear first from David

Lipschutz, an attorney for the California Health Advocates. CaliforVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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nia has had a lengthy experience with Government managed care

plans and has often served as the role of the canary in the coal

mine. We are especially grateful today for the testimony of three

victims of predatory sales practice. Ms. Barbara Clegg-Boodram, a

resident of Judiciary House in Washington, DC, home to a large

number of seniors and disabled persons a few blocks from here, will

testify on behalf of her fellow residents, Edith Williams, Mary

Royal and Grady Hammonds. Mrs. Williams, Ms. Royal and Mr.

Hammonds were victimized by an agent who failed to properly explain the consequences of their enrollment in Medicare Advantage

plans.

Next, we will hear from Kathleen Healey, the director of the Alabama State Health Insurance Assistance Program, SHIP. SHIP is

a national program in each State that offers one-on-one free counseling and assistance to people on Medicare. Also, on the first panel

is Mr. Lee Harrell, deputy commissioner of the Mississippi Insurance Department. Mr. Harrell will share with us some of the practical problems State regulators face when they investigate deceptive practices under the current structure.

We will hear from the insurance industry in our second panel,

Fran Soistman from Coventry Health Care and Gary Bailey from

WellCare Health Plans will testify about the efforts of their companies to combat marketing of abuses. They are joined by Ms. Peggy

Olson, a licensed insurance agent who has specialized in Medicare

coverage since 1985. We will explore with this panel the role of the

independent agents, companies’ relationship with field marketing

organizations, general agents and sub agents, and some of the inherent challenges these relationships pose. We hope each of you

will share with us your candid assessments and your constructive

ideas.

Finally, we will hear from the Government regulators, Ms. Abby

Block, the director of the Center for Beneficiary Choices at CMS,

will testify about CMS oversight of Medicare Advantage. She is

joined by Jim Poolman, the commissioner of North Dakota Insurance Department, and Ms. Kim Holland, the commissioner of the

Oklahoma Insurance Department. These witnesses will discuss

steps their departments are taking to investigate questionable

practices and to warn seniors in their States so they can avoid

being victimized.

The financial windfall to the insurance industry attributable to

the Medicare Advantage program has been likened to the gold

rush. We are bound to hear today that the industry and CMS have

zero tolerance for deceptive sales practice. What we need, however,

is zero abuse. Why do so many elderly and disabled continue to be

enrolled through confusion, if not trickery, in unsuitable and ultimately costly plans? Hopefully, our hearing will answer some of the

questions.

Next, for an opening statement I would like to turn to my friend

and ranking member of the committee, Mr. Whitfield from Kentucky.

4

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

Mr. WHITFIELD. Well, Chairman Stupak, thank you very much

for holding this hearing on problematic sales practices of Medicare

Advantage plans. And I certainly want to thank at the outset Ms.

Clegg-Boodram, Ms. Royal, Mr. Hammonds and Mrs. Williams, who

have come this morning to talk about their personal experiences

with a a deceptive insurance agent just a few blocks from the Capitol trying to sell them a Medicare Advantage plan.

Today we are focused on Medicare beneficiaries who have been

unscrupulously coaxed, misled or fraudulently signed on to plans

that they do not really want and we appreciate this panel helping

us understand this problem.

It is important to expose problems and gaps in the oversight of

Medicare Advantage sales practices and to insure ultimately that

the Medicare Advantage program operates to its full potential as

a new benefit for Medicare beneficiaries. The program cannot reach

that potential when there is a cloud of distrust over the plans created by disreputable sales practices.

The problems we will examine today have occurred amidst a

large and rapid spread of Medicare Advantage plans across the

country. More than 8 million people are enrolled in private Medicare Advantage plans, up from about 5 million just 3 years ago

when the Medicare Modernization Act took effect. The expansion

has been particularly rapid for the Private Fee-for-Service version

of these plans which accounted for some 500,000 of the 700,000

new enrollees in 2007 so far. These Private Fee-for-Service plans

now serve some 1.5 million beneficiaries, strong evidence of their

popularity. Because these plans are not as constrained as their

managed-care counterparts are by the need for contracted doctor

networks, they have spread particularly fast in the rural areas and

heretofore have not had much access to what Medicare Part C offers in terms of extra benefits and services, lower premiums and

the like. Yet it is with these plans that State and Federal officials,

consumer advocates and the health plans themselves have seen the

large number of sales problems.

Medicare Advantage relies heavily upon insurance agents to educate people about these plans to assess the beneficiaries needs and

to assure they know what they are purchasing. With this in mind

I would like to hear specifically from representatives of the two insurance plans testifying today about how they encourage their

agents to make sales but at the same time ensure that the enrollees are fully informed. How do they train and monitor their

agents? How have they reacted to reported problems?

We should bear in mind that much of this growth in these

plans—of sales—has occurred in the shadow of the launching of the

Medicare drug benefit. With the intense focus on the drug benefit

there may have been less than necessary Federal attention on the

growth of the Advantage plans and attendant need for informing

physicians and the public about the new offerings.

Mr. Chairman, this hearing comes at an opportune time. The

Centers for Medicare and Medicaid Services has issued a new marketing guideline for the upcoming year and I understand that State

5

regulators and CMS have been working to improve oversight of the

marketing practices and most recently seven insurers who account

for 90 percent of the Medicare Private Fee For Service market announced a moratorium on sales until CMS certifies they have instituted new marketing provisions.

This is a good juncture for the subcommittee to examine why the

sales abuses have occurred and whether the new measures will be

sufficient to reduce the problems as we move forward to the future.

And I yield back the balance of my time.

Mr. STUPAK. I thank the gentleman.

For an opening statement, the chairman of the full committee,

Mr. Dingell, opening statement, sir.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr DINGELL. Mr. Chairman, this is a very important hearing and

I thank you and commend you for having it.

I will be blunt. The Medicare Advantage marketing practices

that have come to the attention of this committee are disgraceful

in the extreme. Frankly, they have come as no surprise to those of

us who have long questioned the structure of the Medicare Advantage Program and they tend to be a replication of some of the

charges we have seen of some of these same people doing the same

thing with regard to Medigap which this committee had to act upon

years ago to stop the same kind of outrageous practices again by

some of the same people.

I would note that we ought to ask why are Medicare payments

for Medicare Advantage beneficiaries on the average 12 to 50 percent higher then those that Medicare pays for beneficiaries enrolled

in traditional Medicare. We were told that this is going to be a device which will bring competition and reduce costs. Why should the

vast majority of traditional Medicare beneficiaries pay higher

monthly premiums to subsidize Medicare Advantage enrollees? And

that total subsidy is something on the order of $700 million that

is flowing to a group of people through the hands of a group of insurance companies to others who oft times are more affluent.

Wasn’t privatization supposed to help contain costs and allow for

more efficient delivery of quality health care? In my view Medicare

Advantage is not containing costs and there is no evidence that it

is providing value to beneficiaries commensurate with its greater

cost. On the contrary, as we will hear today the very structure of

Medicare Advantage creates conditions ripe for swindling the elderly and disabled. The real beneficiaries of these programs are the

insurance companies, which are profiting splendidly. Humana is reportedly earning 66 percent of its net income from sales of Medicare Advantage products this year.

Should our Medicare Trust Fund be subsidizing the insurance industry? And, indeed, there is an interesting thing to note here. The

Medicare Trust Fund is being depleted 2 years early by the events

that we are discussing today. Clearly, the administration thinks so.

The unprecedented overpayments to the insurance industry are

part of the administration’s agenda to privatize the Medicare system and they are being subsidized by overpayments of somewhere

6

between 12 and 30 percent. Something that is totally unjustifiable

and unsupervised. So far this privatization has neither saved

money nor provided verifiable efficiencies. It has created some very

interesting things. First, deep confusion over a ballooning array of

plans, and second armies of sales agents competing for commissions, cash prizes, trips to Las Vegas for those who sign-up the

greatest number of seniors in the shortest time.

The industry will tell us that they need time to work out the

kinks in the provision for bringing about more effective, more cost

effective, and more coordinated care. But they have had decades to

do this. It is undone, and I hope that Mr. Chairman, your labors

thus far and that of the committee will help us move this matter

forward.

Private managed care options to traditional Medicare have been

around since the creation of Medicare. With the introduction of the

Medicare Plus Choice Act in 1997, Medicare Health Maintenance

Organizations (HMOs) and Preferred Provider Organizations

(PPOs) really took off. In order to encourage cost containment, private insurers were reimbursed between 95 percent and 102 percent

of the cost of traditional Medicare. A number of the better run

Medicare managed care plans were able to offer additional benefits

even at these lower reimbursements.

But after an initial surge in growth many plans started withdrawing from the market citing inadequate payments from the

Government even though they were turning in some fine profits.

The administration responded in 2003 by throwing still more

money at the insurers to prime the Medicare privatization pump.

Insurers responded to the lure of big profits by launching a dizzying number and variety of Medicare Advantage plans.

In addition to draining the Medicare Trust Fund, as I mentioned,

by 2 years, more quickly, overpayments to the insurance industry

serve as a pervasive incentive for insurance companies and agents

to aggressively market their products without regard to the seniors’

health, financial well-being or ability to deal with the kind of practices which we are seeing.

Let us look at some of the things that the committee has heard.

We have received evidence of shameful practices. What are they?

Brokers signing up people with Alzheimer’s and psychiatric disorders, brokers forging signatures, and signing up dead people, brokers telling people that Medicare sent them and that Medicare is

being eliminated and they must sign-up or lose their health coverage.

I want to thank our witnesses for appearing before us today to

share with us some of the glaring problems with Medicare Advantage and possible solutions. And I look forward to working with

you, Mr. Chairman, and members of the committee, not only to

bringing this out but to correcting some of these scandalous abuses.

Thank you.

Mr. STUPAK. Thank you, Mr. Chairman.

Next, Mr. Green, for an opening statement, sir.

7

OPENING STATEMENT OF HON. GENE GREEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. GREEN. Thank you, Mr. Chairman, for holding this hearing

on predatory sales practices involved with the enrollment of Medicare beneficiaries in Medicare Advantage plans. While the notion

of private Medicare contractors has been around since the 1970s

participation in the Medicare Advantage Program has increased

dramatically since Congress passed it. The Medicare Modernization

Act, which significantly increased payments to Medicare Advantage

plans in Harris County, TX, which Houston is a part of, along with

seniors who want to participate in Medicare Advantage have to

choose among 37 different private plans. Unfortunately, the litany

of choices creates a significant confusion among our seniors, confusion that enterprising agents have taken advantage of to enroll

seniors unwittingly in various Medicare Advantage plans.

In my State of Texas some of these questionable marketing practices include door-to-door marketing of these plans, which is illegal.

We know in other States that agents have paired this door-to-door

marketing request with a that a beneficiary fill-out a request for

more information, a document that the beneficiary finds later was

truly an enrollment form for a Medicare Advantage plan. Some of

the tactics offered are so egregious that as part of these bait-andswitch routines their agents reassure seniors they will still be enrolled in Medicare and that their enrollment in a Medicare Advantage plan will not affect their Medicare coverage.

These tactics involve the use of half-truths that seize upon the

trust that is built for more than 40 years now between seniors and

the Medicare Program. Medicare is a trusted brand name that seniors equate with balance, cost-sharing and open access to providers.

After being duped in the Medicare Advantage plans many seniors

now feel misled and frustrated. They can’t necessarily see their

family doctor they have trusted for decades and they can’t do anything about it until the next open enrollment period.

In Houston we are proud to be the home of M.D. Anderson Cancer Center, one of the top cancer centers in the Nation. Most cancer

centers that are across the country do not accept Medicare Advantage plans yet the sales practice of bundling part D and part C

plans has denied many of the seniors the access to these world-renown cancer centers. Unknowing beneficiaries find out too late that

their part D enrollment included enrollment in a corresponding

part C plan and their dis-enrollment from part B. In fact, Memorial

Sloan-Kettering had to proactively send letters to its Medicare patients to educate them on the distinctions between parts B and C

so that more beneficiaries wouldn’t fall for those bundling tactics

and lose their access to cancer care.

The Texas Department of Insurance gets daily complaints about

the marketing practices of Medicare Advantage plans. Unfortunately, the Medicare Modernization Act tied their hands and preempted State insurance commissioners from having enforcement

authority over these practices. Unlike was mentioned earlier in

Medigap coverage from decades ago, CMS doesn’t have the time or

the resources to adequately enforce consumer protections. If the recent agreements between CMS and seven Private Fee-for-Service

plans are any indication, the agencies are relying on the industry

8

to police itself. CMS in this particular program is in need of strong

congressional oversight and I want to thank the chairman for making it a priority for our subcommittee.

As a member of the Health Subcommittee I hope we can learn

from this investigation and enact some much needed consumer protections for our Medicare beneficiaries so they can renew their

trust in the Medicare Program. I look forward to hearing from our

witnesses today and I thank you for sharing your experience. With

that, Mr. Chairman, I will yield back my time.

Mr. STUPAK. Thank you, Mr. Green.

Ms. Schakowsky, for an opening statement, please.

OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Ms. SCHAKOWSKY. Thank you. Thank you, Mr. Chairman.

First, I would like to associate myself with Chairman Dingell’s

remarks regarding overpayments to Medicare Advantage plans,

even those that are not engaged in predatory marketing practices.

Since the creation of Medicare Advantage plans in 2003 and the

subsequent ability to market those plans in 2005, there has been

an explosion in the number of Medicare Advantage products on the

market. This has brought serious new challenges to beneficiaries

who must navigate the chaos of varying programs with different

cost-sharing provisions. It has also posed serious questions about

the State agencies ability to regulate the sales and marketing of

these programs.

Fast forward now to 2007 and you have got seven private insurers who cover the largest number of Private Fee-for-Service beneficiaries voluntarily suspending their marketing programs from

Medicare Advantage plans in light of serious reports of predatory

sales practices. Something has gone terribly awry.

Inappropriate sales practices, manipulation and coercion have no

place in personal decisions about health care. For many people insurance agents rank right up there as a source of information

about their Medicare plan options, that is why I have serious concern about States’ lack of tools for regulating the insurance sales

industry, particularly in light of accounts of our most vulnerable

members of society being targeted.

Dual-eligibles who are more likely to live alone or likely to suffer

from mental or psychiatric disorders, and who are more likely to

have higher levels of chronic diseases or serious disabilities are especially susceptible and particularly targeted by predatory sales

practices. This is primarily due to their ability to switch plans on

a monthly basis. These characteristics also make it all the more

important that they maintain appropriate coverage throughout the

year.

As I suspect we will hear from our witnesses today the appalling

sales practices employed by some of these bad actors can cause immeasurable damage to a person’s financial stability, prospects for

regaining coverage in the future and overall personal health and

safety. I look forward to working with the subcommittee to end

these practices once and for all. I think we need to look at the commission structure of the insurance industry sales industry, the

wide variety among plans and most importantly the lack of authorVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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ity and oversight granted to CMS to regulate sales agents and plan

sponsors. This is a very timely hearing as the committee looks for

ways to truly improve health care, efficiency and quality. And I

truly want to thank the witnesses for being here today and look

forward to hearing what you have to say.

I yield back.

Mr. STUPAK. I thank the gentlelady.

Mr. Burgess, opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. Thank you, Mr. Chairman, and thanks for calling

this hearing. We are going to be gathering some information on potential abuses by insurance brokers and agents marketing Medicare Private Fee-for-Service and Medicare Advantage plans. And I

think we are all struck by those who would either prey on the elderly or defraud the U.S. taxpayer. Those brokers and agents who

violated the trust of their customers must be dealt with in a way

that limits their ability to ever do that again.

Medicare beneficiaries rely on information that these individuals

provide to be accurate, they rely on it to be truthful as they evaluate the different health plans to meet their specific needs. When

a broker or agent seeks financial gain by defrauding these customers, and these customers are our parents, they are our brothers

or our sisters, they are our grandparents, when these agents seek

financial gain by defrauding those customers they erode the trust

that makes up the foundation of the Medicare Program.

The American Association of Insurance Plans has recently set

forth a new initiative that sets up the responsibilities that go beyond existing guidelines and make clear that health plans are committed to giving Medicare beneficiaries peace of mind. The American Association of Insurance Plans will work with the Centers for

Medicare and Medicaid Services to implement new steps on training, retraining, monitoring to ensure compliance, including requiring beneficiary attestation on enrollment applications and other

steps to confirm that beneficiaries understand the plan they have

chosen. In addition, plans must strengthen the mechanisms to

promptly and effectively address non-compliance, including working with an actual Association of Insurance Commissioners, the

Center for Medicare/Medicaid Services, different beneficiary groups

and broke organizations and insure that new uniform processes

and criteria be adopted to report serious broker misconduct in

these areas as well as misconduct by the agent or the plan employee.

I am grateful that the industry has taken some proactive steps

to address this issue. Whatever we do to reinforce this initiative

the solution should not delegate authority to the various States because of the national characteristic of many of these plans. An idea

that may have merit is to create a national database of brokers or

agents that engage in predatory or fraudulent sales of plans. That

way the plans know how to steer clear of certain individuals when

contracting with independent brokers and agents. I also thank the

witnesses for giving of their time in being with us today and proVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
10

viding valuable insight into this problem and, Mr. Chairman, I will

yield back the balance of my time.

Mr. STUPAK. I thank the gentleman.

Next I will turn to ranking member of the full committee, better

known as the winning manager of the baseball team last night, Mr.

Barton from Texas.

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Well, thank you, Mr. Chairman, that was the best

played game I would say in the last 20 years; no errors or very few

errors and the Republicans caught the breaks at the right time.

Praise the Lord, but it was a good game and Washington charities

are about $90,000 richer as a consequence. You, as usual, played

a very good game.

I do appreciate you and Ranking Member Whitfield holding this

important hearing on the Medicare Advantage Program. Medicare

Advantage is an important part of Medicare. Congress has worked

hard to expand the benefits to those who choose this particular

type of program, and it looks like it is a very popular program since

there are more than 8 million seniors who have enrolled in Medicare Advantage plans so far.

Having said that no part of government is immune from responsible oversight. I believe that responsible oversight is important but

it does not include second-guessing successful and popular programs to death or taking benefits away from Medicare beneficiaries

who paid for them. I want to assure the enrollees in Medicare Advantage that their new benefits are not going to be taken away.

I hope this hearing will be a means to strengthen the program

and ensure those enrollees that they get the benefits that they

have chosen as they enrolled in this particular type of Medicare

Program. We have a real responsibility to prevent any program and

its agents from preying on the weak and the vulnerable. To the extent that there are abusive sales practices in Medicare Advantage

we should find them and we should stop them. Mr. Chairman, you

and Ranking Member Whitfield are going to have my full support

for a straightforward inquiry into what may be a very serious problem.

Let me also note that I appreciate your efforts as chairman to

focus this hearing on the consumer protection elements of Medicare

Advantage marketing. Reports of any consumer practices among

some sales agents are troublesome, especially when misleading or

abusive sales tactics target the seniors, the poor and the disabled.

If there are gaps in regulatory oversight or in our marketing guidelines or in our enforcement authorities we should fill them and we

should do so in a bipartisan basis very quickly.

Medicare Advantage has sought to harness the free market to

improve what its beneficiaries can receive in terms of increased

choice, increased competitive benefits, and different payment options. I think this is a good thing. Yet a free market approach does

not mean a sales free-for-all where agents can have their will over

the interests of the beneficiary. CMS has obligations, the health

plans have obligations, and indeed even the sales agents have obligations to ensure consumers receive necessary information to make

11

informed choices. Let me emphasize, we will hold to account those

who fail the Medicare Advantage patient. And we are going to do

that beginning in this hearing, Mr. Chairman. You will have the

Republicans full support on that.

There are areas that need attention. This is demonstrated by the

health plans and CMS’ own recent actions to put in disclaimers

and to improve communication about what the plans are all about.

It is a fair question why it took so long to do that. Why weren’t

problems like have happened anticipated? What else needs to be

done?

I am perplexed at some of the problems that I understand continue to exist. For example, Private Fee-for-Service plans are popular, people like them, they offer benefits that you cannot get in traditional Medicare. Private plans also are potentially more attractive then traditional Medicare managed care to doctors and hospitals because these plans pay at the same rates and even more in

some cases then Medicare pays. This is a selling point to beneficiaries and should be to health care providers. So why does CMS

continue to code these plans as HMOs in the common data file potentially causing physicians to turn beneficiaries away? This is not

an insurance agent problem. This is a CMS problem and it needs

to be fixed.

I would like to echo you, Chairman Stupak, and Mr. Whitfield,

to say that I am seeking constructive information today from all

parties to identify problems accurately, be confident that appropriate measures are in place to reduce abusive sales practices.

Again, Mr. Chairman and Mr. Whitfield, thank each of you for

holding this hearing today and I look forward to hearing what the

witnesses have to say.

Mr. STUPAK. Thank you, Mr. Barton.

Well, that concludes the opening statements by Members. We

have our first panel assembled. Mr. Lipschutz, an attorney with

the California Health Advocates, Ms. Kathleen Healey, director of

the Alabama State Health Insurance Assistance Program, Mr. Harrell, deputy commissioner of the Mississippi Insurance Department,

Miss Brenda Clegg-Boodram, a resident of the Judiciary House

housing complex here in DC, and you are representing your fellow

residents, but they are all at the table. It is Ms. Royal, Ms. Mezey,

you are an attorney on behalf of the residents of Judiciary House,

correct, and Mr. Hammonds, correct, and Ms. Williams.

Since you are all assembled, it is the policy of this subcommittee

to take all testimony under oath. Please be advised that witnesses

have their right under the rules of the House to be advised by

counsel during their testimony and Ms. Mezey, I understand you

are to provide that counsel to the residents there. OK. Does anyone

else wish to be represented by an attorney or counsel here before

they testify today? OK. As I said all testimony is taken under oath

so I am going to ask you to rise and raise your right hand to take

the oath. Ms. Williams, if you just want to sit there and just raise

your right hand that will be fine.

[Witnesses sworn.]

Mr. STUPAK. Let the record reflect all witnesses answered in the

affirmative so we will begin with opening statements. You have 5

minutes for opening statement. We have your opening statements

12

so if you want to paraphrase or summarize that would be great.

Mr. Lipschutz, we will start with you, please.

STATEMENT OF DAVID LIPSCHUTZ, STAFF ATTORNEY,

CALIFORNIA HEALTH ADVOCATES

Mr. LIPSCHUTZ. Chairman Stupak, Ranking Member Whitfield,

and distinguished committee members, thanking you for giving me

the opportunity to testify today. My name is David Lipschutz and

I am a staff attorney at California Health Advocates, an independent, non-profit organization dedicated to education and advocacy on

behalf of Medicare beneficiaries in California. We do this in part

by providing technical assistance and training to the network of

State health insurance programs known in California as HICAP.

Our experience with Medicare is based in large part on our close

work with the HICAPs and other consumer assistance programs

that are on the front line assisting Medicare beneficiaries.

We recognize that Medicare Advantage plans can be a suitable

option for some people with Medicare, but as the Medicare Program has grown and become more complex during the last year

and a half, consumers and consumer advocates have witnessed an

alarming epidemic of abuse surrounding the sale of Medicare Advantage plans primarily, Private Fee-for-Service plans. In the next

few minutes I would like to highlight some of the abusive practices

we have seen and point out how CMS’ recent cumulative response

to misconduct will help but does not go far enough in curbing some

of the root structural causes of misconduct.

Medicare Advantage marketing misconduct ranges from outright

fraudulent practices to the misrepresentation of plans due to agent

ignorance or failure to ensure that consumers understand what

they are enrolling in. Examples of predatory sales practices occurring in California and across the country include the following.

Medicare beneficiaries are being signed-up for plans without

their consent or knowledge through a variety of means including

forged applications. Agents are using scare tactics to convince people to join plans such as saying you will lose your Medicaid unless

you join, or are being lied to, such as Medicare is going private, you

must pick a plan.

Individuals who sought one type of product such as a PDP or a

Medigap go to an agent and end up in a Medicare Advantage plan

that they did not want. Individuals dually eligible for Medicare and

Medicaid, who in most cases already have comprehensive benefits,

are being targeted to enroll in plans that may not be suitable for

them. And in one of the more common scenarios agents will make

sales at senior or disabled housing facilities, either after dropping

by unannounced or after presentations arranged under false pretenses. For example, agents will say they are from Medicare and

want to talk about changes to the program without disclosing that

they are in fact insurance agents selling a product.

Damage that occurs as a result of marketing misconduct can

range from access and continuity of care issues when new enrollees

cannot find providers who will take their plan and forgo treatment

as a result, to financial, including unexpected out-of-pocket costs or

the loss of previously held insurance, such as retiree coverage.

Undoing the damage for individuals can be challenging as plans

13

can be unresponsive in obtaining relief to the Medicare Program

can sometimes be delayed.

CMS has recently responded to the overall problem of misconduct

by implementing new requirements for Private Fee-for-Service

plans and announcing the voluntary suspension of marketing by

certain Private Fee-for-Service plan sponsors. For our outstanding

questions, perceived shortcomings and specific recommendations

concerning these new requirements I will refer to our written testimony.

In short, these new requirements will be helpful but they stop

short of stemming the full-range of abuse we are seeing and they

should be applied to all Medicare Advantage and part D prescription drug plan sales, not just Private Fee-for-Service plans. CMS

action has culminated in the recent voluntary suspensions by certain plan sponsors. While this announcement has had a loud bark,

it will likely have a soft bite as far as curbing ongoing marketing

abuses. At least some of the plans were already under corrective

action plans or have announced that they are already close to

meeting the new requirements, meaning the suspension will likely

be short-lived. In addition, the suspension is in place between the

major enrollment periods when most people make plan changes. So

impact on enrollment numbers and company bottom line is expected to be minimal.

CMS and the insurance industry place the blame for marketing

misconduct on a few rogue agents. Attention to the misconduct of

agents committing abuse is certainly warranted but plans should

not escape scrutiny for their role in this problem. One of the primary forces driving inappropriate sales, we believe, is profit. The

high payments Medicare Advantage plans receive and the commissions plans pay to agents that drive them to steer people towards

Medicare Advantage products over PDPs regardless of whether it

is the best option for the individual. Plans motivate their sales

forces to maximize enrollment through contests, TVs, trips to

Vegas, and cash bonuses for benchmark numbers of sales. At the

same time plans fail to properly oversee and train their contracting

agents, many of whom appear to lack an understanding of the

products they are selling.

As a result of these factors underlying marketing abuse coupled

with the dramatic growth in the types, numbers and variation of

Medicare Advantage plans being sold across the country, many people with Medicare have been enrolled in part D or Medicare Advantage plans they do not understand, did not want or are inappropriate for their needs. In order to more effectively address widespread

marketing abuses recommendations in our written testimony include achieving payment parity between Medicare Advantage and

original Medicare. Applying the standards governing the sale of

Medigap plans to Medicare Advantage and part D sales which better protect prospective enrollees and curb abuses driven by agent

commissions. And standardizing and simplifying the Medicare Advantage and part D benefits so that Medicare beneficiaries can

make meaningful comparisons and plans can be held accountable

for providing adequate benefits. Thank you for this opportunity to

testify.

[The prepared statement of Mr. Lipschutz follows:]

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Mr. STUPAK. Thank you.

Ms. Healey for 5 minutes, please.

STATEMENT OF KATHLEEN HEALEY, DIRECTOR, STATE

HEALTH INSURANCE ASSISTANCE PROGRAM, ALABAMA DEPARTMENT OF SENIOR SERVICES

Ms. HEALEY. Thank you, Chairman Stupak, Ranking Member

Whitfield and members of the subcommittee for the opportunity to

speak on the predatory sales practices in Medicare Advantage.

SHIPs are State-administered grant programs funded by CMS.

SHIPs are housed in State Departments of Aging, Departments of

Insurance and in one State, the Medicare Quality Improvement Organization. Nationally, SHIPs receive significantly less than $1 per

beneficiary from CMS. SHIP is a volunteer-based program and we

ask a lot of the volunteers who join us. The SHIP network is the

only personalized community-based, systematic and established

source of one-on-one Medicare beneficiary counseling in the United

States. We must know all of Medicare from parts A, B, C and D,

to coordination of benefits, Medigap, long-term care insurance, preventative benefits and Medicaid. Our services are free, unbiased

and confidential.

Today’s Medicare environment is very complex. The numerous

and various options offered by private plans has exponentially increased the demand for SHIP services. These new products offered

by private companies have presented a challenge for beneficiaries

unused to a myriad of choices. It is not that people with Medicare

are incapable of making a wise choice; it is that the system often

prevents an informed choice. Unscrupulous agents seeking only a

fast commission provide misleading information and utilize questionable sales tactics to encourage beneficiaries to sign-up for their

plan. Let us look at some of the examples from Alabama that our

clients from SHIP have experienced.

Despite the prohibition on door-to-door marketing, agents arrive

on residents’ doorsteps stating that the President sent them or that

they represent Medicare. These agents bear business cards touting

themselves as Medicare specialists, senior service specialists, not

insurance agents.

Agents ask beneficiaries to show them their Medicare cards and

if applicable their Medicaid cards to verify that the beneficiary is

on Medicare. Later the beneficiaries find out they were enrolled in

the plan without their knowledge. After a sales presentation agents

ask beneficiaries to sign forms verifying that the agents have met

with the beneficiaries or they ask beneficiaries to sign forms in

order to receive their free gifts. What the beneficiaries are actually

signing is the plan’s Medicare Advantage application form. Agents

repeatedly use red, white and blue business cards that look like

miniature Medicare cards.

Telephone marketing has been equally aggressive. Repeated

phone calls to beneficiaries have become increasingly threatening

using scare tactics and misrepresentation. One plan called the

same person five times in 1 day. Telemarketers have called beneficiaries stating that Medicare needs to send an agent to their

homes to correct a mistake in the Medicare and You book that all

beneficiaries receive. Telemarketers have told beneficiaries that

40

Medicare is going out of business or that Medicare is being turned

over to the plan.

Agents will arrive early if they know that the beneficiaries have

requested friends or relatives with them during the appointment.

By the time of the appointment and the arrival of the trusted third

party, the agents have already enrolled the beneficiaries and gone

on their way. When beneficiaries learn that they deceptively enrolled in Medicare Advantage plans they try to sort out the challenges and problems on their own. Too often they discover it is not

an easy problem to fix and they require assistance. SHIPs provide

that needed help.

Deceptive marketing has a profound impact on a person’s access

to health care and well-being. CMS has told SHIPs on several occasions that the responsibility to fix the problem lies squarely with

the Medicare Advantage plans. Consequently, SHIP contacts the

plans. In some instances we must contact 1–800-Medicare as we

piece together a case history. There are two main stumbling blocks

which often stymie SHIP case resolutions efforts.

First, SHIP has no official, dedicated lines to plans or 1–800-

Medicare numbers. Second, 1–800-Medicare refers directly to

SHIPs. Each SHIP has seen an increase in case work volume.

These cases are also increasingly complex and require an extraordinary amount of time to resolve. Mandatory access to plans and

the necessity that these companies recognize SHIP and our efforts

on behalf of beneficiaries would be one key to more efficiency in

handling the complaints and problems we receive. However, that

still doesn’t address the fundamental marketing problems and

processing delays that get the beneficiary in the pickle in the first

place.

The most recent solutions presented by CMS and the State Departments of Insurance are a start, however, they are not the complete answer. It does no good to establish rules and regulations

about what agents may or may not do or what type of marketing

the plans may or may not undertake and not speak directly to the

very population these plans and agents are targeting. There must

be a prevention message about health insurance fraud aimed at

Medicare beneficiaries. Medicare beneficiaries must know the red

flags to look for and how they can protect themselves.

SHIP is ideally situated to deliver the insurance fraud prevention message to Medicare beneficiaries since we already have the

infrastructure in place. However, SHIPs are severely under-funded

and consequently under-resourced so it is difficult for many SHIPs

to provide the proper tools to beneficiaries. The Alabama SHIP is

in the process of developing an insurance fraud prevention campaign which includes tools that empower our seniors. However, we

do not have adequate funding or resources to implement such a

program. With less than a dollar per beneficiary for our entire program and more than 750,000 Medicare beneficiaries in our State

alone our task is daunting. I urge you to support an increase in

SHIP funding nationwide. Preventing the deceptive enrollment into

Medicare Advantage plans including Private Fee-for-Service plans

would greatly diminish the casework of SHIPs and CMS regional

offices. Please help SHIP provide the tools to prevent Medicare

beneficiaries from becoming victims and give State enforcement

41

agencies the teeth to bring both insurers and agents to task for

fraudulent actions.

I want to thank the committee for holding this hearing. I have

shared with you only a handful of examples they are not the only

ones or even the most egregious. Rather, they are representative of

the problems experienced by thousands of beneficiaries nationwide.

I hope these experiences I have shared with you will help serve as

a catalyst for the development of real solutions so Medicare beneficiaries may rest assured that their health care, whether it is

original Medicare or Medicare Advantage, is truly their choice.

Thank you.

[The prepared statement of Ms. Healey follows:]

TESTIMONY OF KATHLEEN HEALEY

Thank you, Chairman Stupak, Ranking Member Whitfield and members of the

Subcommittee for the opportunity to speak on the predatory sales practices in Medicare Advantage and the challenges facing our Medicare beneficiaries and State

Health Insurance Assistance Programs (SHIPs) throughout the United States.

State Health Insurance Assistance Programs (SHIPs) have been in existence for

more than 15 years and are designed to help seniors and people with disabilities

understand their health care coverage options. We are state-administered grant programs funded by the Centers for Medicare and Medicaid Services (CMS). SHIPs are

housed in state Departments of Aging, Departments of Insurance and, in one state,

the Medicare Quality Improvement Organization. Nationally, SHIPs receive significantly less than $1.00 per beneficiary. While some states receive state funding in

addition to their Federal grant, many states rely solely on Federal funding.

SHIP is a volunteer-based program and we ask a lot of the volunteers who join

us. Many programs operate with one or two staff members and rely on volunteers

to educate, counsel, and assist Medicare beneficiaries in their community. The SHIP

network is the only personalized, community-based, systematic and established

source of one-on-one Medicare beneficiary counseling in the United States. We must

know all of Medicare—from Parts A, B, C and D to coordination of benefits,

Medigap, long-term care insurance, preventive benefits and Medicaid. Our services

are free, unbiased and confidential. Our dedication is strong.

SHIPs respond on a community level to Medicare beneficiaries:

• SHIPs educate beneficiaries about Part D, the Medicare Prescription Drug benefit, and the extra financial help available through the Low Income Subsidy and

Medicare Savings Programs. • SHIPs help beneficiaries understand their Medicare benefits by explaining

which services are covered under which part of Medicare. • SHIPs help beneficiaries determine if a Medigap policy is good for them and explain the benefits of each policy. • SHIPs help beneficiaries understand the various public and private long-term

care financing options that are available. • SHIPs help beneficiaries resolve disputes with Medicare or a private Medicare

plan. • SHIPs provide consistent, unbiased counsel for beneficiaries and their caregivers, often in times of crisis. • SHIPs educate seniors, those with disabilities, caregivers, and providers of medical services on all aspects of Medicare.

In Alabama, our volunteers and staff have been interviewed on television and

radio. We have been quoted in newspaper articles, newsletters and magazines. We

are a trusted resource. Nationally, SHIP staff and volunteers have educated and

counseled millions of people and have distributed hundreds of thousands of informational flyers and tip sheets at enrollment and educational events.

Wherever Medicare beneficiaries have gathered, SHIPs have been there. We make

presentations to retirees and also visit senior centers, congregate housing sites, libraries and churches. We also make presentations to state and county provider

groups. Over the past two years, with the implementation of Medicare Part D (drug

benefit) and the rapid expansion of Medicare Advantage plans, SHIPs have educated beneficiaries and their caretakers, provided enrollment assistance, counseled

and resolved problems encountered by beneficiaries. We continue to monitor ongoing

issues that have not been resolved, and provide reassurance to beneficiaries that

there is an entity they can turn to when they do not know where else to go. We

42

have worked with our CMS Regional Offices, hosted CMS Mobile Office Tour events,

and implemented new CMS mandates. We have reached out to create partnerships

to better serve Medicare beneficiaries and to reach hard-to-reach populations.

Medicare’s environment today is very complex. The numerous and varied options

offered by private plans has exponentially increased the demand for SHIP services.

Demand has increased not just from Medicare beneficiaries and their families and

caregivers, but also from health care providers and community leaders. SHIPs are

the essential, local resource for seniors and people with disabilities.

The Advent of Medicare Advantage and Prescription Drug CoverageThese new

products, from stand-alone prescription drug plans to Medicare Advantage plans offered by private companies, have presented a challenge for Medicare beneficiaries

unaccustomed to myriad of choices. Never before have beneficiaries had to select

from so many different plans offering various options and levels of coverage. Never

before have they had so many independent agents, whether welcome or unwelcome,

selling health insurance plans. It is a new experience for many of our clients and

this opportunity for choice has also created significant challenges.

Many times SHIPs have said that having choices, especially with prescription

drug coverage, can be a good thing. At the same time, SHIP staff and volunteers

have warned Medicare beneficiaries to guard their information; to keep their Medicare card as safe as possible as they would their credit card or Social Security number. The warnings have been inadequate because unscrupulous agents continue to

lure unsuspecting and ill-informed beneficiaries into plans they do not want nor necessarily need—especially if they are on both Medicare and Medicaid (also known as

dual-eligible).

Keep in mind, Medicare Advantage products may provide good coverage for some

beneficiaries. If a beneficiary makes an informed choice, has sufficient resources to

cover co-payments and knows that his health care providers will accept it, private

fee for service (PFFS) and other Medicare Advantage plans can work very well. It

is not that people with Medicare are incapable of making a wise choice; it is that

the system often prevents an informed choice. The choices available are not meaningful when Medicare beneficiaries do not understand how the plans are structured

or how to discern true benefits from the flood of sales material coming their way.

Unscrupulous agents, seeking only a fast, and high, commission, provide misleading

information or utilize questionable sales tactics to encourage beneficiaries to sign up

for their plan.

Medicare Advantage Marketing PracticesLet’s look at some widespread examples

from Alabama that our SHIP clients have experienced:

• Despite the prohibition of door-to-door marketing, agents arrive on residents’

doorsteps stating that ‘‘the President’’ sent them or that they represent Medicare.

These agents bear business cards touting themselves as ‘‘Medicare specialists’’ or

‘‘senior services specialists,’’ not insurance agents.

• Agents ask beneficiaries to show them their Medicare cards and, if applicable,

their Medicaid cards, to verify that the beneficiaries are on Medicare. Later, the

beneficiaries find out they were enrolled in the plan without their knowledge. If

they are dual-eligibles, the applications often state that the beneficiaries are not

Medicaid recipients.

• Agents ask some beneficiaries, after an initial visit, to take them around their

apartment building or neighborhood so the agent could visit and sign up their

neighbors. These agents ask the beneficiaries to introduce them to friends and relatives who are Medicare beneficiaries and who may or may not live in the same

neighborhood. In one situation, an agent told the residents of a senior residential

apartment complex that Medicare and a specific PFFS company had assigned the

agent to that apartment building and that no other company was supposed to be

there.

• After a sales presentation, agents ask beneficiaries to sign forms merely verifying that the agents have met with beneficiaries or they ask beneficiaries to sign

forms in order to receive ‘‘free’’ gifts. What the beneficiaries are actually signing is

the plan’s Medicare Advantage application form.

• Agents encourage beneficiaries to enroll in plans stating the beneficiaries would

not pay anything for medical care and if they did not sign up, the beneficiaries

would be penalized by Medicare. Not wanting this ‘‘penalty,’’ the beneficiaries, who

are often dual-eligible, enroll in the plans.

• Agents tell beneficiaries that the private fee for service (PFFS) plan they are

offering is supplemental insurance.

• One agent continued to visit a building where he enrolled many of the residents.

When residents complained to the agent about receiving bills for co-payments from

their health care providers, the agent took the bills and said that he would straightVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
43

en them out with the plan and call the beneficiaries back. They did not hear from

him again and the unpaid bills were turned over to collection agencies. • Agents have repeatedly used red, white and blue business cards that look like

miniature Medicare cards. • Telephone marketing has been equally aggressive. Repeated phone calls to beneficiaries have become increasingly threatening, using scare tactics and misrepresentation. One plan called the same person five times in one day. Telemarketers have

called beneficiaries stating that Medicare needs to send an agent to their homes to

correct a mistake in the Medicare and You handbook that all beneficiaries receive.

Some telemarketers insist that they are calling from Medicare and they tell beneficiaries that they will lose their Medicare if they do not sign up for the telemarketer’s plan. Telemarketers have told beneficiaries they have the plan that the

government won’t tell beneficiaries about and it could save beneficiaries money.

Telemarketers have told beneficiaries that Medicare is going out of business or that

Medicare is being turned over to the plan. • Agents will arrive early if they know that the beneficiaries have requested

friends or relatives to be with them during the appointment. By the time of the appointment, and the arrival of a trusted third party, the agents have already enrolled

the beneficiaries and gone on their way.

In many instances, beneficiaries do not even realize they are no longer enrolled

in Original Medicare. Beneficiaries learn of their enrollment into Medicare Advantage plans when a health care provider refuses to see them because the provider

does not accept the terms and conditions of the new plan—most often a private fee

for service (PFFS) plan—the provider is out of the plan’s network, or the beneficiary

begins to receive bills from providers for unpaid services or co-payments.

When beneficiaries learn that they have been deceptively enrolled in Medicare Advantage plans, they try to sort out the challenges and problems on their own. Too

often they discover that it is not an easy problem to fix and that they require assistance. SHIPs provide that needed help. Deceptive marketing has a profound impact

on a person’s access to health care and well-being. The best way to have a clear

picture of the problem is to have the rest of the story—the before and after the misrepresentation or deception by the agent:

Example 1: Ms. J is a 61-year-old disabled woman. She has had both Medicare

and Medicaid (a dual-eligible) for several years. In January 2007, she went to her

local pharmacy for assistance in finding a Part D plan. Her pharmacist signed her

up with Company D’s prescription drug plan. Several months later, an agent with

Company D came to her home and asked her if she would like to sign up for free

supplemental insurance since she did not have any. He also told her that by signing

up she would not lose any of her current benefits and she would receive additional

coverage that Medicare does not provide.

In May 2007, she went to her family doctor and discovered that she was no longer

covered by Original Medicare and that her doctor did not take Company D’s private

fee for service (PFFS) plan. She contacted Social Security and was given the number

for SHIP.

SHIP discovered that Ms. J was not enrolled in the Part D plan that could save

her the most money, so we changed her drug coverage plan to something that would

work better for her. At the same time, we also faxed and mailed a request for her

to be disenrolled from Company D’s private fee for service plan.

Example 2: Ms. F is an 80-year-old widow. She has been on Original Medicare

with Company X’s Medigap policy providing her with supplemental insurance. Ms.

F takes care of Ms. G who is her 55-year-old disabled daughter. Ms. G has been

a full dual-eligible (which means she has both Medicaid and Medicaid) for many

years. Ms. F chose Company X’s prescription drug plan (PDP) for herself and her

daughter in January 2007. In February 2007, an agent from Company X came to

her home and asked her if she would like to make her life easy by having her and

her daughter’s medical coverage simplified by having Company X serve as their supplemental insurance. She explained that her daughter had Medicare and Medicaid;

therefore, she did not need supplemental insurance. The agent countered this by

saying she would get extra benefits for her and her daughter at no additional cost

and that their current benefits would not be affected. Ms. F then enrolled herself

and her daughter into Company Xs plan—a private fee for service (PFFS) plan.

Two months later, Ms. F took her daughter to see her specialist. When they arrived, Ms. F was asked to make a co-payment. When she inquired why (because

they had never paid one before), she was told that her daughter no longer had Medicare and Medicaid. Ms. F went home and contacted the agent who sold her the plan

and was told that she could not get out of the plan. Ms. F contacted SHIP. Our office contacted Company X and was told she could disenroll. We then faxed and

mailed a request for Ms. G and Ms. F to be disenrolled from the plan.

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Example 3: Mrs. H and Mr. I are in their seventies. Both have been on Original

Medicare for years and have a supplemental insurance policy (a Medigap) with

Company M. In March 2007, Mrs. H received a call from Company B’s agent inquiring about her supplemental coverage. He wanted to know how expensive the coverage was. Mrs. H told him that it was rather expensive and that she was concerned

because it was going up every year. He then asked if he could come by and talk

to her and her husband about a supplemental plan with his company that was not

expensive. Once the agent arrived, he told them they were eligible for a free supplement to Medicare through his company. Mrs. H inquired about the cost that they

would have to pay up front to see their doctor and was told that they would only

have to pay a $10 co-payment and that they could drop their policy with Company

M.

Two days after enrolling in the plan, Mrs. H and Mr. I went to their local senior

center and heard a presentation given by the SHIP coordinator on Medicare Advantage. It was not until they heard the presentation that they realized the agent had

given them misleading information.

After leaving the senior center, Mrs. H went home and contacted the plan and

asked if she and her husband could be disenrolled. She was told they could not. She

contacted SHIP. We sent a request to be disenrolled for Mrs. H and Mr. I. They

were successfully disenrolled on May 1, 2007.

Example 4: Ms. C is disabled. She has been a dual-eligible, having both Medicare

and Medicaid, for many years. She has suffered from seven strokes and is required

to see numerous specialists. In January 2006, she was auto-enrolled in Company A’s

prescription drug plan (PDP). In April 2006, she was suddenly disenrolled from

Company A because she had been auto-enrolled into five other prescription drug

plans, all of which began to cancel each other out.

In May 2006, Ms. C was not enrolled in a PDP and she had to pay for her medications without any help. One day in May 2006, she was shopping with her parents

at a retail store and saw a Company A agent. She asked the agent if he could sign

her up for the stand-alone prescription drug plan (PDP) she first had in January

2006; however, the agent, knowing she was receiving Medicaid benefits, signed her

up for Company A’s private fee for service (PFFS) plan even though she repeatedly

told him she only wanted drug coverage.

After Ms. C enrolled with what she thought was Company A’s PDP, she received

a card from Company B, another company. Company B paid for her prescriptions

until August 2006. Company B was cancelled in August because Company A (the

plan into which she was enrolled in May) reflected on the Medicare system in August. Ms. C decided it was best to contact CMS about her problems. CMS filed a

complaint on her behalf.

Meanwhile, she began receiving calls and bills from her physicians as a result of

unpaid medical bills. Ms. C was shocked because she was under the assumption

that Medicare and Medicaid were still paying her bills. She had no idea that Company A was supposed to be paying. When she tried to get her physicians to file with

Company A, she discovered that they did not accept Company A. Ms. C contacted

CMS again because she had over $900,000 in unpaid medical bills. CMS forced

Company A to pay the unpaid bills and to process her disenrollment from its plan.

Unfortunately for Ms. C, she began receiving collection letters from Company A

because of unpaid premiums. The premium was over $33 per month. Her income

was $643 per month. Ms. C contacted Company A and the collection agency because

she did not think she should have to pay for the plan since she never asked for it.

Both Company A and the collection agency told her that there was nothing she

could do but pay the bill. Ms. C began to send regular payments of whatever

amount she could afford. The collection attempts still continued, only stronger.

Ms. C found out about the SHIP program and contacted our office. We have

worked with Ms. C to stop the collection efforts and to have the premiums written

off by Company A. In late June 2007, we received a letter stating that the plan

would not seek payment for the premiums.

These are just some of the examples of how the marketing practices impact Medicare beneficiaries and impede their access to health care. We send complaints to the

CMS Regional Office when we need a retroactive disenrollment and to provide examples of what we are seeing at the local level.

CMS has told SHIPs on several occasions that the responsibility to resolve problems lies squarely with Medicare Advantage plans. Consequently, SHIPs contact the

plans. In some instances, we must also contact 1–800-MEDICARE as we piece together a case history.

There are two main stumbling blocks which often stymie SHIP case resolution efforts:

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1. SHIP has no official, dedicated lines to plans or 1–800-MEDICARSHIPs have

had to be resourceful to serve the beneficiaries. With no ‘‘named’’ plan contacts from

CMS nor required dedicated phone lines for SHIPs to utilize in case resolution for

plans or 1–800-MEDICARE, state SHIPs have developed workable solutions to get

the job done. We find our own contacts at plans. When we run into issues where

the ‘‘scripts’’ used by the customer service representatives with the plans and with

Medicare are incorrect or miss the point, we muscle our way up the chain of command to find someone who can solve the problem. We try not to refer cases to the

CMS Regional Offices if we can solve them ourselves because we know of the backlogs and time delays that can result. These time delays often cause additional issues

as beneficiaries hesitate to seek necessary medical care, unsure of their health insurance coverage.

2. 1–800-MEDICAR refers directly to SHIPsThroughout the existence of Medicare

Advantage and Part D, SHIPs have consistently experienced Customer Service Representatives (CSR) at 1–800-Medicare referring beneficiaries to SHIPs for assistance. The CSRs follow scripts for the calls. It is not unusual to have a SHIP counselor or even a SHIP director or program staff member contact 1–800-MEDICAR for

assistance only to be referred back to the state SHIP.

Each SHIP has seen an increase in casework volume. These cases are also increasingly complex and require an extraordinary amount of time to resolve. However, we have been doing the best we can given our limited Federal funding and

staff resources. Mandatory access to plans and the necessity that these companies

recognize SHIP and our efforts on behalf of beneficiaries would be one key to more

efficiency in handling the complaints and problems we receive. After all, access is

critical to handling cases in a timely fashion. That still does not address fundamental marketing problems and processing delays that get the beneficiary in the pickle

in the first place.

Are the solutions proposed by CMS to address predatory marketing practices

enough?The most recent solutions presented by CMS and the state Departments of

Insurance are a start, however, they are not the complete answer. Yes, a State Department of Insurance can pass regulations that would require each insurance agent

to leave a business card with the beneficiary. And yes, they could also require

agents to identify themselves as insurance agents and inform the person that they

are representing a product, not Medicare or Medicare supplements. And, if they violate these provisions and other marketing guidelines, these agents could be subject

to discipline. As you know, CMS will be requiring more of the plans beginning in

2008.

Is the problem real? In a recent press release CMS has stated that it has received

only 2,700 complaints nationwide, a relatively minimal number. It is my impression

that not all cases are being reported. For example, SHIPs do not refer all cases to

CMS. We handle them ourselves. Additionally, from my involvement with elder

abuse and legal assistance with our agency, I have learned that for all the elder

abuse cases that are reported, there are just as many or more that go unreported.

Perhaps a better gauge is the number of Medicare Advantage disenrollment requests that have been filed.

Beneficiaries must receive information on how to prevent becoming a victim of unscrupulous marketing practicesCMS has taken steps in the right direction by announcing some new corrective actions. However, CMS has failed to mention the prevention message that must be delivered to Medicare beneficiaries. It does no good

to establish rules and regulations about what agents may or may not do, or what

type of marketing the plans may or may not undertake, and not speak directly to

the very population these plans and agents are targeting. How would a beneficiary

know that they should be very suspicious of an insurance agent who comes to his

or her door unannounced and without an appointment?

There must be a prevention message—not about health care—about health insurance fraud aimed at Medicare beneficiaries. Medicare beneficiaries must know the

red flags to look for and how they can protect themselves. A comprehensive media

campaign with a simple message would be a start.

SHIP is ideally situated to deliver the insurance fraud prevention message to

Medicare beneficiaries since we already have the infrastructure in place. I have seen

it work in Alabama. Our SHIP has been able to educate beneficiaries and those who

have heard the message have been empowered. For example, an agent attended a

senior center when the director was absent hoping to make a sales presentation and

enroll attendees. Unfortunately for the agent, the seniors had also been taught by

SHIP what questions to ask agents and how the PDPs and Medicare Advantage

plans work. The seniors were able to determine fact from fiction and literally ran

the agent out of the building.

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However, SHIPs are severely under-funded and consequently under-resourced so

it is difficult for many SHIPs to provide the proper tools to beneficiaries. An adequately funded, comprehensive educational and media campaign with a unified message aimed at beneficiaries would achieve dramatic results. The campaign could

arm Medicare beneficiaries with the information they need to protect themselves

from unscrupulous insurance companies and their agents.

The Alabama SHIP is in the process of developing an insurance fraud prevention

campaign which includes tools that will empower our seniors. However, we do not

have adequate funding or resources to implement such a program. With less than

a dollar per beneficiary for our entire program and more than 750,000 Medicare

beneficiaries in our state alone, our task is daunting. Developing the media campaign and printing and disseminating these materials to the target population is expensive. I urge you to support an increase in SHIP funding nationwide.

Preventing the deceptive enrollment into Medicare Advantage plans, particularly

private fee for service (PFFS) plans, would greatly diminish the casework of SHIPs

and CMS Regional Offices. Please help SHIPs provide the tools to prevent Medicare

beneficiaries from becoming victims and give state enforcement agencies the teeth

to bring both insurers and agents to task for unscrupulous and/or fraudulent actions.

I want to thank the Committee for holding this hearing. I have shared with you

only a handful of examples; they are not the only ones, or even the most egregious.

Rather, they are representative of the problems experienced by thousands of beneficiaries nationwide. I hope the experiences I have shared with you will help serve

as a catalyst for the development of real solutions so Medicare beneficiaries may

rest assured that their health care—whether it is Original Medicare or Medicare

Advantage—is truly their choice.

Mr. STUPAK. Thank you.

Mr. Harrell, deputy commissioner of Mississippi Insurance Department, your opening statement, please, sir.

STATEMENT OF LEE HARRELL, DEPUTY COMMISSIONER,

MISSISSIPPI INSURANCE DEPARTYMENT

Mr. HARRELL. I appreciate the chairman for allowing us to come

speak. I am Lee Harrell, deputy commissioner of insurance for the

State of Mississippi and on behalf of commissioner of insurance

George Dale. We appreciate the opportunity to share with you the

experiences we have had in Mississippi related to Medicare Advantage plans.

I am not here to demonize CMS or the plan sponsors but we

want to walk through what we are seeing in Mississippi and it is

going to be typical of what you are going to hear today from your

other witnesses, I believe. You will hear about problems today,

there are a lot of problems in the Advantage program. We don’t

need to get into a blame game but we need to work together to find

a solution to protect our senior citizens.

Aside from the specific unfair misleading and the fraudulent

marketing practices that are in my written testimony that you

have heard today, we have also seen other general problems with

agents who sell these plans. Agents being hired to sell only during

the open enrollment periods, these agents get licensed around the

first of October, sell through December, than let their license lapse

until the following year, in other words the equivalent of seasonal

help. By far the biggest problem is lack of sufficient training of

agents. One of the companies who touts the best training of its

agents gives 10 hours of instructional training all in one sitting.

The biggest problem we are seeing in making a case against

agents alone is the fact that the primary witnesses are often elderly persons who because of their age or physical condition may beVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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come easily confused or simply cannot accurately remember the sequence of events. Even if they are able to provide the department

with clear and accurate information about the tactics used by the

agent, by the time the matter gets to a hearing their memories

may not be as clear. Also, many elderly victims are not able or are

unwilling to attend a hearing and sometimes they are simply too

embarrassed to even report that they have been a victim.

Some of these specific types of complaints we have received in

Mississippi are door-to-door solicitation or cold calls by agents

without having been invited by a Medicare recipient to do so.

Agents claiming to be from Medicare and sometimes presenting a

red, white and blue card designed to look like a Medicare card. The

agent has a recipient complete a request for more information form

which turns out to be an application for a Medicare Advantage

plan. The agent asks a recipient to sign a form just to show my

boss that I have contacted you, which again turns out to be an application form. The agent assures the recipient that enrollment in

this plan would not affect the recipient’s Medicare coverage without

mentioning that the recipient may not be able to go to the same

health care provider or other facility. And that he may be required

to pay a co-pay. Recipients being enrolled without their knowledge

without having any contact with the agent, it is believed that recipient’s personal information was fraudulently obtained and that

does not mention the problems of having the recipient victim disenrolled or un-enrolled in the plans they were improperly enrolled

in.

Our Department of Insurance has obtained the licenses of two

agents involved in Medicare scams. The first license was revoked

on a finding that the agent retained recipient’s personal information from a home health agency. The recipients were enrolled in a

plan without their knowledge or consent. There was also evidence

in that case where the mother of the daughter was bedridden and

unable to write or communicate but according to the agent she

signed the form to sign-up in the Advantage program. That agent

has been indicted in Mississippi for these allegations.

One of the agents was revoked for door-to-door solicitation of

Medicare Advantage plan in two low-income housing areas. As a

result of that the Department of Insurance sent a team of lawyers

and investigators into the complex to interview the victims. Some

of them were afraid to talk to us because they did not know who

they could trust. We were able to obtain 21 affidavits. Some of the

people who did not take affidavits based on their mental condition.

At the 11th hour prior to the hearing the attorney for the agent

subpoenaed all 21 victims and was going to make them travel 150

miles to Jackson, Mississippi to testify.

We were in the process of investigating a third agent for similar

practices when that agent surrendered his license. From 2006 to

the present, the Mississippi Department of Insurance received over

a thousand complaints on Medicare Advantage plans alone in part

because we are the people they know. They are not familiar with

CMS and they are not generally going to call a stranger in Atlanta,

Georgia when their insurance commissioner is right there at home.

These complaints represent at least twice as many complaints as

we normally receive on all other topics combined. We speak to senVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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ior groups across the State about these practices and how can they

avoid the problems. Mississippi takes seriously its duty to protect

its consumers while promoting a healthy insurance market. But

the way the current Medicare Advantage system is designed we are

precluded from fully meeting that duty. Clearly, the piecemeal approach to enforcement is not working nor is it realistic to expect

that it will. We suggest as a regulatory model the current system

for regulating Medigap insurance, which is the States enforce Federal minimum standards. If you don’t think there is a problem I

urge you to contact your respective insurance department or more

important go out to the senior citizen groups in your respective

States and talk to them, ask them. I think someone said somewhat

earlier that these are our parents, our grandparents and our aunts

and uncles. We have to find a way to protect the senior citizens.

I appreciate you allowing me to testify today.

[The prepared statement of Mr. Harrell follows:]

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Mr. STUPAK. Thank you for your testimony.

Ms. Clegg-Boodram, on behalf of your residents there at Judiciary House, care to state a few words?

STATEMENT OF BRENDA CLEGG-BOODRAM, JUDICIARY

HOUSE, ACCOMPANIED BY MARY ROYAL, GRADY HAMMONDS, EDITH WILLIAMS, AND JENNIFER MEZEY, SUPERVISING ATTORNEY, LEGAL AID SOCIETY OF THE DISTRICT

OF COLUMBIA

Ms. CLEGG-BOODRAM. Good morning.

Mr. STUPAK. Good morning.

Ms. CLEGG-BOODRAM. My name is Brenda Clegg-Boodram. I live

at Judiciary House which is a DC housing authority property for

seniors and disabled people of low income. I am accompanied by

Grady Hammonds, Edith Williams and Mary Royal. We all are

residents in the Judiciary House which is located in Chinatown

section of Washington, DC. Our population is deemed independent

living. I volunteer as the acting president and treasurer for the

resident counsel which acts as a liaison between DC housing and

other social service organizations.

The Judiciary House is as I said a housing authority property

which provides low-income housing to the most vulnerable population in the city. The elderly and disabled tenants do not and

many times cannot understand paperwork. Although the tenants

are deemed capable of independent living in reality for much of

this population this is not true.

I was approached in late January 2007 by two gentlemen who

identified themselves as having good news about Medicare Part C.

At this point I was not aware that they were selling insurance. Initially I thought they worked with Medicare. Darnell Keys and T.C.

were sent to my office by the property manager’s office. They advised me that they had information about Medicare. They proceeded to explain that Medicare had recently approved part C

which was specifically for eyes, dental and hearing. And as I understood them this would be in addition to Medicare Part A, B and D.

They asked me when could they do an educational presentation

to my tenants and advised that they would provide the posters. I

advised that I had already had the Legal Aid Society lawyers to assist my tenants with their health care and their prescription coverage. They advised that they understood and they told me that

they were not dealing with part D for prescription coverage.

I felt confident that these men understood and I treated them

like any other health outreach. I provided them with a date and

about a week later they gave me the posters. At this point they did

give me some paperwork about Coventry and I again reminded

them that Legal Aid had already reviewed and assisted my participating tenants for appropriate insurance and prescription coverage.

I posted the posters but I did not read the information about Coventry.

I arranged for them to do their presentation at two of our tenant

meetings. One meeting took place in the resident council office and

the other in the community room. I was not ever told that they

were selling insurance or that they intended to change my tenants’

health coverage. It was my understanding that they were going to

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add Medicare Part C to their current coverage. They did two presentations in the month of February 2007. About 3 or 4 weeks later

Mary Royal came to me and advised that her coverage was

changed. Then Grady Hammonds, Edith Williams and there were

other tenants who complained. They could not get their medications and that their physicians and hospitals did not accept and/

or know about this insurance company and calling customer service

did not help.

Please note, this incident created a health crisis for our witness

Ms. Edith Williams, who has MS and had to be treated by an

emergency room visit and subsequently she had to pay cash for her

medications because they had changed her Medicare Part D drug

coverage. She did not have all the money and over a period of 2

weeks or more she suffered physically and she had to scrape-up

money for her meds.

I contacted Jennifer Mezey, supervising attorney of the Legal Aid

Society of the District of Columbia. Attorney Mezey helped Mary

Royal, Grady Hammonds and Edith Williams with their dis-enrollment. I know that there are other tenants in my building who need

the assistance of Ms. Mezey to dis-enroll but they are unable to ask

for help and they are still suffering.

I believe that there is a lack of responsible coverage of care for

seniors, mental, emotional and sometimes the physically disabled.

And I feel that there should be measures taken to prevent these

types of incidents from occurring.

This statement is also a question, where is the accountability?

Who makes sure that the population who can least afford these

types of mistakes are protected? I know of individuals in other

States who are having similar problems so this is not a local but

rather a national problem. We barely survived the Medicare Part

D problems and, in fact, there are citizens who are unable to advocate for themselves who do not understand and are stuck with inadequate health care and prescription coverage as a result of part

D. We seriously need more checks and balances written into the

regulations.

I really think that this is not just a rogue salesman problem and

I think that you guys who create these programs fail in the detail

aspect of these programs and you need to look at it seriously because you are hurting the people who can’t help themselves and

some of these people worked for you guys in the service industry.

We all can’t be rich or famous or whatever. We do these little jobs

like cleaning and all of that so detail really makes a difference and

the salesmen are not the only ones who are responsible and I

thank you for the privilege of making this statement.

[The prepared statement of Ms. Clegg-Boodram follows:]

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Mr. STUPAK. Thank you.

Now that concludes the opening statements of the opening panel

here so we will move to questions, we will go for 5 minutes. I will

begin.

Ms. Clegg-Boodram, let me ask you this question. You indicated

in your testimony you said there are still residents of Judiciary

House then you said unable to ask for help to dis-enroll in this

Medicare Advantage. Explain that.

Ms. CLEGG-BOODRAM. Because we are a ‘‘multi-function community’’ the disabled refers to people who are mentally-challenged and

intellectually challenged and they know something is wrong because when they go to the doctor or all of a sudden their personal

care assistant disappears or they go to the pharmacy things are not

working. But because of the Privacy Act and many other issues I

can’t just arbitrarily snatch them and say you need my help and

you have got to sit down. Allow me to allow Legal Aid to help you

through this. And they will come and you will talk to them and you

have to be very patient. There is a whole bunch of stuff that you

guys have no clue about.

Mr. STUPAK. That is why we are having this hearing.

Ms. CLEGG-BOODRAM. Right.

Mr. STUPAK. Try to get a clue.

Ms. CLEGG-BOODRAM. I hope you can because it is very serious.

Mr. STUPAK. I agree.

Ms. Healey, is there a SHIP program in Washington, DC or do

we rely strictly on Ms. Mezey and Legal Aid?

Ms. HEALEY. There is a SHIP program in DC, yes.

Mr. STUPAK. Ms. Mezey, so you work with SHIP then over here

in DC to get these folks dis-enrolled?

Ms. MEZEY. We work with the SHIP program. We collaborate

with them but Legal Aid also does this work on our own.

Mr. STUPAK. OK. Very good.

Mr. Harrell, and in your testimony was this—is this the type of

problem you have seen in Mississippi? You said you have over a

thousand complaints, this, what we see at Judiciary House, is this

common and found in Mississippi, also?

Mr. HARRELL. The problem is—the gentleman from the, Mr., I

am not going to attempt to pronounce his name, from California,

[Mr. Lipshutz’s] problems sound very similar to Mississippi’s problems and I don’t think you can get any more different than California and Mississippi. So that the problems are going to be systematic across the country deemed by other insurance regulators

across there. The problems are the same using the business cards,

misrepresenting, forging people’s names, so it is not a Mississippi

problem. It is a national problem from one State to the next, I

think the problems are the same.

Mr. STUPAK. Then I guess the point I was trying to ask you, I

know you mentioned door-to-door and salesmen, and going to senior housing and you encouraged us to check with our senior groups

to see if they are having the problems. I guess the point I am trying to get at is, Ms. Clegg-Boodram said, they do not know how to

dis-enroll or how to correct the problem, or unable to ask for help.

Do you see that with the people you, as the insurance commissioner you represent?

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Mr. HARRELL. Yes, sir. They are not familiar with the program.

They do not know who to call and for an example I have got one

here that did contact the actually, the gentleman that the lady’s

brother, and for example on one day he called Humana, stayed on

the phone for an hour and a half. Calls the next day, hour and a

half, the next day an hour, on and on and on. One day he stayed

on the phone from 10:30 to 5:15 on hold. Never spoke to a person.

It said hold please when he would call—just on and on for looks

like 10 or 12 days. The most time he stayed on hold was 10:30 to

5:15.

So most of them do not know who to ask, most of them, and a

lot of them are embarrassed to go ask because they have been

taken advantage of and they do not, like I said, they do not know

what CMS is. Mississippi has an elected commissioner and that is

who they call. And we are not able, due to the jurisdictional limitations, we are not able to give them the help that they deserve and

need.

Mr. STUPAK. You indicated that there is a 2-month window period here where these agents come out and they get 10 hours of

training and basically what, October to December, is the enrollment period or December to February is the enrollment period,

whatever you said. Do those so-called agents who get the 10 hours

worth of training, do they become insurance agents, licensed in

Mississippi or are they temporary and do not need a license?

Mr. HARRELL. They are a temporary license. They come in and

sell, well they do not have a temporary license, they have a real

license but they only sell for those 2 to 3 months, then they go back

to wherever they came from and they may go to another State.

They may go to sell maybe some other product. We do not know

where they go, we just see examples of a lot of agents allowing

their licenses to lapse and then come back the next year.

Mr. STUPAK. OK. Ms. Healey, when Commissioner Harrell mentioned about this person being on hold from 10:15 to 5:30, you indicated about numbers, direct numbers, the 800 number. Is this what

you are trying to express to the committee?

Ms. HEALEY. Exactly. The SHIPs have to call the same number

of the plan and 1–800-Medicare so we go through the same process.

Even though we have all the information that we need to and we

just need to get the plan to do what we need them to do, we are

on hold just as long as everybody else.

Mr. STUPAK. OK. Mr. Lipschutz, what recommendations would

you make to ensure these abuses that we have heard of this morning actually stop? I know there are guidelines but the guidelines

are just simply that, guidelines. There is no enforcement. There is

no accountability. You do not have to follow a guideline, right, if

you do not wish to, what would you recommend? What would you

like this committee to see done?

Mr. LIPSCHUTZ. Our recommendations would range from the specific, including mandatory agent training with the standard curriculum and testing. It would include standardizing appeals processes, including retroactive dis-enrollment and securing special enrollment periods through the Medicare Program, as well as broader

recommendations such as achieving payment parity between Medicare Advantage and the original Medicare Program, which we beVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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lieve would minimize some of the incentives that are currently

driving plans, to neutralize the commission structure, and to rely

upon many of the protections that are contained in the Medigap

rules that apply to the sale of Medigap products that include insuring that products are suitable for beneficiaries before they are sold,

insuring that beneficiaries—or that commissions for sales—are not

higher when someone duplicates coverage that they already have

or switches out coverage with comparable coverage. So our recommendations, I will refer you to our written testimony for our

specific recommendations concerning CMS’ new requirements.

Again, they are helpful but we have a lot of outstanding questions

about how far they will really go to stop the abuses.

Mr. STUPAK. OK. My time is expired.

Mr. Whitfield, for questions, we may go around more than once

here with Members because of a very interesting panel. Thank everybody on this panel for being here. Mr. Whitfield.

Mr. WHITFIELD. Thank you. Ms. Clegg-Boodram, how many people actually live in, is it Judiciary House, and what is the total

number of people that live there?

Ms. CLEGG-BOODRAM. Judiciary House is a 10-story building

with essentially 271 units. Currently, they claim we have about

192 occupied units.

Mr. WHITFIELD. But it is an independent living facility?

Ms. CLEGG-BOODRAM. That is what they say, yes. And some of

us are independent.

Mr. WHITFIELD. But there are some people who live there that

are not able——

Ms. CLEGG-BOODRAM. Fifty-five percent of my population.

Mr. WHITFIELD. And what is your responsibility there?

Ms. CLEGG-BOODRAM. I am on the resident council. It is a volunteer position. And so essentially I connect them with services when

they come and ask.

Mr. WHITFIELD. So Ms. Mezey, you are the attorney for these

groups of residents that were defrauded. Is that right?

Mr. MEZEY. Legal Aid in November and December of last year,

had come out to Judiciary House to help people with their Medicare Part D enrollment. To make sure they were in appropriate

prescription drug plans. After these people had come to Judiciary

House and Ms. Clegg-Boodram realized that people had signed-up

and wanted to get out, she called me and then we helped them to

dis-enroll from the plans.

Mr. WHITFIELD. OK. So they had signed up for Medicare Advantage Program but they had no idea of what that really was.

Ms. MEZEY. Right. As Ms. Clegg-Boodram said during, in February, there were two sessions.

Where the residents signed-up for plans and then when they realized that they did not want to be in these plans anymore we

helped them get out of them.

Mr. WHITFIELD. But there also is a DC health insurance assistance program, correct?

Ms. MEZEY. Correct. There is a SHIP here the same way as Ms.

Healey’s counterpart in DC, and they have also helped a lot of people get out of these plans as well.

71

Mr. WHITFIELD. So, Ms. Boodram, when, Ms. Clegg-Boodram,

when salesmen come to you, you would frequently call Ms. Mezey,

and then would you call the health insurance assistance program

as well to ask for their thoughts on it or anything like that?

Ms. CLEGG-BOODRAM. No, unfortunately, the health insurance

whatever program is not widely publicized. A lot of this information is not available. And my question is to you, sir, is why doesn’t

CMS do an educational component?

Mr. WHITFIELD. Yes.

Ms. CLEGG-BOODRAM. So that we really understand what the different parts of Medicare or an agent——

Mr. WHITFIELD. So you were not even aware that there was a DC

health insurance program.

Ms. CLEGG-BOODRAM. No. I called Legal Aid because I realized

there was a problem. There was a contact I have at GW, George

Washington University Medical Center.

Mike, who helped me out through some of the part D problems

but in the long run I had to call lawyers because I really could not

do it.

Mr. WHITFIELD. And, Ms. Mezey, were any legal steps taken

against the salesmen who convinced these people to sign-up without their being fully aware of what they were doing?

Ms. MEZEY. We have been focusing at this point, we are mainly

focused on getting people out of the plans, which we were able to

do through our CMS regional office. And helping Ms. Williams get

her prescription drugs, which were cut-off, through these efforts.

And as far as I know, to my knowledge, nothing has happened to

the salespeople.

Mr. WHITFIELD. Yes. Now, Mr. Harrell, you are with the insurance commission in Mississippi, correct?

Mr. HARRELL. Yes, sir.

Mr. WHITFIELD. So if a person is licensed to sell insurance in

Mississippi and they use fraudulent practices, you all have the authority to take their license, would that be correct or not?

Mr. HARRELL. That is in question now. You have the license that

the State of Mississippi would issue, but the underlying product,

Medicare Advantage, is not something the State of Mississippi regulates. Attorney general lawyers have raised that as an issue for

the Department of Insurance, as to how are you taking action

against an agent for a product that you do not have any jurisdiction over, period.

Mr. WHITFIELD. So there is a legal question of whether or not

you have any jurisdiction, is that correct?

Mr. HARRELL. The department maintains the position that we do,

and we have taken licenses and we have multiple open investigations ongoing as we speak.

Mr. WHITFIELD. Ms. Healey, what about in Alabama, has this

issue been discussed in Alabama, the authority that Alabama has

to take a license?

Ms. HEALEY. Well, I am housed in the Department of Senior

Services. We are working with our Department of Insurance but I

would defer that question to our Department of Insurance.

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Mr. WHITFIELD. Now, Mr. Lipschutz, your organization in California is that a private entity or is that a governmental entity

or——

Mr. LIPSCHUTZ. We are independent, private non-profit agency.

So we are not funded by the SHIP program and we do not administer them but we work closely with them.

Mr. WHITFIELD. Ms. Healey, I was curious of people who sign-up

for Medicare each year, they become eligible to sign up. Do you

have any idea what percent would come to your agency for assistance in selecting the right plan?

Ms. HEALEY. I would be giving an estimate but in the information in the Welcome to Medicare packet that CMS sends to the beneficiary, they do have a list of the SHIPs called in the materials.

We do get quite a few beneficiaries aging into Medicare but I do

not know the percentage.

Mr. WHITFIELD. OK. My time has expired.

Mr. STUPAK. And thank you. Mr. Burgess for questions.

Mr. BURGESS. Thank you, Mr. Chairman. This is not going to be

a question but a statement to you, Mr. Chairman. Are we going to

hear at some point from the Inspector General of Health and

Human Services? Are we going to hear from the appropriate people

at the Department of Justice to find out what is happening with

the people who are apparently guilty of malfeasance in the sale of

these products? This sounds to me like Medicare fraud, Mr. Chairman. This hearing is all well and good but it seems like this should

be pursued at a different level than simply an oversight hearing.

Mr. STUPAK. Well, unfortunately, in the bad piece of legislation

that was passed, the standardization of policies, the regulations of

insurance agents and that which we usually find in the Medigap

and Medicare Supplementals were stricken for at least a couple

years under part D here it is more of a State issue there so——

Mr. BURGESS. Well, reclaiming my time, I have an article here

from the New York Times dated May 7, 2007, and it talks about

individuals who are being signed-up who are deceased. Does anyone on the panel have any direct knowledge of a deceased person

being signed-up for one of these plans?

Mr. STUPAK. Congressman, I have read media reports about it.

Mr. BURGESS. Well, again, I would just ask the question, signingup a deceased person for a Medicare plan sounds to me like Medicare fraud and I am not a lawyer, I am just a simple country doctor

but I would think that that would fall into that purview and I do

not see how you can suspend the investigation and the prosecution

of somebody who is guilty for Medicare fraud simply by passing a

statute, even if it was us who passed it.

Mr. STUPAK. I will give the gentleman his time back but that is

really consumer fraud. It is not a Federal fraud case to do that.

Mr. BURGESS. I beg to differ. As a practicing physician, if I was

guilty of Medicare fraud I was going to jail, and it was Attorney

General Janet Reno who made that very clear back in 1990.

Mr. STUPAK. Right. But the way this program was written and

that is why it was such a controversial program when it was put

forth, the dual-eligibles and the others, the standard frauds that

we see as you as a doctor with the Federal Government is much

different underneath this legislation and that is why we have the

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State insurance commissioners and State folks here because they

really have the consumer protection. Unfortunately, it is lacking at

the Federal effort and I will be glad to join you in trying to tighten

that loophole.

Mr. BURGESS. Well, let me just ask Mr. Harrell then because it

was always my understanding in my home State of Texas that

when the insurance commissioner had the ultimate trump card.

They could pull the license of someone to sell insurance in the

State and then you told Mr. Whitfield that you do not think you

have that authority in this situation?

Mr. HARRELL. That was an issue that was raised by our attorney

general lawyers. It is an issue that is out there. The Department

of Insurance still believes that we have the legal jurisdiction over

yanking, as you called it, the agent’s license. And we would make

a referral if we determined if or thought there were criminal activities.

Mr. BURGESS. Well, and I would encourage you to do so and I

would hope you would do so if that is indeed the case. Ms. Clegg,

let me just ask you, I know when Medicare Part D first started,

my office, you are correct, there were some problems and my office

was aware of the problems we had in our area. I took each of those

problems on as individual casework, if the person who was calling

and complaining was willing to sign the appropriate formwork to

allow me to intercede on their behalf. I know Washington, DC has

a delegate, not a representative, but did you contact your delegate’s

office? Did you get the delegate’s office involved in the individual

casework when these problems started to come to light? You alluded that you had some problems with some of the privacy restrictions that prevented you from getting too deeply into a person’s

medical care and I appreciate that. Obviously, privacy laws are

something that we continue to strengthen up here and that is always going to be an issue, but if the person was willing to sign a

release at the delegate’s office and let their delegate intercede with

CMS directly on their behalf, did that happen at Judiciary Center?

Ms. CLEGG-BOODRAM. No, we did do an approach to the delegate’s office but we did not get a response. So I just kept moving

until I could find someone to help us.

Mr. BURGESS. Well, again anyone has the right to petition their

member for help and we were pretty aggressive about it because

the pharmacist, some of which I knew from my previous professional life, were not at all shy about calling me and faxing me and

telling me the problems they were having so we did take a very aggressive stance and CMS to their credit would deal with those. And

I would just offer that as—if you continue to have problems, please,

do not overlook that as an avenue because my experience I found

that to be a pretty powerful way to intercede on someone’s behalf

and from again, maybe our experience was different. I have not

had the experience that has been discussed here today and to the

best of my knowledge it has not come up as a constituent issue

back in the district office, but you can bet I will be checking on it

later on today. I think the individual Member of Congress’ office

does have some ability to help dis-enroll, with the dis-enrollment

process and working through some of these problems and if we are

the ones who caused it then, as has been alleged, then certainly we

74

are the ones who should be on the front lines of solving it. Just as

we have dealt with the passport issue here recently. Thank you,

Mr. Chairman, for your indulgence. I will yield back.

Mr. STUPAK. Thank you, Mr. Burgess.

Ms. CLEGG-BOODRAM. May I speak?

Mr. STUPAK. I have to go to Mr. Murphy. I think we are going

to go another round. I am certainly going to give you an opportunity and your residents if they want to say a few words.

Mr. Murphy, 5 minutes.

Mr. MURPHY. Thank you, Mr. Chairman. I want to ask a couple

of folks, maybe Ms. Williams, you can help me with this. I am trying to get a sense of how you were presented information on these

plans. So, for example, when someone was talking to you about

purchasing a Medicare Advantage plan, I am correct there, that is

what someone offered you, right? Did they offer a comparison for

example of Medicare Advantage or something else, do you remember?

Ms. WILLIAMS. Well, if I can answer this correctly. First, I was

having trouble with another insurance company. OK. And when I

heard about Advantage and what they had to offer and I went with

them because I thought it was better then I found out that it

wasn’t what I thought it was. When they interviewed me I gave

them my Medicaid and Medicare card. I asked them would I need

this and they said no, I didn’t need that anymore, that I would be

covered with them.

Mr. MURPHY. Can you, and this is really helpful and thank you

so much, if you could try and recall to the best of your ability did

they mention specifically what the Medicare Advantage plan would

cover that the Medicare and Medicaid wouldn’t cover?

Ms. WILLIAMS. They said that it would cover dental, eye, eye doctor and something else and I asked them what about my medicine?

And they said that is why I didn’t need the Medicaid and Medicare

because they would cover it.

Mr. MURPHY. So dental, eye and medicine, and then when you

started with your Medicare Advantage plan did you find that they

did or did not cover dental and eye and medicine?

Ms. WILLIAMS. Well, I didn’t take it that far to find out.

Mr. MURPHY. OK.

Ms. WILLIAMS. Only as far as my medicine, I got sick.

Mr. MURPHY. I appreciate it. I am trying to find out. I am so

sorry this happened to you.

Ms. MEZEY. Congressman, can I explain what happened to Ms.

Williams?

Mr. MURPHY. Yes.

Ms. MEZEY. OK. Ms. Williams was previously in a Medicare Advantage plan that also had prescription drug coverage. So when

Ms. Williams signed-up with the Advantra Freedom plan which did

not have drug coverage and this was not made clear to her, she

was in the hospital, she came out of the hospital and had to take

steroids and antibiotics and those drugs were not covered.

Mr. MURPHY. And I am trying to find out all of these elements

and thank you, it helps me to know this, Ms. Williams, and I am

sorry this is upsetting for her. I am trying to understand what

these folks said to you and it really helps us a lot to know that.

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Is there anybody else who can give us information in terms of the

kind of information that was said on these sales pitches in particular? Ms. Royal, could you let us know a couple things?

Ms. ROYAL. Yes. I was the first person who informed Brenda

about the problems I was having. I had to go to the hospital for

a procedure. They had me down there as Medicare HMO. I said I

have regular Medicare and Medicaid. And so I could not get my

procedure done and so when I got home that evening I had got the

card from Advantage before I got any other information and it said

doctor co-payment $10, emergency room $50, and so I had called

customer service. I said I can’t afford to pay $10 for each doctor’s

appointment that I have I said because I go to the doctor sometimes four times in a month. And so she said well the reason I

enter us in it, she said well you can write us a letter and stating

that I no longer have to be in the program.

So I said what about my Medicare and Medicaid? She said I

would no longer have Medicaid and Medicare . That would be discontinued and I would their insurance. I said well I don’t want

your insurance I said because I prefer to have my Medicaid and

Medicare because it said that I may not have the same doctor and

be able to go to the same hospital. I said well I have about five different doctors. I said I cannot afford to try and find another doctor

to train him and I said and have different hospital because I went

to Providence [Hospital]. Providence told me that they did not carry

that type of insurance.

Mr. MURPHY. And just to be clear, and this is all what a salesperson was telling you with Medicare?

Ms. ROYAL. They told me that they didn’t even mention that I

had to change doctors.

Mr. MURPHY. OK.

Ms. ROYAL. They didn’t say that.

Mr. MURPHY. That was never told to you——

Ms. ROYAL. Medicaid would take care of my eyes, my dental and

ears, nose and throat, which Medicare do not handle. But I get all

of that from my Medicare and my Medicaid.

Mr. MURPHY. OK. Thank you, Mr. Chairman.

Mr. STUPAK. Thank you. A few more questions here for you.

Ms. ROYAL. Oh, excuse me, I did have to show them my Medicaid

and my Medicare card.

Mr. STUPAK. Ms. Healey, Ms. Royal was just talking about Medicare and Medicaid and underneath the MMA Act of 2005 the dualeligibles are no longer, it doesn’t exist. Would you explain that a

little bit the dual-eligibles and how it is underneath the new program because there is so much confusion out there and if you

would explain that.

Ms. HEALEY. The dual-eligibles? There are several different types

of dual-eligibles. If you have Medicare and you may have what is

called a qualified Medicare beneficiary where your co-pays and

your co-insurance would be taken care of, the next level would be

what is called a SLMB, Specified Medicare Low, I believe the acronym is wrong, and then QIs, and each one is a different level but

the QMBs are the full duals and that is where Medicare and Medicaid covers most of their cost, all of their costs actually.

76

Mr. STUPAK. I guess the point I was trying to make and it is easy

for us to ramble off those acronyms but for people like Ms. Royal

and others it is very, very difficult and they don’t understand the

changes that took place in 2005, therefore, their coverage is much

different then what it was before.

Mr. Harrell, Mr. Burgess and I were talking a little bit about it,

about the law and the agents. You indicated you have jurisdiction

over the agents but do you have jurisdiction over the policies that

are being presented in your State of Mississippi or is that a subject

still open to interpretation?

Mr. HARRELL. The position is that we don’t have jurisdiction over

the product itself which would be the policies’ marketing.

Mr. STUPAK. Just the agents then?

Mr. HARRELL. Yes, sir.

Mr. STUPAK. Mr. Lipschutz, you indicated that one of the things

we have to do is to commission structure, take a closer look at the

commission structure. I get the impression that Medicare Advantage are profit-driven policies?

Mr. LIPSCHUTZ. Well, they are profit-driven policies for the companies but they also try to maximize enrollment into their plans by

using commission structures that tend to pay more in commissions

for enrollment into Medicare Advantage plans than other plans and

it is not uncommon for plans to pay three, four, five, six times as

much in commissions, each commission in a Medicare Advantage

plan than they pay for a standard——

Mr. STUPAK. Give me an example of a commission for a Medicare

Advantage plan versus a different plan.

Mr. LIPSCHUTZ. Well, one example would be say a company that

offers both a stand alone part D prescription drug product and a

Medicare Advantage plan will typically offer say $50 for each enrollment into a stand-alone part D product and it will offer $250

or more for each enrollment into a Medicare Advantage product.

That creates an incentive on the part of the agent to steer people

towards those Medicare Advantage products regardless of whether

or not that is actually the best option for an individual.

Mr. STUPAK. What responsibility, we talked a little bit about

agents here and their fees and commissions, but what responsibility does the insurance carrier itself, the parent company, have?

Here are two people like Ms. Royal and Ms. Williams and Mr.

Hammonds, and others.

Mr. LIPSCHUTZ. It is my understanding that the companies are

free to set their own commission structures. A CMS marketing

guideline says that companies can set commission structures commensurate with the level of involvement that is entailed when trying to describe a product to an individual. So in theory the Medicare Advantage product is more complex than the stand-alone part

D product the company can pay more or a greater commission. But

there are no standards that require an agent to actually explain

the additional complexity of a particular plan. It is my understanding that it’s a CMS position that they do not have the ability to

regulate commissions that are paid to insurance agents.

Mr. STUPAK. And have you or Mr. Harrell or Ms. Healey, have

you—gone back to the insurance carriers, the parent company and

say look what your agents are doing? You have a responsibility

77

here if not legal at least moral and ethical to make sure that your

policies are being presented accurately to individuals. Have you

contacted anyone like that?

Mr. LIPSCHUTZ. We have contacted some companies and some

companies have contacted us in response to complaints that we

have made about agent activity.

Mr. STUPAK. Mr. Harrell.

Mr. HARRELL. We have done the same thing in Mississippi working with the respective carriers, working with CMS, working with

Social Security Administration and we have two on-going marked

conduct examinations of two of the carriers.

Mr. STUPAK. Ms. Healey.

Ms. HEALEY. We have done the same thing, in fact, we worked

with some agents to talk about the difference between a full dual

and someone who just receives only Medicare.

Mr. STUPAK. What I have seen thus far from CMS is maybe some

voluntary guidelines. Do you think voluntary guidelines work or do

we need more? Anyone, Mr. Harrell, Mr. Lipschutz, Ms. Healey,

Mr. Harrell?

Mr. HARRELL. I don’t think it has worked up to now. Same as

some of the same problems that we are seeing today are the same

problems that the Department of Insurance saw in the late 1980s

and early 1990s with Medigap products and it hasn’t worked to

date and I don’t think it is going to work.

Mr. STUPAK. Ms. Healey.

Ms. HEALEY. We are moving forward with our toolkit because we

are going to focus on prevention. Two of the things we have already

developed is a form that we want the beneficiary to fill out, did you

check to make sure that your doctor is going to accept this? Did

you contact SHIP to work with us? We also have a form that we

can, that SHIP can hand the agent and they will need to initial

that this plan is going to take them out of original Medicare so

they are aware of what they are going to be facing and try to make

an informed decision because we feel that the seniors are failing to

ask enough questions and they are not verifying the information

and they are not checking with a trusted resource such as SHIP

before they make that decision because the agents who are doing

this are basically predators.

Mr. STUPAK. Sure. Mr. Lipschutz, did you want to add anything?

Mr. LIPSCHUTZ. I would like to highlight a statistic I came across

the other day. It is my understanding that nationwide there are

roughly 12 to 14,000 SHIP counselors, including volunteers. That

is compared to what some industry estimates put at 200,000 agents

selling Medicare products across the country. Whereas insurance

agents are specifically trying to steer people towards particular

plans the SHIP programs are not permitted to do so and instead

it is their mission to provide unbiased counseling about individual’s

options so that people can make informed decisions about their

choice.

Mr. STUPAK. Thanks. My time has expired. Ms. Clegg-Boodram,

looked like you were wanting to say something there. Was there

something you want to say?

Ms. CLEGG-BOODRAM. These individuals never made it clear that

they were an insurance company, No. 1. Number 2, when they

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talked to our people they knew that most of our people did not understand what they were talking about. Ms. Williams and Mr.

Grady Hammonds and Ms. Royal are probably three of the most

proactive individuals in our community. So that is the level and it

is not fair. And I have one last little, little question, OK?

Mr. STUPAK. Sure.

Ms. CLEGG-BOODRAN. When you guys designed this program I

think you all realized that it had some problems because it feels

like it was designed to fail. OK. That is No. 1. I mean my body is

falling apart but parts of my mind still work. Then, how could this

program, and any rule written into it, supersede the laws of this

country so that someone couldn’t be prosecuted for Medicare fraud?

I have a problem with that. So when you guys are doing your legislative duties or whatever, you guys got really good lawyers because

they are making the dollars and I think this whole problem is a

dollar thing. And it has nothing to do with the people of this country. And it is getting old. Thank you very much.

Mr. STUPAK. Thank you for your testimony and this program was

controversial when it was brought forth and it passed by a very

close vote, and but it did pass. In this country when it passes, it

becomes law. We have to administer it whether you support the

program or not the best as possibly can and we have a couple more

panels here and that is why your testimony is important to us here

today to understand the problems being faced by folks out there.

Mr. Whitfield, questions please?

Mr. WHITFIELD. I don’t have anymore questions. I do have one

comment before Mr. Walden I understand has questions. Ms.

Clegg-Boodram, I want you to know that CMS will be testifying on

a later panel and they have a responsibility for managing the entire Medicare Program, and Medicaid as well at the Federal level.

But I can assure you that anyone that defrauds a person relating

to Medicare can be prosecuted. So this Medicare, and we will have

them talk about that but we do appreciate your time very much

today.

Mr. STUPAK. Mr. Walden.

Mr. WALDEN. Thank you, Mr. Chairman. Thank you, Mr.

Whitfield. I apologize for having to come and go here but some

other meetings I had to attend to but I am very concerned about

what I heard in your testimony and obviously it is our obligation

to not only learn about what went wrong but how to make sure it

doesn’t go wrong again. And how to make sure that people who

have been harmed are unharmed, which is not a word but I think

it gets the meaning of the problem here.

Mr. Harrell, how effective do you think the new practices such

as post enrollment call-back can be. I mean I have heard from

some that say, OK, the agent comes in and makes the sale but

then the company calls back and says here is what you were sold.

Are you sure this is what works for you.

Mr. HARRELL. The problem is when they call back, the insured

is still not going to understand it. That’s the problem that I think

Ms. Boodram referenced a while ago with the three witnesses she

brought here today. They were, without putting words in their

mouth, they were at the top of the list in terms of the most active.

Who’s out there protecting the ones who don’t know who to call?

79

They don’t know what the agents are selling them. They don’t

know who CMS is or the carrier when they call-back, so I don’t see

the call-back in some of the more despicable cases. I don’t see the

call-back working.

Mr. WALDEN. OK. So how would you fix this then? Would you

just ban the sale of these products altogether?

Mr. HARRELL. For the informed person I don’t think the product

is a bad situation, for some people it is a good product. If you can

somehow just like the Congress did with the Medigap product, if

you give the State regulators the jurisdiction over the product and

the agent I think with that joint effort that Congress did in the

1990s along with NAIC, was able to solve the problem. You don’t

see those problems in Medigap now that you see in Medicare Advantage due to the policing of it from the State regulators who are

in every State who have been able to solve that. When you go out

and penalize the agent and the company that is when you are

going to start seeing some reaction from the carriers.

Mr. WALDEN. Are you seeing any of these problems with the

Medicare Part D?

Mr. HARRELL. No, sir.

Mr. WALDEN. And are those products sold by agents as well?

Mr. HARRELL. I mean you usually see problems with any insurance product, in Mississippi we are very familiar with the insurance issues the last couple years but we are not seeing the same

volume you are going to get a problem on any insurance product,

but the volume of what we are seeing, the largest volume of complaints we are seeing, and we are a very rural State, is involving

Medicare Advantage once you get past Hurricane Katrina issues.

Those are the two biggest problems we are seeing.

Mr. WALDEN. Why is it you are not seeing a problem with Medicare D? That is a very complicated process I can assure you having

my wife’s parents sign-up and go through that I retreated immediately out of the room and told my staff, we have got to hold some

hearings, some meetings out, in the district to educate people.

Mr. HARRELL. I don’t know exactly, I am very familiar with that.

My own parents call me about Medicare Advantage, what is this?

And I quickly got them in touch with our consumer services director.

Mr. WALDEN. Right.

Mr. HARRELL. And had her explain all of the nuances and differences similar to what Ms. Healey does. I wasn’t capable of doing

that and any time you are representing your parents, I am also a

lawyer by trade, it gets to be dangerous. But what I have seen I

don’t know why when we are still complaints but we are not seeing

anywhere near the volume of the complaints we are seeing on Advantage.

Mr. WALDEN. And when you talk about the volume in the

Medigap plans, can you give me some perspective here of how

many complaints you get overall versus complaints out of Medigap?

What is that volume figure you are referencing?

Mr. HARRELL. I didn’t bring those stats with me. Our office keeps

the stats of what kind of complaints we get but I will be glad to

provide them.

Mr. WALDEN. Is it twice as many as you get on other plans?

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Mr. HARRELL. The Medicare Advantage is the leader as it relates

to all complaints that we are getting now.

Mr. WALDEN. Among health and among these——

Mr. HARRELL. Among all types of insurance.

Mr. WALDEN. All types. So does that include property, casualty,

auto?

Mr. HARRELL. It even includes Katrina claims.

Mr. WALDEN. OK. And so it is No. 1.

Mr. HARRELL. Yes, sir.

Mr. WALDEN. In Mississippi. Is that the same in California from

your perspective, Mr. Lipschutz?

Mr. LIPSCHUTZ. I think in California the State Department of Insurance hasn’t registered as many complaints as other State insurance departments, in part because of the way different SHIP programs are organized in different States. In some States SHIP programs are administered through the Department of Aging, whereas

in some States it is administered through the Department of Insurance. And I think in States where the SHIP program is administered through the Department of Insurance it is much more likely

that complaints will get registered and it is a much more streamlined process. So while the complaint volume to the Department of

Insurance might not be as high in California as some of these other

States, that does not mean that the volume of problems are not in

fact happening.

Mr. WALDEN. OK. I understand what you are saying. My time is

about to expire. I want to thank all of you for your testimony today

and we obviously are going to pursue this with vigor and certainly

look to CMS to see how they plan to address this issue as well.

Thank you, Mr. Chairman.

Mr. STUPAK. Mr. Burgess, any questions?

Mr. BURGESS. Let me just ask Mr. Harrell a follow-up to what

your discussion with Mr. Walden. You said penalizing the agent

and the company was the best way to get this problem solved. Did

I understand that correctly?

Mr. HARRELL. In our opinion, yes, sir.

Mr. BURGESS. And right now there is a discrepancy with how you

are able to respond to someone who has a problem with Medigap

as opposed to someone who is in a Medicare Advantage Program,

is that correct?

Mr. HARRELL. Yes, sir.

Mr. BURGESS. And what is the nature of that discrepancy?

Mr. HARRELL. Looking at it with the Department of Insurance

does not have jurisdiction over the product that is being sold in

Medicare Advantage due to the standardization that Congress

passed that relates to Medigap. If we could tie the two together,

link the company and the agent because the agent is representing

the company, he is not representing me.

Mr. BURGESS. OK. Is the plan licensed by the State?

Mr. HARRELL. The insurance company is, yes, sir.

Mr. BURGESS. And you still have jurisdiction over that, is that

not correct?

Mr. HARRELL. On the company itself we do but not the underlying product that is being marketed.

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Mr. BURGESS. But if it is amalgamated to whomever and they

are selling a Medicare Advantage plan in your State you could simply pull all of their license for all of their products, could you not?

Mr. HARRELL. That is in question. Our lawyers are advising us

that they don’t think we have jurisdiction over the product itself.

Now whether we can or cannot take the license is something that

we have not, we have looked at it but also that would also harm

all the other individuals who sold good products.

Mr. BURGESS. Sure, sure it would be a drastic step, but it would

certainly be a way of getting the company’s attention.

Mr. HARRELL. Amongst the other thousands of policyholders who

were not victimized, yes, sir.

Mr. BURGESS. Well, let me ask you this. If you had another company with another policy that wasn’t Medicare Advantage and you

discovered a problem with it what would be the trajectory that you

would follow there?

Mr. HARRELL. It depends on what the situation would be. Examine the company to find out what the problem was, what the violations and how to fix them. And then take disciplinary action

against the company.

Mr. BURGESS. And in your opinion what is it that prevents you

from doing that for the Medicare Advantage purchasers in your

State who feel that they have been harmed?

Mr. HARRELL. Our lawyers have looked at it and had discussions

with CMS. It is their opinion that we do not have the underlying

jurisdiction to take action against the carrier as relates to the product being marketed.

Mr. BURGESS. Well, I think we are going to hear from CMS later

on this morning. I will be interested in their response to that as

well but clearly if that is an area where you don’t feel you have

the power to advocate on behalf of the people in your State, that

is something that I think needs to be corrected. And, Mr. Chairman, I will just for the good of the order, I did follow-up with my

constituent service department back home. We currently have no

Medicare Advantage cases that are pending. We have two Medicare

Part D that were just resolved that were apparently long-term

cases where people were trying to dis-enroll and weren’t allowed to

do that. But again the individual Member’s office has considerable

ability to deal with CMS and for those of you who are having difficulty I would not overlook that as an avenue to get some immediate help for the recipients who are in the greatest amount of

need. And with that, Mr. Chairman, I will yield back.

Mr. STUPAK. I thank you, Mr. Burgess. Every week my staff

gives a report and Medicare Advantage is one of those that shows

up every week in my district and I have half of the geographic size

in the State of Michigan and the problem we see is once you recognize a problem with Medicare Advantage and you want to dis-enroll, the length of time it takes and the hoops you have to go

through for our constituents is very, very difficult, to dis-enroll

once you realize there is a problem there.

Mr. BURGESS. But if the gentleman will yield, that and that is

exactly the place where the congressional office can make a difference. Two cases that I referred to were long-standing cases and

we had them resolved within one, 4 weeks, and one, 5 weeks. I

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grant you that is a long period of time but when someone has been

fighting it for a year they are grateful to have that sort of attention.

Mr. STUPAK. Sure. And on behalf of Ms. Norton, the delegate

from Washington, DC, she advises that if you would vote to make

DC full voting rights in the Congress, she could move more expeditiously to help her constituents. She is a very effective voice here,

right. Mr. Murphy, did you have any further questions?

Mr. MURPHY. Yes, Mr. Chairman, just real quickly.

Mr. STUPAK. Sure.

Mr. MURPHY. Mr. Harrell, are these the issues that the insurance commissioners through other States have prepared any sort

of report on, these problems with Medicare Advantage, to your

knowledge?

Mr. HARRELL. I believe the National Association of Insurance

Commissioners is working on that. You have two commissioners on

another panel later today and I think they can update you as well.

I know that the southeastern zone of the insurance commissioners

have been working on this together trying to solve the problem. We

have written our entire congressional delegation on this issue.

Mr. MURPHY. OK. I certainly hope that they will make that

available to the chairman. Also, how have insurance companies responded to your requests about complaints from people selling

these plans in this way?

Mr. HARRELL. On a one-on-one basis they have been very cooperative working with us trying to solve the problems. They have also

been trying to work with the Social Security Administration trying

to get the bank drafts stopped, trying to dry-up the checks, working

with CMS. It is a very difficult problem because you have got two

very large governmental agencies working together, hopefully, and

a large insurance company trying to work together but on a oneon-one basis they have been, but that is just one-on-one of the ones

who are contacting the Department of Insurance. I know to contact

CMS, many don’t know who they are and may not know to contact

their Senator or their Representative because they don’t know that

it is not an insurance product. In fact, when we have written our

congressional delegation, we have even spoken to some of our congressional staffers and some of them were not sure why the people

were calling them either initially. Now they do now because of all

the publicity that has been out there in the last year.

Mr. MURPHY. When they have identified that that there is some

problems in terms of agents, perhaps, less than scrupulous behavior in terms of selling or promising plans there are a couple of

things I want to know. One is while people were looking to switch

plans back were there gaps in their coverage and did anybody offer

anything during that time to help with payments or medications or

hospital or anything, or were these people left completely out in the

dark.

Mr. HARRELL. It is my understanding—I defer to some other

panel—some of them were left in some gap periods because they

had cancelled one and trying to get dis-enrolled in the other.

Mr. MURPHY. How do we keep track of agents that are involved

in fraudulent behavior then? How do you keep track of them? Is

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there a national database? How do we know in the future if these

people are trying to sell other——

Mr. HARRELL. The National Association of Insurance Commissioners has formulated a national database for an agent. So if an

agent in Pennsylvania has his license revoked and he moves to

Mississippi, when we run his name through the system it will reveal that Pennsylvania Department of Insurance took action regarding Mr. Smith.

Mr. MURPHY. And then here is another issue here. When we read

now and then about people being involved in unscrupulous activity

with regard to sales tactics with insurance plans what is unique to

this issue, the Medicare Advantage or the Medicare issues that is

not just a matter of people doing bad things. But what is there

unique to this that is allowing this to occur that we need to

change?

Mr. HARRELL. Well, my personal opinion is you look at the victims here, the insureds, they are all elderly. Some of them are in

good mental shape, some of them in good physical shape, a lot of

them are not. If you go into a nursing home and start enrolling individuals, you are going to have some who do not need to be in a

position of making that decision. And we have seen a lot of them

where they would have a power of attorney, be it either brother or

sister or another loved one, that is a power of attorney. That person is supposed to be there but for some reason they are not. I

don’t know why the agent would have gone when the power of attorney person is not there. We are seeing instances of those and

some of the issues we have talked about today are, if you give the

States authority to enforce it, right now that is in question, do the

State regulators have that authority? That is what we are trained

for, that is what we have been doing for over a hundred years, not

me personally, but that is what the insurance forum is across the

country are doing. All of them have specially-trained staff. In Mississippi our SHIP program is not even part of the Mississippi Department of Insurance and my figures don’t even include what the

SHIP program has gathered complaints on.

Mr. MURPHY. Ms. Healey or Mr. Lipschutz, either of you have

any comments on this in terms of the questions I just raised about

other things specific to this Medicare plan that allows these fraudulent salespeople to operate here?

Mr. LIPSCHUTZ. I would say part of the reason is due to the complexity of the Medicare Advantage Program, the sheer number of

plans that are now available, the differentiation between the plan

types, the great flexibility the plans have to design their benefits

and cost-sharing structures that can sometimes leave people paying

more for certain benefits if they are in such a plan than they would

in original Medicare.

Mr. MURPHY. Did any of you know is there any side-by-side comparison of here is what is in Medicare, here is Medicaid, here is

what is Medicaid Advantage, here is the preferred plans, any sideby-side clear comparisons so that people can either look at to see

what is in this and what is not and how much is it going to cost

me? I haven’t been able to find any and so I find, no wonder people

can be victimized.

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Mr. LIPSCHUTZ. I think some SHIP programs do piece together

their own side-by-side comparisons of various plans. I would also

ask the Congressman to direct the question toward CMS because

there may be some prohibitions against plans actually comparing

benefits against one another. The one of our outstanding issues

when it comes to particularly Private Fee-for-Service plans is that

we believe that those that are targeting marketing towards dualeligibiles should be able to clearly show how the benefits they provide are, in fact, better than State Medicaid benefits, if at all.

Mr. MURPHY. Thank you. Thank you, Mr. Chairman.

Mr. STUPAK. Thank you. That concludes questions of this panel

and I want to thank this panel once again for putting and bringing

forth and educating Members as to the problems faced with a

Medicare Advantage. Thank you all for coming and you are dismissed. And we will have our second panel come forward.

Our second panel of witnessess will be Mr. Francis Soistman, executive vice president of health plan operations at Coventry Health

Care, Incorporated, Mr. Gary Bailey, vice president of Medicare

Operational Performance at WellCare Health Plans, Incorporated,

and Ms. Peggy Olson with Healthwise Insurance Planning, LLC.

Welcome, and as you know it is a policy of this subcommittee to

take all testimony under oath. Please be advised that witnesses

have a right under the rules of the House to be advised by counsel

during testimony. Do any of our three witnesses wish to be represented by counsel here today? They all indicate no. Then if so,

I am going to ask you to stand and raise your right hand and take

the oath.

[Witnesses sworn]

Mr. STUPAK. Let the record reflect all witnesses replied in the affirmative. You are now under oath. We will start with our opening

statements.

Mr. Soistman, do you want to start, please.

STATEMENT OF FRANCIS SOISTMAN, EXECUTIVE VICE PRESIDENT, GOVERNMENT AND INDIVIDUAL PLANS, EXECUTIVE

VICE PRESIDENT, HEALTH PLAN OPERATIONS, COVENTRY

HEALTH CARE, INCORPORATED

Mr. SOISTMAN. Chairman Stupak, Ranking Member Whitfield

and member of the subcommittee, thank you for inviting me here

today. I am Fran Soistman, executive vice president of Coventry

Health Care, a national health insurance company headquartered

in Bethesda, Maryland. Our Medicare programs provide part D

prescription drug coverage to 700,000 beneficiaries and serves more

than 200,000 beneficiaries through a variety of Medicare Advantage plans. We understand the committee’s concerns about marketing activities of independent agents and we appreciate the opportunity to discuss these matters with you.

I want to make three points today. Number 1, putting beneficiaries first is a core value for Coventry and we have a very good

track record in doing just that. Number 2, while we have faced

some unanticipated problems with the conduct of some independent

agents we have taken steps to put this right. And No. 3, we remain

committed to working with CMS, State regulators and our industry

to insure fair and appropriate marketing practices.

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As a leader in serving Medicare beneficiaries for more than a

dozen years we have a solid track record. In marketing our HMO

and PPO plans through our internal sales force and then our part

D plans through national distribution partners we had great success and encountered few complaints about agent marketing practices.

When we began offering Private Fee-for-Service plans for 2007

enrollment we ran into some unexpected challenges with the marketing activities of certain independent brokers and agents. The

situation at Judiciary House where an agent misrepresented himself and misrepresented our product is an unfortunate example of

these activities. This was a deplorable situation and I want to extend my personal and Coventry’s deepest apologies to Mr. Hammonds, Ms. Royal and Ms. Williams. This kind of conduct is unacceptable.

Coventry has terminated both agents and the agency. We have

taken a number of steps over the past 8 months to deter sales to

dual-eligibles, protect beneficiaries, and enhance agent training

and accountability. First, in January we sent two field communications to independent agents emphasizing that our Private Fee-forService plans are likely not suitable for dual-eligibles and reiterating special marketing guidelines for, excuse me, for institutionalized settings.

Second, to further deter agents from selling Private Fee-for-Service plans to dual-eligibles, we proposed eliminating commissions on

such sales. CMS advised that our proposal would not satisfy their

non-discrimination rules so instead we stopped paying upfront commissions on these sales. We have already seen significant reductions as a result.

Third, we began a successful program to make verification calls

to all enrollees in Mississippi to confirm that they understand and

intend to sign-up for our Private Fee-for-Service plans. We are

moving to extend this program across the country.

Fourth, we are implementing stricter guidelines for marketing

our products in subsidized housing facilities. Fifth, we raised the

bar for agents requiring they pass a test to ensure their grasp of

our products and the do’s and don’ts of marketing. Sixth, agents

are now required to re-train and re-test prior to selling products for

the 2008 enrollment year. Seventh, we have enhanced our broker

quality-management program to include new performance metrics

and an expanded special investigations unit that allow us to evaluate agent practices and take action when necessary.

Coventry remains committed to working with CMS, State regulators and our industry to protect Medicare beneficiaries. As the

committee knows on June 15, CMS, Coventry and six other leading

companies announced a temporary suspension of Private Fee-forService marketing activities. This was done to strengthen consumer

protections for early implementation of CMS’ new marketing guidelines for 2008.

We continue to work constructively with regulators in a number

of States including Mississippi, Georgia and Oklahoma. Finally, we

are working with AHIP to identify helpful industry level measures

such as a national registry of sanctioned brokers.

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In conclusion, Mr. Chairman, we have no tolerance for improper

agent conduct and we are committed to doing whatever it takes to

ensure appropriate marketing practices by everyone who sells a

Coventry product. This is good for our customers. It is good for us.

We have an excellent reputation in this industry. We value that

reputation and we intend to keep it.

Thank you.

[The prepared statement of Mr. Soistman follows:]

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Mr. STUPAK. Thank you.

Ms. Olson, your opening statement, please, for 5 minutes.

STATEMENT OF PEGGY OLSON, HEALTHWISE INSURANCE

PLANNING, LLC

Ms. OLSON. My name is Peggy Olson. I am honored to have been

asked to testify before the subcommittee. I am a licensed health insurance agent from Portland, OR, and I specialize in the sale of

Medicare-related health insurance products including Medicare Advantage plans. I have been in the insurance business for 25 years

and I have counseled seniors since 1989.

I am very aware of the publicity surrounding agents selling

Medicare Advantage plans. I make absolutely no excuses for those

individuals or their egregious violations of the Medicare marketing

rules. However, I do not think the outrageous behavior of a dishonest few is in any way reflective of my entire industry.

The sale of senior products is a labor of love. This is not a quick

way to get rich. I have never been offered a trip to Las Vegas.

The Medicare eligible population has unique needs. Clients are

frequently suffering from debilitating or chronic medical conditions.

Many have trouble with functional literacy or comprehension. Selling any Medicare-related product if it is done properly is a very

labor-intensive process that requires patience, compassion and specialized knowledge.

I have an example in here of a client I worked with recently who

it took a long, long time to get her problems straightened-out. For

this nice lady, I will receive $4 per month in commission for the

entire time she stays on the contract.

The standard I use for advising my clients is to treat them as

I would my own parents and this is the standard that most of my

professional colleagues use too. Most licensed producers who sell

Medicare Advantage plans spend a lot of time advising their clients, answering questions and helping to select the best possible

plan for them.

I would hate to see the subcommittee take any actions that

would limit the ability of people to access the services of a licensed,

ethical health insurance producer. One of the main ways we can

make sure that all producers selling Medicare-related products do

so in the most ethical manner is through education. My passion for

education is a large part of what led me to become involved with

the National Association of Health Underwriters, which is my industry’s professional trade association. Since joining I have worked

with HCFA, on Medigap standardization and to create agent training programs for the sale of Medicare managed care.

NAHU has been committed to senior product education but I

wanted to make sure that all of you were aware of the project we

have undertaken in cooperation with America’s health insurance

plans to make sure the producers have access to high-quality, consistent training.

Our program has been reviewed by CMS and approved for Continuing Education Credit in almost every State, except Oregon.

And we are actively promoting the course to both NAHU members

and non-members. The program is currently being updated and expanded to include more training on Private Fee-for-Service plans

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and will be available in a more universal format. It is our understanding this will be the standard for education for producers

whether they are independent agents or employees of insurance

carriers.

The recent voluntary suspension of Medicare Advantage Fee-forService product sales accentuates the need for this type of comprehensive training. It is our understanding that all carriers will

utilize this uniform training and its required exam to be certain

that all agents are trained with the same information.

I truly appreciate this opportunity to appear before the subcommittee today and hope that I can help.

[The prepared statement of Ms. Olson follows:]

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Mr. STUPAK. Thank you and thank you for your testimony.

Mr. Bailey.

STATEMENT OF GARY BAILEY, VICE PRESIDENT, MEDICARE

OPERATIONAL PERFORMANCE, WELLCARE HEALTH PLANS,

INCORPORATED

Mr. BAILEY. Mr. Chairman, Ranking Member Whitfield and

other members of the committee, I appreciate the opportunity to

testify about the sales practices of Medicare Advantage Programs.

I am Gary Bailey, vice president, Medicare Operational Performance for WellCare Health Plans. At WellCare I am responsible for

monitoring and improving our Medicare Advantage and prescription drug programs. Previously, I spent over 30 year at CMS working to improve the operations of the Medicare Program and services delivered to beneficiaries. Today I am proud to be working at

WellCare, a company committed to providing high quality products

and services to Medicare beneficiaries.

WellCare is striving to have a best-in-class compliance program.

We have a zero tolerance policy for inappropriate marketing.

WellCare is a leading provider of managed-care services with a

long-standing commitment to Medicare/Medicaid. Founded in 1985,

our team of over 3,000 associates currently serves over 2.2 million

Medicare/Medicaid members nationwide. We offer Medicare Advantage plans in 40 States and DC.

Today I will speak about WellCare’s efforts to protect beneficiaries in the marketing of Medicare Advantage plans. I will provide this committee with specific recommendations on how to improve this program. WellCare’s corporate ethics and compliance

program is called the Trust Program. We have enhanced the Trust

Program with additional measures in the oversight of independent

sales agents who market our Medicare Advantage products.

These measures include we conduct a thorough pre-screening of

all agents. We verify the agent as licensed. We conduct extensive

criminal background checks. We have extensive agent training, retraining and testing. If an agent does not pass with 100 percent or

if they are not trained or re-trained, they are suspended from selling WellCare’s products.

We maintain a field management program. We conduct ridealongs with our agents. We also look at dis-enrollment rates to see

if there are any inappropriate trends. We call each and every member after they enroll in our plan to measure their satisfaction, to

ensure that they fully understand their new plan and that they are

fully informed.

We have developed a strict code of conduct. Every agent agrees

to the code of conduct before they can market our products.

We have recently started a secret shopper program. We have an

outside, independent organization that monitors our marketing efforts to give us feedback from the member and to ensure broker

compliance. When any compliance issue is identified agents are immediately investigated and if appropriate are terminated. Over the

last 7 months we have terminated 18 sales agents for marketing

conduct violations.

But there is more to do. We recently announced additional efforts

to strengthen our compliance program. These include implementaVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00120 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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tion of an in-bound telephone enrollment verification process. This

system will ensure that prospective enrollees understand the plan

while they are meeting with a licensed agent. We will find this out

in real time.

The program will be in addition to our 100 percent out-bound

call-back program already in place for new members. Also, since we

are recording the call we can monitor the agent’s behavior at the

point of sale.

On June 15, we announced our decision to join six other Medicare Advantage organizations in pledging to strengthen consumer

protections for Medicare beneficiaries. The pledge implements

CMS’ 2008 marketing rules in 2007. This pledge includes a temporary suspension of the marketing of our Private Fee-for-Service

plans until we implement these new rules.

Our Trust Program’s compliance process works. For example, in

monitoring Medicare Advantage enrollment applications we

proactively discovered an agent in Georgia that had submitted

fraudulent applications. Working with the Georgia Department of

Insurance and others, aggressive action was taken against this

agent. This agent and his accomplice were subsequently arrested.

In California we learned of improper marketing by an agent that

translated approved marketing materials into Chinese and then

distributed them to Medicare beneficiaries who do not speak

English. We terminated this agent. Following this we immediately

undertook a national agent re-training program and initiated a program of making calls to 100 percent of our members to verify their

understanding of our plans.

But we support even more improvements. First, we believe there

should be a uniform national training program for all agents who

sell Medicare Advantage products. Second, we believe a national

database should be developed now to share information about those

agents and brokers who have been sanctioned by a State or terminated by a health plan. We do not want to be associated with an

agent or broker who has been terminated by another plan because

of their non-compliance with State or Federal rules.

Third, we believe all plans should conduct the in-bound telephone enrollment and verification process I described. If the national database had been established we would not have hired an

independent agent selling for another plan whose license had already been suspended in Mississippi. This agent then moved and

was selling Medicare Advantage plans in Alabama. We were one of

the plans who unknowingly had this agent selling for us. We then

learned he had lost his license. We investigated and terminated

him within 72 hours. If we had had a national database he would

never have been allowed to sell our products or any other plan’s

products.

We appreciate the committee’s attention to this important program and thank you for the opportunity to testify and I look forward to answering your questions.

[The prepared statement of Mr. Bailey follows:]

STATEMENT OF GARY BAILEY

Good afternoon, Chairman Stupak, Ranking Member Whitfield and members of

the Committee. I am Gary Bailey, Vice President, Medicare Operational PerformVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00121 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
114

ance for WellCare Health Plans. In that role, I am responsible for monitoring and

improving WellCare’s operations and performance in our Medicare health plans, including both the Medicare Advantage (MA) plans and Medicare Prescription Drug

Benefit plans (PDP). Previously, I was Deputy Director for Plan Policy and Operations in the Center for Beneficiary Choices at the Centers for Medicare & Medicaid

Services (CMS). During my tenure at CMS, I was responsible for the administration

of Medicare Advantage plans and the Medicare Prescription Drug Benefit. I appreciate this opportunity to testify about sales practices in the Medicare Advantage

program, what we at WellCare have done to contribute to industry improvement,

and what more can be done to ensure the program works well for Medicare beneficiaries.

In my 32 years of Federal Government service at CMS, I consistently focused on

improving the Medicare program. During my tenure at WellCare, I have been extremely impressed with WellCare’s commitment to serving the needs of Medicare

beneficiaries, the organization’s responsiveness to rapidly changing Medicare program dynamics, and our commitment to strong corporate compliance. WellCare is

a company that prides itself on continuous improvement, and I have seen this improvement first hand in our approach to Medicare Advantage sales and oversight.

WellCare understands the challenges and the rules governing marketing practices

in the Medicare Advantage program, particularly for new Private Fee for Service

(PFFS) products that have expanded so rapidly. Health plans and their independent

sales agents must abide by appropriate marketing and sales practices for these

products so that beneficiaries understand the important differences between PFFS

and traditional Medicare or other options, so they can select a plan that best fits

their health care needs. At WellCare, we have a zero tolerance policy for non-compliance with our marketing guidelines. We will—and we have—promptly terminated

contracts of non-compliant sales agents. It is our company’s ethic to do more than

merely ‘‘follow-the-rules’’—we have NO tolerance for any unethical behavior.

In my testimony today, I will provide information about: WellCare’s governmentsponsored health care plans, specifically our Medicare Advantage PFFS plans;

CMS’s recent audit of WellCare’s PFFS plans; our recently announced decision to

join six other leading health plans in pledging to strengthen consumer protections

for Medicare beneficiaries; and WellCare’s zero-tolerance of inappropriate marketing. Finally, I will provide our recommendations about how further improvements

can be made to marketing and oversight of Medicare Advantage plans.

I. ABOUT WELLCARE HEALTH PLANS

WellCare is a leading provider of managed care services dedicated exclusively to

government sponsored healthcare programs, such as Medicare and Medicaid.

WellCare operates a variety of Medicaid and Medicare plans, including health plans

for families, children, and the aged, blind, and disabled as well as prescription drug

plans. Founded in 1985, our team of over 3,000 associates serves more than 2.2 million members nationwide. We currently operate networked managed care programs

in eight states, and we are the fifth largest vendor to CMS for the nationwide PDP

program.

In order to better serve the Medicare population, WellCare continues to expand

its range of Medicare products. In 2006, WellCare laid the foundation for the January 2007 nationwide launch of our Medicare Advantage PFFS plans that feature an

open network and additional benefits for members. We operate our open-network

MA plans through three life and health insurance subsidiaries under the WellCare

name. We contract with licensed, independent sales agents across 39 states and

offer these MA plans in 793 counties in 39 states and Washington, D.C. As of March

31, 2007, WellCare has enrolled over 32,000 members in our Medicare Advantage

PFFS plans.

II. CMS AUDIT OF WELLCARE

As you may know, there was a report in the New York Times about a CMS audit

conducted on WellCare’s private fee-for-service operations. The routine audit consisted of documentation review, interviews with WellCare staff and sampling of various records. Preliminary findings were issued during the exit conference in midMarch and formal findings were subsequently delivered to WellCare.

As a result of the CMS audit, WellCare has improved several marketing processes, two of these, the ‘‘secret shopper’’ program and the telephonic enrollment system, will go a long way towards addressing the concerns put forth by CMS. In addition to those improvements, WellCare has implemented mandatory broker re-training and re-testing, the translation of additional materials into multiple languages,

and additional outreach and coordination with advocacy groups and state agencies.

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WellCare appreciated the opportunity to have CMS come on-site within the first

10 weeks of our launch of the Medicare Advantage private-fee-for-service program

to provide early identification of concerns and improvement opportunities. We welcome input and communication from others on issues and concerns. We will investigate and take swift action when we suspect any abusive practices.

III. OUR DECISION TO JOIN SIX OTHER LEADING MEDICARE ADVANTAGE HEALTH

PLANS IN PLEDGING TO STRENGTHEN CONSUMER PROTECTIONS FOR MEDICARE

BENEFICIARIES

Based upon our concerns about misleading marketing practices by independent

agents, WellCare has helped lead the drive toward industry improvements. We are

working with CMS, America’s Health Insurance Plans (AHIP), the National Association of Insurance Commissioners (NAIC) and other health plans to develop consistent compliance and oversight standards for independent sales agents.

On June 15, WellCare announced its decision to join six other leading Medicare

Advantage health plans in pledging to strengthen consumer protections for Medicare

beneficiaries. This pledge includes the accelerated implementation of the 2008 CMS

Call Letter, the CMS marketing guidance provided to MA PFFS plans on May 25th

as well as the development of best practices for compliance oversight of independent

sales agents. To allow time for these activities, the pledge includes a temporary suspension of the marketing of our PFFS plans.

Under the voluntary pledge of compliance with CMS, a plan may not market

PFFS plans until CMS certifies that the plan has the additional systems and management controls in place to meet all the additional requirements specified in the

May 25, 2007 guidance and 2008 Call Letter issued by CMS. While the full range

of updated requirements will be in effect for all sponsors of PFFS plans beginning

October 1, 2007, WellCare and the six other MA health plans have agreed to accelerate the adoption of these new requirements. CMS will require the following protections before PFFS marketing can resume:

• All materials, including advertisements, enrollment materials, and materials

used at sales presentations must include model disclaimer language provided by

CMS in its guidance; • All representatives selling the product must pass a written test that demonstrates their thorough familiarity with both the Medicare program and the product they are selling; • A provider outreach and education program must be in place to ensure that

providers have reasonable access to the plan terms and conditions of payment, and

that provider relations staff are readily accessible to assist providers with questions

concerning the plan; • Outbound education and verification calls will be made to all beneficiaries requesting enrollment to ensure that they understand the plan rules; • A list of planned marketing and sales events must be provided to CMS that

includes events sponsored by delegated brokers and agents as well as those sponsored by the plan; and

• At CMS’s request, plan sponsors must provide a complete list of all representatives marketing a PFFS product and authorize CMS to make that list available to

State Insurance Departments upon request.

Even before these new CMS requirements, WellCare had previously announced

enhancements to our compliance program for our PFFS products, including an inbound telephone enrollment and verification process and a ‘‘secret shopper’’ program

using an independent organization to anonymously monitor field marketing activity.

These enhancements are in addition to extensive compliance efforts that were already in place for our independent sales agents.

III. WELLCARE’S CURRENT APPROACH TO THE MARKETING OF MEDICARE ADVANTAGE

PLANS

WellCare vigorously enforces a zero-tolerance policy for the violation of all laws,

rules, and policies. I will address both the Federal and WellCare controls in turn.

A. Federal Controls on the Marketing of Medicare Advantage Plans

As a rule, each WellCare employee is personally responsible for compliance with

all Federal, state, and local laws and regulations. All employees and representatives

of WellCare must become and remain knowledgeable on the legal and regulatory requirements applicable to their respective positions, duties, and contractual requirements. Additionally, WellCare has created an environment enabling all people who

work and are under contract with WellCare to exercise this individual responsibility.

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The marketing of Medicare Advantage plans is controlled by Federal regulations

and CMS guidance. Federal regulations prohibit the distribution of any marketing

materials or election forms to prospective beneficiaries unless approved by CMS. In

conducting marketing activities, MA organizations may not: (i) provide cash or other

monetary rebates as an inducement for enrollment; (ii) engage in any discriminatory

activity, including targeted marketing to Medicare beneficiaries from higher income

areas without making comparable efforts to enroll Medicare beneficiaries from lower

income areas; (iii) solicit Medicare beneficiaries door-to-door; or, (iv) engage in activities that could mislead or confuse Medicare beneficiaries or misrepresent the MA

organization. Importantly, Federal rules also require an MA organization to establish and maintain a system for confirming that enrolled beneficiaries have in fact

enrolled in the MA plan and that beneficiaries understand the rules applicable

under the plan.

In addition to regulations, CMS has released numerous guidance documents that

reflect CMS’s current interpretation of the requirements and related provisions of

the Medicare Advantage and Medicare Prescription Drug Plan rules. As I mentioned, on May 25, 2007, CMS issued additional guidance specifically to MA PFFS

plans outlining CMS’s new requirements for PFFS marketing. Finally, the CMS

2008 Call Letter outlines in detail the information that health plans need to ensure

compliance with CMS policies and program requirements.

B. WellCare Health Plans Compliance Programs for Medicare Advantage Plans

In addition to the Federal regulations and marketing guidance, WellCare Health

Plans has implemented even stronger oversight policies. These are based upon our

corporate ethics and compliance program, known as the Trust Program, that was

adopted in 2002. All people associated with WellCare must accept the individual responsibility and duty to conduct WellCare’s business in an ethical and compliant

manner, consistently adhering to the standards of conduct embodied in the Trust

Program.

1. The Trust Program

The Trust Program is the foundation for WellCare’s operations, unifying our longstanding corporate ethics and compliance policies under a comprehensive program

with the goal of establishing a culture of integrity and trust within WellCare. The

Trust Program promotes prevention, detection, and the resolution of conduct that

does not conform to applicable Federal or state laws or our high standards of business ethics. The Trust Program applies to WellCare, our Board of Directors, employees, and our business partners. The Trust Program provides guidance and oversight

to ensure that all work at WellCare is performed in an ethical and legal manner.

The Trust Program, however, cannot substitute for an individual’s personal sense

of honesty, integrity and fairness. We strongly encourage all people within the

WellCare community to rely on their common sense in recognizing right from wrong

using the Trust Program to ensure that we observe high ethical standards.

2. Additional Compliance Measures

To augment the Trust Program, we recently announced enhanced compliance

measures designed to protect the rights of Medicare beneficiaries. These enhancements will increase the oversight of independent sales agents who market the company’s MA products. Our recent improvements include two new components for

oversight of MA independent sales agents. Because independent sales agents market

more than health plans, WellCare firmly believes these improvements are necessary

to ensure that the quality and professionalism of WellCare’s sales practices remains

best-in-class.

The first improvement is an inbound telephone enrollment and verification process. This system will allow prospective enrollees an additional opportunity to verify

their understanding of plan benefits, acknowledge that they received all the information needed to make an informed decision before joining a Medicare Advantage

program, and confirm their voluntary election to select the plan terms. The phone

call verification will be digitally voice recorded at the point of enrollment for all

Medicare Advantage beneficiaries. With this new enrollment process, WellCare will

implement a real-time verification and quality assurance process. The inbound verification program will be in addition to the 100 percent outbound callback program

already in place for new members.

The second new component is the launch of a ‘‘secret shopper’’ program where

WellCare will use an independent organization to anonymously monitor the compliance of Medicare Advantage independent sales agents. This national program began

its rollout just before the announced voluntary suspension of marketing. Once

WellCare meets the benchmarks outlined in the agreement with CMS, and resumes

marketing, the program will continue its phased nationwide rollout. All results of

WellCare’s secret shopper program will be reported directly by the independent organization to WellCare’s Corporate Compliance department, generally on a sameVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00124 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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day or next-day basis. Like our other compliance and consumer protection measures,

the secret shopper program aims at ensuing seniors are fully informed about their

PFFS benefits and treated appropriately by independent agents. It also will help us

to identify inappropriate agent activity and aid in our ongoing efforts in improving

agent education.

In addition, WellCare is working with America’s Health Insurance Plans (AHIP)

on new principles, standards and practices to further protect Medicare beneficiaries.

In short, these new measures will tolerate nothing less than strict adherence to a

code of conduct that appropriately educates and protects our members. We are confident that with these new enhancements, our overall compliance strategy will continue to be best-in-class.

Other enhancements to WellCare’s compliance program will build upon the extensive activities already in place to oversee independent sales agents for Medicare Advantage private fee-for-service products, including:

• Confirmation of agent’s state licensure; • Extensive criminal background screening; • Mandatory training and testing on product benefits and marketing guidelines; • Mandatory contract terms, incorporating a sales agent code of conduct; • On-site monitoring of agents by field sales management; • Post-enrollment outreach calls to 100 percent of new members; • Mandatory re-training and re-testing to refresh knowledge of plan terms and

marketing guidelines;

• Secret Shopper program;

• Developing an inbound enrollment verification process;

• Rapid resolution of any identified compliance issues; and,

• Zero tolerance for verified infractions.

3. Sales Agent Code of Conduct

As a leading provider of Medicare products, WellCare has established a reputation

for providing quality health plans at affordable rates for beneficiaries. In an effort

to ensure all independent sales agents contracted with WellCare are representing

our plans with the highest degree of integrity, we also require every sales agent to

abide by the ‘‘WellCare Sales Agent Code of Conduct.’’ This code of conduct requires

the following:

Respect the beneficiary: Agents must provide guidance with the beneficiary’s best

interest in mind, be respectful of the beneficiaries’ wishes and understand their

unique health care needs. Sales agents should be available for any questions or concerns before and after the sale.

Provide full disclosure: Agents must present all plan options completely with full

disclosure of any plan limitations and compare WellCare plans to the beneficiary’s

current coverage to ensure they understand differences in features, benefits, costs,

and access to providers.

Follow proper marketing guidelines: Agents must follow approved marketing

methods for setting appointments and conducting sales sessions as outlined by CMS

regulations. Agents cannot solicit individuals via door-to-door sales, phone calls or

unsolicited email and cannot solicit or enroll members where health care services

are dispensed.

Use approved materials: Agents must use only WellCare and CMS approved materials and agents must not alter the materials in any way. WellCare has developed

all the sales and marketing material needed to present plan information to the beneficiary and makes these materials available in multiple languages.

Proper use of sales tactics: Agents must never use high pressure sales tactics to

influence a beneficiary’s decision to enroll. Agents must allow the beneficiary time

to review and understand the information and offer them independent sources of information such as the CMS web site: www.cms.hhs.gov.

Representation: Agents must always represent themselves and WellCare appropriately to ensure that beneficiaries understand that they represent WellCare but

are not an employee of WellCare, Medicare, Social Security, or any other government entity.

Use enrollment forms correctly: Agents must not back-date, falsify, or alter any

enrollment document or form, and applications must be submitted so that information on the original copy matches exactly with the copy that was left with the prospective member. Completed enrollment forms must be mailed or faxed to WellCare

within 24 hours of the date the beneficiary signed the form.

Do not discriminate: To ensure fairness, agents must not discriminate against potential enrollees on the basis of health status, ethnicity, or any other improper criteria. If an agent believes a beneficiary lacks understanding of the program or is

of questionable competence, he or she must observe proper procedure by having the

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member’s authorized representative present at the time of enrollment and approve

the member’s decision.

Comply with oversight standards: WellCare has rigorous compliance standards for

all independent sales agents. Agents must know and understand these standards.

4. WellCare Oversight

To ensure compliance with all marketing guidelines and the Code of Conduct, all

Sales Agents are informed and understand that WellCare undertakes the following

initiatives:

• Deployment of a secret shopper service to pose as potential beneficiaries to experience the sales process/presentation;

• Revocation of selling privileges for sales agents who do not complete the mandatory training and score 100 percent on the required testing;

• Follow-up calls to all beneficiaries enrolled by any terminated sales agent to

confirm the beneficiary’s enrollment decision or to facilitate disenrollment;

• Monitoring of sales data for potential issues and to educate or even terminate

agents based on the findings, with emphasis on proactive resolution of issues;

• Monitor a confidential compliance Hot Line where members, associates and

government regulators can report concerns about potential marketing misconduct;

and

• As our inbound enrollment verification process is implemented nationwide for

PFFS, all agents will need to complete any sales activities through this process.

The focus of our oversight is to ensure that each Medicare beneficiary receives

high quality, professional interaction in their sales experience. Medicare beneficiaries must fully understand their health plan benefits, coverage limitations, and

policies to make an informed choice about the health care coverage that best suits

their needs. Ensuring a positive sales experience is in everyone’s best interest. If

a product or service is not good for a beneficiary, then it is not good for WellCare,

either.

C. Recent Examples of WellCare’s Zero Tolerance Policy

Through WellCare’s compliance programs, 18 independent sales agents have been

terminated for marketing conduct violations across the country because WellCare

has a zero-tolerance for agent misconduct. However, we are never satisfied with our

past performance, and we continue to improve our internal compliance measures.

The New York Times report I mentioned was critical of WellCare’s private feefor-service operations, and I’d like to set the record straight. In January 2007,

WellCare learned of improper marketing efforts by a California licensed, independent sales agent who was not an employee. This agent translated approved marketing materials into Chinese and aggressively distributed them to a group of Medicare

beneficiaries who did not speak English. WellCare immediately analyzed the selling

history of this agent to reveal that the agent used inappropriate sales tactics and

that the materials he was using were not approved. As a result, WellCare immediately terminated its contract with the sales agent.

Because WellCare takes its responsibilities under the Medicare program seriously,

we moved quickly and aggressively. First, WellCare staff commenced mandatory retraining for the insurance agency that contracted with the terminated agent to reinforce the agency’s understanding of the Medicare marketing guidelines and

WellCare’s expectations. Second, WellCare initiated mandatory retraining and testing on a national basis for all licensed independent sales agents under contract with

WellCare for its Medicare Advantage products. If sales agents do not complete this

follow-on training and score 100 percent on the required retesting, their selling

privileges with WellCare will be revoked. Third, WellCare initiated mandatory new

member call-backs to 100 percent of new Medicare Advantage enrollees to confirm

that their sales experience was positive and that they understand their benefits.

WellCare also placed follow-up calls to the beneficiaries enrolled by the terminated

agent to confirm their enrollment decision or facilitate disenrollment.

Another recent action occurred with a sales agent in Georgia. In early December

2006, through our monitoring of enrollment applications, we learned that an agent

submitted several Medicare Advantage applications for deceased persons. That day,

an investigation was initiated and within two days, the agent in question was terminated. We conducted an analysis of and contacted all of the fired agent’s enrollees.

Through the investigation, we learned that the terminated agent participated in

several prohibited marketing activities in violation of Federal regulations, CMS

guidelines, and WellCare policies. Accordingly, WellCare informed the Georgia Department of Insurance and Federal authorities of the agent’s actions, and we cooperated with them on their investigation. In the spring, the fired agent was escorted

from his home in handcuffs by Georgia law enforcement authorities. He and his accomplice are now behind bars.

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V. WELLCARE’S RECOMMENDATIONS TO FURTHER IMPROVE MARKETING PRACTICES

WellCare is extremely proud of our Medicare Advantage offerings. The plans offer

beneficiaries new choices to broaden the ways in which beneficiaries can receive

high quality health care. We are confident that Federal regulations combined with

our vigilant internal compliance efforts and commitment by the industry will help

ensure the highest standards of integrity. Nonetheless, through the operation of our

zero-tolerance policy as well as our recent dialogue with CMS, as evidenced by our

new compliance pledge to further strengthen consumer protections, we recognize

there is room for improvement. We offer the following recommendations for your

consideration:

Development of a mandatory national standardized Medicare training program for

all agents selling Medicare products. While plans conduct such training and specific

training will always be needed for company-specific benefits and products, consumer

protection can be enhanced by ensuring all agents marketing PFFS products are

trained with a uniform set of education materials and directed to cover with Medicare beneficiaries a set of mandatory topics and disclaimers. This will provide a

platform for excellence in education of consumers and streamline investigation of

any compliance issues with agents. This issue is currently under discussion with

AHIP and CMS;

Use of an inbound telephone enrollment and verification process that would provide the opportunity to ensure that enrollees fully understand the benefits and features of the plan. Again, this proposal would serve to enhance consumer education

and help plans to quickly identify any compliance or training issues with independent agents. It would ensure that no person who did not have an adequate understanding of the PFFS product would be enrolled in the program;

Creation of a national database to provide and share information about agents

and brokers that have been sanctioned by a state or terminated by a health plan.

While most agents are ethical and professional in their marketing of our products,

a national database would allow plans to track and quickly report any issues with

a small subset of roque agents—who sometimes seek to sell in other states when

their bad behavior is discovered in one state. Again, this issue is currently under

discussion with AHIP, NAIC and CMS;

Early implementation of the CMS 2008 Call Letter. This effort is now underway

for those plans, like WellCare, taking the voluntary compliance pledge;

Additional provider outreach and education, including fixing the ‘‘Common Working File;’’ and

Industry-wide adoption of secret shopper programs.

While all of the issues mentioned above should be adopted, I want to stress the

importance of two of them—inbound verification and a national database. As the

Committee is aware, there was an independent agent whose license was suspended

in Mississippi, but he continued selling MA plans in another state. WellCare was

one of the plans who unwittingly had this agent selling our products in Alabama

because Alabama was not aware the agent had been suspended in Mississippi, and

he passed all other background checks. We became aware of the Mississippi suspension only through word of mouth during our general outreach effort to the Mississippi Medicaid Agency and the Department of Insurance. When they identified

this agent as a problem in Mississippi, we immediately sought to determine if he

was selling our products in any other states. He was, we undertook an investigation,

and within 72 hours had terminated our relationship with him. We began contacting

the members in Alabama he had signed up and worked to disenroll those who were

not satisfied with our product.

Luckily, we found this agent, but it was very much due to our aggressive oversight. It is our belief, though, that with inbound verification and a national database, this agent and others like him could be stopped much sooner. Inbound verification would have stopped this agent from enrolling individuals in the first place

if they expressed concerns about the agent. We also could more quickly and

proactively investigate such agents. And we could quickly report to the central database any termination of an agent to protect other Medicare beneficiaries who may

be approached by the same agent marketing for a different company.

In conclusion, we believe the most effective action to undertake on behalf of Medicare beneficiaries is to improve communication channels and provide effective confirmation of allegations of abusive marketing practices. By fostering cooperation at

the Federal, state, health plan, and agent or agency levels in communicating and

resolving complaints, we can take swift action against those who defraud Medicare

beneficiaries.

WellCare is proud to be an industry leader in good compliance. We started with

a best-in-class compliance program five years ago and have added enhancements

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along the way as we continuously seek to improve the quality of our products, our

operations, and the practices of the independent sales agents that market our products.

Thank you again for this opportunity to testify about our perspectives on these

important issues. Please be assured that WellCare remains deeply committed to the

long-term success of the Medicare Advantage program. We appreciate the critical

oversight that the Committee provides over this valuable program and look forward

to continuing to work with you to meet future challenges in the Medicare and Medicaid health programs.

Mr. STUPAK. Thank you. We will start with the questions.

Mr. Soistman, Mr. Bailey talked about a national registry for

agents, would you be in favor of that?

Mr. SOISTMAN. Mr. Chairman, we would be very much in favor

of that.

Mr. STUPAK. OK. Would you be in favor of putting that registry

on the Internet so senior citizens would have access to it so they

could see if these agents were in fact registered and licensed in

good standing?

Mr. SOISTMAN. We think the, Mr. Chairman, we think that information should be available to the public at large and obviously to

State regulators provided it is kept timely and it is reliable. I think

it could be a very useful tool in the process.

Mr. STUPAK. You have all mentioned the abuses we have heard

about on Medicare Advantage. Strike that, I don’t want to go there.

Mr. Bailey, let me ask you this question. Your company is on a

corrective action plan by CMS right now, is that correct?

Mr. BAILEY. Yes, sir, that is correct.

Mr. STUPAK. What led to that? Why did you have to go on this

corrective action plan?

Mr. BAILEY. OK. We were notified by CMS that they were going

to do an audit, a full review of our Private-Fee-For-Service plan in

March. They visited us on March 12. It was a good opportunity for

us. The program was only 10 weeks old and we would rather find

out if there were any issues that needed to be corrected sooner

than later. So they spent the week with us. We had an informal

debriefing at the end of that week on March 16. They actually

issued a requirement report to us on April 19.

Mr. STUPAK. Your private plan had only been out there for what,

10 days you said?

Mr. BAILEY. Actually, for 10 weeks. And it is not unusual——

Mr. STUPAK. Was there a lot of complaints then?

Mr. BAILEY. I think there were probably two reasons they decided to visit us. One, it is not uncommon for the agency to visit

new plans when they are in start-up mode just to provide technical

assistance, but also I think they had received a number of complaints about brokers in general and wanted to visit us and make

sure we were doing all that we could do to prevent that from happening. So I think that is the two contributing factors.

Mr. STUPAK. Were the complaints on what you call on the inbound verification call? Is that what the complaints were based on?

Mr. BAILEY. Actually, what they really asked us to do after

spending a week with us in terms of corrective action, they wanted

to make sure we were managing the broker community as effectively as we could.

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Mr. STUPAK. Now a broker community now, that would be

agents?

Mr. BAILEY. That would be the agents. Primarily the agent or

brokers on this one. They wanted to make sure that, in fact, they

wanted to see the results of the calls that we were making, as I

had mentioned earlier, we began to make in February before the

CMS audit occurred, calls to our Private Fee-for-Service applicants

before they were enrolled to gauge the satisfaction of their sales experience.

Mr. STUPAK. Now that is that in-bound verification call, right?

Mr. BAILEY. Actually that is another thing.

Mr. STUPAK. OK.

Mr. BAILEY. There are three different levels of calls. What we do

for Medicare Private Fee-for-Service as a result of some of the

abuses that we had heard of earlier where that the agent in San

Francisco had illegally translated the marketing materials, we realized at that point we need to reach out to the beneficiaries before

they were enrolled, before they were into the system, so we implemented a 100 percent call-back on Private Fee-for-Service enrollees. So that is call No. 1.

We would call them and we ask them about their satisfaction of

the sales experience. We wouldn’t want to do that at the time the

broker was there so we waited about a week after is we call them

up, go down some of the benefits of the program, some of their understanding, but more importantly how did the sales satisfaction

go. So that is the first call.

The second call that we have been doing on all members for our

programs are the out-bound calls within 2 weeks of effective enrollment we call them and we discuss with them their understanding

of the benefits. We want to make sure that we have the correct address, they understand their benefits and how to access them.

The in-bound telephone and verification call is something relatively new now. Some other major plans are using it. But what

we want to do there at the time of a sales transaction, this may

have occurred to several folks in this room or up there, with other

products. At the time of the sales transaction, before the sale is actually consummated, the agent will make a call, in this case to an

enrollment verification specialist working at WellCare, and they

will talk to the representative for several minutes to provide some

of the beneficiary’s information. But more importantly, we ask the

beneficiary to take the phone, if they wouldn’t mind, and the enrollment verification specialist goes through a pretty detailed questionnaire. We do not ask about broker performance but you understand the deeming concept and how that works, the provider must

accept this. Do you understand that if it is a Medicare Advantage

plan and we go down a list.

Mr. STUPAK. Does CMS approve these scripts that you are like

any other outward communications?

Mr. BAILEY. Absolutely. That script like any other outward communication that CMS has been approved.

Mr. STUPAK. Go to exhibit No. 8. So CMS approved these communications, halftime, extra points, we are urging your agents to signup people. You get $100 bonus for every application and you can

possibly win a Panasonic 42-inch, plasma HDTV.

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Mr. BAILEY. I don’t think since this wasn’t a communication to

the members that CMS would have had to approve it, but I recall

this.

Mr. STUPAK. But wouldn’t this go to your members, your agents,

your brokers, your independent brokers.

Mr. BAILEY. The agents.

Mr. STUPAK. OK. The independent brokers and——

Mr. BAILEY. The CMS approveal, I believe, is required on communications going to the members.

Mr. STUPAK. To members you mean the people you sign-up, in

other words.

Mr. BAILEY. We don’t do this. We have actually stopped any type

of effective incentives January 1, when we began to offer our product. I remember this specifically. We were very concerned about the

agents making sure they got their applications of the members to

us quickly. Because if not you can run into some date lag so we

don’t want that, so we actually put incentive out if, in fact, this

was to promote them getting their applications into us quickly and

not gathering them and sending them all at once.

Mr. STUPAK. But they wouldn’t get paid a commission unless

they got their application in, right?

Mr. BAILEY. This is true but from the beneficiaries, we wanted

to minimize the amount of time from when the beneficiary said I

would like to join to when we were able to fulfill the member, the

member kit and providing the ID card.

Mr. STUPAK. So you are telling us you had to do this to get them

to turn in their applications quicker?

Mr. BAILEY. No, I think at the time we just wanted to just have

a double-check to make sure they got them as quickly as possible.

Again, we don’t do this anymore but at the time the program was

relatively new for us, we just didn’t have any track records as to

how long it would take to get those in. And now we seem to have

a pretty good flow of applications and we are not really concerned

about this.

Mr. STUPAK. I find that hard to believe that you have to do these

kind of incentives to get them to get your application in early. I

would think they would get their application in because their commission runs on it, right?

Mr. BAILEY. In terms of what some of the folks have said about

things that you have done and what you have learned from them,

I think that situations like this that you have raised have driven

us to supporting the implementation of the in-bound enrollment

verification system. Because, in effect, what you have done there

if it is successful encounter between the representative from the

plan and the agent and the beneficiary it all transpires over the

telephone. It is done telephonically.

Mr. STUPAK. These sort of invites agents to play rather quick and

loose with the facts in order to get your points to get your chance

to win that plasma TV that retails at, according to your flyer here,

$1,439.99. I mean this would be more encouraging to sign people

up not to get your applications in quickly. Well, I got to get it in

by the deadline if you want to qualify for the contest but and you

don’t do this anymore?

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Mr. BAILEY. No, we don’t do that anymore and that, as I said

there was some things in the administration of the program that

you learn from and you move forward so no we don’t.

Mr. STUPAK. OK.

Mr. Whitfield, for questions, please.

Mr. WHITFIELD. Ms. Olson, I represent a rural district and a lot

of people like these Medicare Advantage Programs and from your

experience as a person selling them, what are the positives about

these Medicare Advantage Programs? Why do people like them?

Ms. OLSON. There are a number of reasons. First of all, let me

state I do not sell Private Fee-for-Service plans because they don’t

work very well where I am.

Mr. WHITFIELD. OK.

Ms. OLSON. Medicare Advantage plans are relatively easy to understand. There are co-payments, some of them offer both in-plan

and out-of-plan benefits, usually they offer vision benefits, some alternative care benefits, depending on where you are, and the price

is reasonable. And you know, pretty much, from month to month

as opposed to a Medicare Supplement or a Medigap plan exactly

what your out-of-pocket is going to be.

Mr. WHITFIELD. OK. Now, let me ask you, do you represent a lot

of different insurance companies?

Ms. OLSON. I use to. I got it down to about seven companies now

for my Medicare people.

Mr. WHITFIELD. All right. So you have seven companies that you

represent.

Ms. OLSON. Yes, sir.

Mr. WHITFIELD. Are you an agent or a broker or a consultant?

Ms. OLSON. I am an agent and a consultant.

Mr. WHITFIELD. And, Mr. Soistman, your company has a Medicare Advantage Program that it put together and you were selling

it, is that correct?

Mr. SOISTMAN. Yes, Congressman, we have multiple Medicare

Advantage Programs.

Mr. WHITFIELD. OK. And what percent of your sales force would

be actual employees of your company as opposed to independent

brokers or independent agents?

Mr. SOISTMAN. Well, our Medicare Advantage plans that are

health plan based, we call them coordinated care plans, they are

in five markets, and they are limited by the number of counties.

So they are not even statewide in those five markets and there are

approximately 35 employees who are responsible for selling.

Mr. WHITFIELD. So those are in-house employees and then you

have contracts with other agents that can sell them as well.

Mr. SOISTMAN. That is correct.

Mr. WHITFIELD. OK. And, Mr. Bailey, what about how many

agents do you have in-house selling these programs?

Mr. BAILEY. I don’t have those numbers at my fingertip and I can

absolutely get those but I am thinking probably in-house could be

15 to 20 percent, 25 percent of the total agent population.

Mr. WHITFIELD. OK. Now, Mr. Soistman, unfortunately your

company was the one involved with Judiciary House and the salesman that sold those Medicare Advantage Programs at Judiciary

124

House from your analysis and review of that case what did they do

wrong?

Mr. SOISTMAN. Well, Congressman, they did a number of things

wrong. First, just so the committee understands these are independent agents. They weren’t employees of the company. What we

have been able to piece together through out internal investigation

is that as the previous panel indicated, the agents did call on Judiciary House on two occasions in February. They, apparently, made

statements representing that they were from Medicare and that

they were there to talk about the new part C programs. So clearly

they were misrepresenting themselves. They were misrepresenting

the purpose of their visit and, clearly, misrepresented the products

that they were marketing. As far as we can tell, they were indeed

promoting our Advance for Freedom Private Fee-for-Service plan.

We know these agents represent other companies so don’t know exactly——

Mr. WHITFIELD. But they both had licenses to sell in the District?

Mr. SOISTMAN. The agent in particular that was identified as

having signed the applications was licensed, he indeed was licensed.

Mr. WHITFIELD. And has he lost his license in the District?

Mr. SOISTMAN. He has lost his license and the agency that he is

affiliated with was terminated as well.

Mr. WHITFIELD. But it would be possible——

Mr. SOISTMAN. I am sorry, let me correct that.

Mr. WHITFIELD. OK.

Mr. SOISTMAN. He has been terminated, losing his license is not

something that we really can affect other than report any agent

who has violated the contract and has done something of a significant nature including fraud, we would report them to the State Department of Insurance.

Mr. WHITFIELD. But if he went to Mississippi, say, and wanted

to sell insurance in Mississippi on his application would he have

to state or would they ask the question have you been terminated

in another jurisdiction or do you know?

Mr. SOISTMAN. I would imagine that in most States that is a requirement if you have ever lost your license you have to report

that. The States, I think, are somewhat limited in terms of the

availability of that information though.

Mr. WHITFIELD. Now, Ms. Clegg-Boodram, mentioned in her testimony that when the Federal law passed that allowed Medicare

Advantage Programs to be sold that in essence CMS was prohibited

from bringing any Medicare fraud charges against anyone. Now,

you understand as an insurance company selling Medicare products

you can be prosecuted for fraud by CMS, is that correct?

Mr. SOISTMAN. Well, we can certainly, CMS has the authority to

take multiple actions, corrective actions, sanctions, et cetera, if we

are violating our agreement or not living up to the agreement.

Mr. WHITFIELD. So that is quite clear that that is still in place

which we think is certainly helpful and I see my time has expired.

Mr. STUPAK. Thank you, Mr. Whitfield.

Mr. Walden.

Mr. WALDEN. Thank you very much, Mr. Chairman. I want to

welcome our panelists. I appreciate your testimony as well.

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Mr. Bailey, I want to go to you on this extra points sales promotional flyer that went out to the agents. At the very bottom it

says WellCare reserves the right at its sole discretion to determine

eligibility for this program on a case-by-case basis and may disqualify agents if they violated any of these provisions, the producer

agreement, CMS Marketing Guidelines, or the law. So this flyer

would aggressively, well, it is designed to get agents to go out and

sell your product first of all, which isn’t an offense I don’t think.

I have been in the broadcast business for 20 years and we are

always trying to find ways to incent agents but we don’t incent

them to violate the law or other practices of ethical business behavior, so my question is given that last line there, were there agents

that you encountered that went too far in WellCare, and if so were

there case-by-case situations where policies were not appropriate

had been issued and were subsequently reviewed and terminated?

Mr. BAILEY. Let me try to answer that question the best that I

can. We have terminated 18 agents in the last 7 months.

Mr. WALDEN. Eighteen agents.

Mr. BAILEY. Eighteen agents. When an agent is terminated in

terms of the downstream effect what we do is we then reach out

to talk to all of the enrollees of that particular agent just to make

sure that they were fully informed as to what the plan was at the

time of enrollment.

Mr. WALDEN. And let me stop you on that point because in the

prior panel I asked about the call-back notion which is a little different then this but it is basically the same, you are checking back

and the answer I got was generally that that is not an effective

technique because some of these people don’t know whether they

are in the right plan or not.

Mr. BAILEY. All right. Well, several comments. With regard to

the calls that we made we actually have a compliance staff with

WellCare that will make these particular calls and we will basically advise them, of what happened with the agent we found that

he had provided misleading information, and we just want to make

sure were you satisfied with the presentation, do you feel fully informed. And several of those individuals for whatever reason

whether because of the fact we have told them about the agent or

have had second thoughts, have wanted to dis-enroll and we have

worked with CMS and the regional office the SHIP, whomever to

dis-enroll those people.

In terms of the previous person’s comment, I can understand

that. I think that having an out-bound telephone verification system, an out-bound call process, 2 to 3 weeks after they enroll which

what we do is great but it doesn’t go the whole way. We think it

needs to be done in conjunction with the in-bound telephone verification enrollment system. And that is when the beneficiary actually is at the conclusion of the appointment with the licensed agent

the broker asks if he may use the beneficiary’s phone and they call

an enrollment specialist in the plan. The enrollment specialist goes

down a very detailed questionnaire to try to tease out the fact that

the beneficiary isn’t fully informed and if any of these answers appear not to be the fact that—not to be the matter, actually, we actually will end it at that point. But what we will do is say please,

give the call back to the broker, the telephone back to the broker

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and we will explain at this particular point we don’t think the person is fully informed. It is not good to have someone that is not

fully informed in our plan.

Mr. WALDEN. So are you doing that now with each enrollment?

Mr. BAILEY. Well, actually we were ready to roll this out.

Mr. WALDEN. OK.

Mr. BAILEY. And then we participated and we let the enrollment

freeze.

Mr. WALDEN. Right.

Mr. BAILEY. This was absolutely directed towards brokers so

while this halt is here, and we are determining other ways to

strengthen our broker management processes, we are actually looking at this again to strengthen. But, yes, we are ready to roll this

out and we are excited about this.

Mr. WALDEN. OK. Mr. Soistman, is your company looking at a

similar sort of proposal?

Mr. SOISTMAN. On the post verification process?

Mr. WALDEN. Or the in-bound, as the agent is sitting there counseling somebody if they say it is, I have been on those solicitation

calls, not insurance but like to my alma mater and if you agree to

give they say, OK, now I have got to put my supervisor on the line

and they confirm that I have agreed to give. It sounds like that sort

of process is what Mr. Bailey’s company is looking at. Is that something that would work for yours?

Mr. SOISTMAN. Congressman, we have some concerns about that

process. More specifically, we are concerned that there may be a

feeling of intimidation to have the agent and the Medicare beneficiary going through that process together and we really feel that

it would be best when the agent leaves to then confirm and we can

ask a series of questions and do it in a way that is far less intimidating.

Mr. WALDEN. Well, let me because my time is about expired. I

was troubled by some of the comments from the last panel of the

delays in being able to get a live body on the line to get an answer.

And my frustration level is pretty short when it comes to trying to

get consumer help. And I am curious, maybe Ms. Olson, can you

tackle that one for me? What needs to happen there that seems

like a real abuse.

Ms. OLSON. If I was queen of CMS or whatever——

Mr. WALDEN. Well, if you have got the answer we may convene

that.

Ms. OLSON. We need a lot more very well-trained customer service people, poly-lingual, if possible. I tell my people if they are calling Medicare, 1–800-MEDICAR, have a cup of coffee there. Be

ready, it is going to take some time.

Mr. WALDEN. Right.

Ms. OLSON. And be prepared. The Medicare Advantage plans and

the prescription drug plans have caused huge numbers of questions. In Multnomah County, OR, we have 47 different Medicare

Advantage plans available. That is absurd. If I was running things

I would standardize the Medicare Advantage plans and that was

spoken of earlier. I think that makes sense the same way we did

with the Medicare Supplements a number of years ago and I was

involved in that. This population in particular, spends a lot of time

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on the phone and they are very deliberative and they have a lot

of questions. And if an agent can’t answer them properly, first of

all that agent shouldn’t be selling the product. Second of all those

people need to have instant access to somebody who can answer

their questions.

Mr. WALDEN. And is that the responsibility of Medicare or Medicare and the plans?

Ms. OLSON. It could be the State SHEBA programs. It could be

the insurance plans.

Mr. WALDEN. Does anybody track how long you wait on the call,

and does that matter to anybody?

Ms. OLSON. Yes, I do.

Mr. WALDEN. Who, but I mean as a consumer, do I know I have

been on, I think, phone companies that sort of thing, they tell you

how long you have waited but there internally they are regulated

on that, too, by their regulators. Does anybody regulate you all on

that from the plans, do you regulate it?

Mr. SOISTMAN. I am happy to field that question.

Mr. BAILEY. Yes, we have. We do have performance measures

and metrics on the quality and of the phone calls that we make

with members. I don’t have them all at my fingertips. One is the

average speed of answer.

Mr. WALDEN. Got it.

Mr. BAILEY. Another one is the waiting time. I am not sure exactly——

Mr. WALDEN. Are those data published anywhere for consumers

to know about?

Mr. BAILEY. I believe, we share those with CMS. I can verify

that.

Mr. WALDEN. OK. They are going to be on our next panel, I

guess, so thank you. Thank you. I have way over-extended my

time. Thank you very much.

Mr. STUPAK. Let me follow that up, will you provide those numbers to us, the waiting time and quality there? If you provide them

to CMS could you provide them this committee?

Mr. BAILEY. Absolutely. And what is very interesting is the person that runs our call center is extremely proud of those because

we always exceed the CMS metrics, so when I tell him that the

committee has asked for this, you will get it post haste, sir.

Mr. STUPAK. OK. This is not your agents waiting but your clients

waiting.

Mr. BAILEY. No, at WellCare employee we have a call center that

this year we will probably handle 10 million calls and we are proud

of what they do and he will be very proud to submit the data and

probably come on a plane and walk you through it. I know him

very well.

Mr. STUPAK. OK. And the last panel told us we would almost

need a direct line to Starbucks just to stay awake on the phone.

Mr. Soistman, can you also provide those waiting time for us?

Mr. SOISTMAN. Mr. Chairman, it would be my please to do that.

Mr. STUPAK. OK. Thanks. Thanks, Mr. Walden.

Mr. Burgess, for questions.

Mr. BURGESS. Thank you, Mr. Chairman. I can assure you that

I was monitoring the time that Mr. Walden went over.

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Let me ask our witness from Coventry, Mr. Soistman, you heard

the testimony from the previous panel on the problems that the

young lady with multiple sclerosis had when she went to the emergency room with the Coventry plan. Now, if you proactively do

these phone calls back to the people who signed-up for the program, a lot of times they aren’t going to know that they have a

problem with the product that they have purchased until they go

to use it. So what, do you have any quality assurance mechanism

in place at your company that makes certain that at the point of

utilization that the beneficiary who enrolled in the plan understands what they got what they understood they were getting? Because it seemed to be a real disconnect there regardless of how she

was signed-up and whether or not it was, in fact, proper to sign

her up, the disconnect between what the beneficiary thought they

had and what they actually had?

Mr. SOISTMAN. Congressman, let me begin by answering it this

way that the product that Ms. Williams and Ms. Royal both were

enrolled in was not really the right product given their Medicaid

status, the Medicare/Medicaid status. And that is getting to the

root cause which we took steps in early January.

Mr. BURGESS. Well, let me just ask you this. Do you think

proactively you have gone back and now identified all of those potential problems and corrected the defects in plan coverage that

might have been given to a dual-eligible?

Mr. SOISTMAN. I don’t think we have corrected all of the defects

meaning that there are still individuals enrolled who are dual-eligibles into these plans. We have reached out to all of the dual-eligibles who were associated with agents who misrepresented the product to make sure that they knew they had an opportunity to switch

plans if they so choose.

Mr. BURGESS. Was that only with a telephone call because again

we heard testimony from the last panel that maybe a telephone call

may not be a sufficient way to conduct that interview?

Mr. SOISTMAN. Presently, our process is by telephone. If we are

not able to reach the beneficiary by telephone we then provide a

letter.

Mr. BURGESS. I don’t want to ask this question but I have to. You

don’t outsource that calling, do you?

Mr. SOISTMAN. No, Congressman.

Mr. BURGESS. This is someone who speaks English at least, we

heard about the problem of needing multiple, somebody who is

poly-lingual but at least the person who is calling them back is

calling from an American call center?

Mr. SOISTMAN. It is and I am pleased to say, Congressman, that

we built that call center in your home State of Texas.

Mr. BURGESS. Then I know they are getting good service. I appreciate that. Well, how—for any of the three up there—do you account for the predatory practices actually beginning in the first

place? What was the driver there? I mean you are talking about,

Ms. Olson, you are talking about $4 a beneficiary, is that enough

to drive the kind of practices that we are seeing that caused people

to go door-to-door to sell these policies?

Ms. OLSON. Well, $4 per month per client. And, of course, that

is one plan I am selling. I have one plan that I sell where I don’t

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get paid anything per month. But I think the initial rules were not

as clear as they could have been and I think in the big rush to get

particularly the Medicare Advantage with prescription drug plans

up and a number of us talked about this before it happened, that

we would see a rush towards people signing-up as many clients as

they possibly could, either on the agent level or on the company

side.

Mr. BURGESS. Let me ask you this. We heard testimony from the

panelists who were the State insurance commissioners or deputy

commissioners and I have in the evidence binder under tab 10 I

have a letter from the Department of Insurance from the State of

North Dakota, Mr. Poolman, and the opening paragraph, or the

second paragraph, as part of MMA 2003, the regulation of Medicare Advantage plans and the companies marketing them was

given to CMS. And the letter goes on to state that maybe that is

not the best way to deal with that. Does anyone on the panel here

agree or disagree with that statement that, perhaps, this authority

should be given back to the State commissioners or do you feel that

the State commissioners lack the authority that they need to be

able to adequately provide the oversight?

Ms. OLSON. Well, since my license or one of my licenses is and

my real license is through the State of Oregon, I mean I have real

license elsewhere but the State of Oregon can take away my license. And at that point I would lose my errors and omissions insurance and in theory could not get my license back again.

Mr. BURGESS. So the amount of regulatory authority that the

State commissioner at least in Oregon possesses should be adequate for oversight to prevent this problem from happening?

Ms. OLSON. On the agents’ side, I would think.

Mr. BURGESS. Mr. Bailey, you alluded to the fact that there was

an agent arrested in Georgia, is that correct?

Mr. BAILEY. Yes, we had a situation where we have a process in

place to check the validity of the applications when they come in

and the system showed us that some of the applicants, in fact, were

deceased. We conducted a quick investigation. We terminated the

broker. We contacted the Georgia Department of Insurance and

they conducted their own study. We helped them on the study and

they actually, that agent and his accomplice were arrested, not

sure of the disposition now, but they were arrested.

Mr. BURGESS. Did that State insurance commissioner, let me—

did they have the authority to do what they needed to do under the

laws as it is written?

Mr. BAILEY. I have not personally spoken to the commissioner.

I can assume that they probably have revoked this gentleman’s license and the fact, and actually he was incarcerated for some period of time. What we have found in terms of, it wasn’t so much

a case of do we need additional regulation, it was more from what

we have seen over the last 25 or 26 weeks since we have been in

the program, it is more an instance of communication and coordination. We have reached out to a lot of DOIs to share information

with them. A lot of the DOIs have reached out to us to share information with us just like the case for Mississippi where they advised us of the gentleman that was working without—well, they

had suspended his license. What we have found we need to bridge

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the coordination, the communication gap, we need some tools. We

need some help. And we think the national database where anyone

can go in and put information in, and anyone even an insurance

commissioner can check not only what is happening outside of his

or her State boundaries, but also within the State. We think that

coupled with something else that I want to mention also, which

was a national, mandatory standardized training program for any

agent that is going to sell Medicare products. We have a lot of companies selling Medicare products. We probably all have what we

consider to be good training materials. We would like to see something up to the next level, work under the auspices of CMS and

have this out and have——

Mr. BURGESS. Does that function not already get taken care of

by the individual States in their Department of Insurance?

Mr. BAILEY. I am sure that training of the agents is absolutely

essential to the States’ requirements but we are talking about a

consistent and mandatory training to at least guarantee that every

agent has a certain level of Medicare across the country and that

is what——

Mr. BURGESS. Well, shouldn’t you as a company demand that of

any agent that sells policies on your behalf?

Mr. BAILEY. We provide our own training not only on Medicare

but also on our particular products. But we would like to make

sure that we are just taking advantage of any best practices and

taking advantage of the expertise of CMS in helping to develop this

training program and then making it mandatory.

Mr. BURGESS. OK. Thank you. And, Mr. Chairman, I see that I

have used all of the additional time that Mr. Walden used.

Mr. STUPAK. And let us go another round I think if you have

some more questions we can go a little bit more with this panel.

Ms. Olson, you are an independent or representing the independent insurance agents, correct?

Ms. OLSON. And I am an independent insurance agent.

Mr. STUPAK. So you sell more than just Medicare Advantage policies all kinds, home, casualty, life, the whole thing.

Ms. OLSON. Oh no, health insurance, life insurance.

Mr. STUPAK. OK.

Ms. OLSON. Long-term care.

Mr. STUPAK. So what is the benefit of having an insurance agent

acting as the middle person, if you will, between an insurance company and a consumer?

Ms. OLSON. There are a number of reasons. First of all, we know

those products very well. In some cases I designed the products

that I am now selling, when I was working for the insurance companies. So I know the products and that is why I finally cut it

down to about seven products.

Mr. STUPAK. Seven products or seven companies?

Ms. OLSON. Seven companies.

Mr. STUPAK. OK.

Ms. OLSON. I take the time, I can also translate what the paper

says into a real life situation for them. I also make sure that all

of my clients know that no matter what the problem is if they have

a problem with their health insurance, they call me. I have trained

most of the agents in our State about Medicare so I get a lot of reVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00138 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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ferrals from other agents. And I know most of the people who work

for the insurance companies I use.

Mr. STUPAK. Where is the breakdown here, Medicare Advantage

and last year we have had all these reports and that is the reason

we are having these hearing.

Ms. OLSON. Right.

Mr. STUPAK. I hear the company saying it is those darn agents.

On you, on behalf of the agents saying no, the companies aren’t

doing it right. Where is the breakdown here? When you, when the

last panel, Mr. Harrell, says they have had more complaints on

Medicare Advantage then they do on Hurricane Katrina claims in

Mississippi so where is the breakdown?

Ms. OLSON. That is outrageous. We need to have the standardized training. Standardized training for all agents who are selling

Medicare-related products. And that is what the National Association Health Underwriters and the American Health Insurance

plans has put together. CMS has already approved it to be used.

Mr. STUPAK. Well, it is a guideline. What CMS is suggesting so

far has been guidelines. Where is the enforcement of a guideline?

What happens if you violate the guidelines?

Ms. OLSON. Refuse to appoint agents who have not taken that

training.

Mr. STUPAK. All right. And then the company should pay for the

training then I take it?

Ms. OLSON. Not necessarily.

Mr. STUPAK. You want CMS to pay for the training?

Ms. OLSON. No, I would pay for it.

Mr. STUPAK. OK.

Ms. OLSON. I have paid for it.

Mr. STUPAK. Well, all right. Let me ask you this, one policy you

said you received no money, then one policy you said you received

$4 a month and you spent a lot of time. You said you have never

been to Vegas.

Ms. OLSON. Well, I have been to Vegas, but I haven’t been paid

to go to Vegas.

Mr. STUPAK. Then maybe that is where you make a living because I see one policy with no money and another one $4 a month.

To even qualify for that plasma TV at $1,400 you would have to,

at $4 a month, you would have to go 360 months and that is 30

years. If you sell it to a person who is 62 you have to make sure

they live to 92. Is that right?

Ms. OLSON. Exactly. Right.

Mr. STUPAK. So doesn’t these incentives like tab No. 8 about the

plasma TV, isn’t it really incentives for agents to cut corners to get

that commission to move things along faster?

Ms. OLSON. I certainly hope not.

Mr. STUPAK. But isn’t that the purpose of it really?

Ms. OLSON. I am sure it can be interpreted that way.

Mr. STUPAK. Well, do you really think that it is the gift of deadlines. No, I didn’t think so either. The seven companies you sell for

do you get prizes? Do you qualify for prizes and trips?

Ms. OLSON. Sometimes they are available I just never get there.

Mr. STUPAK. OK.

132

Ms. OLSON. I don’t do enough business with one company to

qualify for something like that.

Mr. STUPAK. Well, what other suggestions are there other then—

let me ask you this. CMS rules currently allow cross-selling. Would

you support a rule banning cross-selling?

Ms. OLSON. Cross-selling?

Mr. STUPAK. Of policies met, I go from Mr. Bailey’s to Mr.

Soistman’s, I am cross-selling two different insurance products.

Ms. OLSON. Well, only during enrollment or if you moved out of

the service area could you do that.

Mr. STUPAK. Well, I don’t know. That is why we are trying to see

if this cross-selling is a good idea or not. It is two different products.

Ms. OLSON. You mean to voluntarily move a client’s insurance so

that you get like the big first year commission or bonus?

Mr. STUPAK. Commission, yes.

Ms. OLSON. Well, that is extremely unethical.

Mr. STUPAK. Well, so you wouldn’t——

Ms. OLSON. Not if it wasn’t right for the client.

Mr. STUPAK. If we banned it that would be OK?

Ms. OLSON. For me it would be fine.

Mr. STUPAK. OK. Because it is that first year where you make

your money, right?

Ms. OLSON. Not necessarily. If you are just going to make $4 a

month for the life of the contract you just want them to live a long

time.

Mr. STUPAK. Sure, but aren’t some of them set-up that if you

switch over in the first year there is a pretty good bonus? You are

not aware of that?

Ms. OLSON. It has to be the right thing for the client.

Mr. STUPAK. Right, I realize all that. I am saying what is the reward for doing it in cross-selling? Isn’t that the benefit, you get

a——

Ms. OLSON. It can be very definitely.

Mr. STUPAK. OK. Thank you.

Mr. Whitfield, questions?

Mr. WHITFIELD. Just one other question.

Ms. Olson, obviously there are some unscrupulous sellers out

there and that has been demonstrated quite clearly. But you are

a professional in Oregon and you have a reputation of selling

health insurance plans for people and I am sure you have experienced some situations where you sold a plan that turned out not

to be the right plan and a person came back and you have to deal

with that to dis-enroll and so forth. So as a person who is in the

community and a part of that community, I mean you have every

incentive to be sure that they get the right plan, don’t you?

Ms. OLSON. Absolutely.

Mr. WHITFIELD. I would think it would be a major headache to

sell somebody the wrong plan and they don’t have the coverage, I

mean they would be pretty upset.

Ms. OLSON. Very definitely. It saves me a lot of time to do it

right the first time.

133

Mr. WHITFIELD. Right. And what we have to be sure of from our

next panel is that CMS is providing the tools to make sure that everyone has the incentive to do it right the first time, so, thank you.

Mr. STUPAK. Nothing? All right. Then we will move on to our

third panel. Thank this panel for their time and efforts and testimony today and answers. Thank you.

Our third panel is Ms. Abby Block, director of the Center for

Beneficiary Choices at the CMS Centers for Medicare and Medicaid

Services, the Honorable Kim Holland, commissioner at Oklahoma

Insurance Department, and Mr. Jim Poolman, commissioner at the

North Dakota Insurance Department. We will have those witnesses

come forward in a minute here.

It is the policy of this subcommittee to take all testimony under

oath. Please be advised, witnesses have the right under the rules

of the House to be advised by counsel during testimony. Do any of

our witnesses wish to have counsel present during their testimony?

Ms. Block? No. Ms. Holland? Mr. Poolman? OK.

All right. Then I will have you rise and raise your right hand

and take the oath, please.

[Witnesses sworn]

Mr. STUPAK. Let the record reflect the witnesses have indicated

in the affirmative. They are now under oath. We will start with

opening statements. We will start with Ms. Block, if you would

please for your opening statement.

STATEMENT OF ABBY BLOCK, DIRECTOR, CENTER FOR BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND MEDICAID

SERVICES

Ms. BLOCK. Mr. Chairman and members of the subcommittee, I

am pleased to be here today to discuss oversight issues related to

Medicare Advantage organizations, particularly with regard to

marketing.

As you know, Medicare Advantage offers an affordable, highvalue choice in comprehensive health care coverage for all Medicare

beneficiaries. I am also pleased to report that this year beneficiaries selecting an MA plan are receiving on average $1,032 per

year in benefits over and above what original Medicare provides.

Enrollment in growth in one type of MA plan, the Private Feefor-Service plan, has increased precipitously since the Medicare

Prescription Drug Improvement and Modernization Act of 2003. In

fact, more than 500,000 beneficiaries have enrolled in Private Feefor-Service plans from August 2006 to February 2007.

However, specific features of the Private Fee-for-Service product

are unfamiliar to many beneficiaries and providers and, therefore,

a certain level of confusion with this product is coming to light as

more people enroll. Responding to emergent concerns, CMS is

building on lessons learned and information gathered during 2006,

to strengthen its oversight of Private Fee-for-Service plans, and all

Medicare organizations in 2007 and forward into 2008, ensuring

beneficiaries’ protections begins early. Before a plan sponsor is allowed to participate in the MA program it must submit an application and secure CMS approval. CMS conducts a comprehensive review of all applications to verify compliance with a broad range of

important protections. Any deficiencies in these areas must be

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cured before a plan is able to go to the next step of benefit and bid

review.

Second, upon successful completion of the application or renewal

process, plans submit benefit packages and bids for CMS review

and negotiation. Through the bid review process CMS assesses MA

benefit packages to ensure that they are not discriminatory against

certain classes of beneficiaries. In the CMS actuarially equivalence

test on the benefit packages and cautionary arrangements reviews,

benefit packages must be valued as equal to or better than Medicare Fee-for-Service.

Once plans have secured application and bid approval, CMS continually collects and analyzes performance data submitted by plans’

internal systems and beneficiaries. The recently released 2008 call

letter to plans serve as a central guidance document to help plans

implement new CMS policies and procedures. Baseline measures

for performance measures outlined in the call letter will be used for

the MA plan report card available this fall, in time for the next

open enrollment period. And, by the way, we monitor, and those report cards will include information on wait times at call centers, at

plan call centers. All of that is very carefully monitored and there

are requirements in place. CMS’ monitoring of the performance

metrics is supplemented by routine and targeted audits of MA

plans which is outlined in more detail in my written testimony.

In addition to regularly scheduled audits, a new contract, a risk

assessment tool, will be available in the fall of 2008, and will be

used to identify organizations and program areas representing the

greatest compliance risks to Medicare beneficiaries and the Government in order to focus audits in the highest risk areas.

On May 21, 2007, to further support compliance efforts, CMS

issued a proposed rule strengthening its current oversight requirements and penalties for Medicare Advantage plans and part D prescription drug plans. Among other things, CMS proposed new steps

to help expose potential fraud or misconduct through mandatory

self-reporting of compliance violations as well as modifications to

the current rules to expedite our ability to take compliance actions,

including non-renewal of contracts.

On May 25, 2007, CMS released guidelines that include specific

policies for Private Fee-for-Service MA plans designed to protect

beneficiaries from inappropriate sales tactics. Those guidelines say

that Medicare Advantage organizations must monitor the activities

of employees and contractors engaged in the marketing of plans to

potential enrollees to ensure that their activities comply with applicable Medicare and other Federal health care laws.

We are working with State insurance department officials and

the National Association of Insurance Commissioners to address

problems with marketing. Part of this effort includes a Memorandum of Understanding that allows States and CMS to share information more easily.

As an update to the number in my written testimony, I am

happy to say that to date 27 States, Puerto Rico, and the District

of Columbia, have signed the MOU. These agreements are critically

important because State insurance departments, indeed, retain jurisdiction over licensed brokers and agents in their States. And

CMS requires that plans use only licensed agents.

135

Therefore, States can act on information they receive from CMS

or any source to control any inappropriate or illegal marketing

practices of their licensees.

We are particularly concerned about reports of marketing

schemes designed to confuse, mislead or defraud beneficiaries and

have taken very vigorous action to address these issues. Ninetyeight Medicare Advantage plans are on a corrective action plan to

fix identified problems and allow enhanced monitoring of their conduct.

In a further step to target marketing violations, CMS recently

announced that seven health care organizations have agreed to voluntarily suspend the marketing of Private Fee-for-Service plans.

CMS will certify that a given plan is ready to resume marketing

when the plan has demonstrated to us that it has the systems and

management controls in place to meet all of the conditions specified

in the CMS marketing guidance I mentioned earlier.

Again, this guidance includes strong measures such as verification of the beneficiaries intent to enroll, documented training of

marketing agents and brokers, and inclusion of a clear disclaimer

statement in all Private Fee-for-Service marketing materials that

tells beneficiaries what a Private Fee-for-Service plan is and what

it is not.

We are putting in place a rigorous process to review organizations’ actions to determine when CMS can certify that the plan is

ready to resume marketing. Violations after plans resume marketing will be subject to the full range of available penalties which include suspension of enrollment, suspension of payment for new enrollees, civil monetary penalties, and termination of the plan’s participation in the Medicare Program.

This voluntary suspension action is meaningful and precedentsetting and indicates how important good practices are to both

CMS and the industry. The organizations included in the voluntary

suspension represent 90 percent of Private Fee-for-Service enrollment. Their willingness to forego significant enrollment opportunities indicates their determination to work with CMS to root out

problems and do the right thing for beneficiaries.

CMS has also developed Standard Operating Procedures to implement our long-standing policy that any beneficiary who believes

he or she was enrolled in a plan without consent, or through misinformation may contact 1–800-MEDICAR to request prospective disenrollment assistance, or work through a CMS regional office to request assistance with retroactively dis-enrolling from the plan, and

returning to original Medicare, if desired. CMS is committed to

taking whatever steps are necessary to ensure that people with

Medicare are not misled or harmed by MA plans or their agents.

As evidenced by our recent actions, we are putting beneficiaries

first and we will continue to do so.

Thank you and I look forward to taking any questions.

[The prepared statement of Ms. Block follows:]

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Mr. STUPAK. Ms. Holland, opening statement, please.

STATEMENT OF KIM HOLLAND, COMMISSIONER, OKLAHOMA

INSURANCE DEPARTMENT

Ms. HOLLAND. Thank you, Mr. Chairman, distinguished members. My name is Kim Holland and I am the Oklahoma State insurance commissioner. I appreciate the opportunity to speak to you

today about an issue for which I care deeply, the safety and security of our citizens promised by the availability of quality insurance

products and services. I want people to want to be insured.

Since the roll-out of Medicare Part D the Oklahoma Insurance

Department has responded to an unacceptable number of complaints caused by the inappropriate and sometimes fraudulent marketing of Medicare Part C and part D products by certain insurance companies and their agents. We have received hundreds of

complaints from confused, unhappy and frightened citizens who

have been misled or deceived during a sale.

The creation of new and affordable programs under Medicare

Part C and D means that many of our Nation’s seniors no longer

have to choose between a meal or their medication. But it is this

reality of pressing demand for coverage and a growing supply of

available plans, 54 in Oklahoma alone, that necessitates adequate

regulatory oversight. Yet, the MMA’s preemption of State’s authority to oversee the licensure, market conduct and financial solvency

of Medicare Part D, agents and carriers, and the marketing practices of Medicare Advantage insurers has allowed insurers to exploit this exemption from regulatory oversight.

Our seniors are plagued by aggressive and frequently misleading

advertising, agent high-pressure sales tactics, and a lack of responsiveness if not outright neglect from their insurance companies. A

letter I received just this month from a senior caregiver offers a

poignant illustration of the problems. I quote directly from her correspondence. ‘‘WellCare employees are stationed on every other corner in the neighborhood. They are approaching people in the street

including our residents to sign them up for WellCare services. They

do this in a very aggressive manner. They do this without establishing the care needs of the current providers of the patients.’’ She

writes that 90 percent of their residents suffer from chronic illnesses and that their ability to form competent judgments is impaired. She also writes that she sent a letter expressing her concerns to WellCare in October 2006, and has received no response.

She told me personally that WellCare is not facilitating dis-enrollment in a timely manner, that patient care is being denied, and

that her CMS regional offices manager did not know how to address the problem.

We recently completed a targeted market conduct examination of

Humana, one of America’s largest providers of Medicare Advantage

plans in response to an escalation in number and nature of unresolved complaints involving the sales tactics of agents selling their

products. When finally completed the examination exposed chronic

and blatant disregard for State regulation and for senior policyholders and the inadequacy of Federal oversight. That examination

focused on the current limits of our authority regarding Medicare

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Advantage and part D products, insurers’ obligation to properly license their sales agents.

However, the full scope of market conduct oversight customarily

performed for the benefit of insurance consumers goes well-beyond

licensing. Insurance departments monitor compliance of an insurer’s handling of complaints, claims practices, marketing and sales

materials and advertising, producer licensing as well as appointed

agent training and conduct, underwriting and rating practices, policyholder service, and company operations and management. Our

rigorous examination standards ensure that consumer protections

are kept at the forefront of an insurer’s enterprise, equally balanced with their profit motives.

Our inability to assert this balance has resulted in a travesty of

security for Medicare beneficiaries. Since my recent testimony to

the Senate, I have met with Humana executives who outlined new

processes and heightened compliance oversight of their Medicare

business stream. Well, we are still in disciplinary discussions with

the company and will continue to monitor their activities closely.

I am somewhat encouraged by their actions to devote increased resources to assist and protect their Medicare plan policyholders.

However, the problems identified with Humana are certainly not

unique to them but rather a glaring example of what is occurring

on a regular basis as companies pursue market share in an unregulated environment. Insurance departments across the Nation

are receiving complaints of a similar nature from seniors, their

families and caregivers against many insurers, including other

dominant players such as WellCare, Coventry, Secure Horizons and

Pyramid Life.

While I applaud CMS for their recent efforts to compel insurer’s

to refrain from marketing activities while they attempt to address

the issues I raised in my Senate testimony, their efforts are simply

no substitute for the 136 years of State-based insurance regulation

that has resulted in our sophisticated and expansive and incomparable understanding of insurance company financials, operations

and marketing.

Congressmen, we put this expertise to use everyday acting

promptly and judiciously on behalf of the industry and the consuming public. Given our seniors chronic and continuing complaints

against insurers why are State insurance departments vast resources being denied those in need to their continued peril?

I opened my remarks by telling you that I want people to want

to be insured. It is a challenging proposition but an important goal

in insuring the financial security of Oklahomans and the future

prosperity of my State. But I can tell you that my progress is severely impeded when my public is fearful that their insurer or their

insurance product is bad. When they begin to question whether

going without coverage is safer and less costly then simply going

without.

Today I ask again that Congress un-encumber me from the unproductive, unnecessary and dangerous preemptions that expose

my citizens to the neglect and abuse I have described, and let me

do my job. I am not interested in territorial squabbling or fingerpointing. I am interested in working together for the benefit of my

folks back home. If government cannot protect our most vulnerable,

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our children, our frail, our disadvantaged and our elderly, of what

use are we? Let us do our job.

Thank you very much.

[The prepared statement of Ms. Holland follows:]

STATEMENT OF KIM HOLLAND

Good morning Mister Chairman and members of the Committee. My name is Kim

Holland and I am the Oklahoma State Insurance Commissioner, an elective office

I have held since January 2005. I appreciate the opportunity to speak to you today

about an issue for which I care deeply: the safety and security of our citizens promised by the availability of quality insurance products and services. I want people to

want to be insured.

The primary obligation of my agency is to protect our insurance consuming public.

I, and my staff of over 150 dedicated individuals, take this obligation very seriously.

Our office fields over 60,000 calls to our consumer assistance division each and

every year, plus an additional 12,000 calls to our federally funded SHIP program.

We license and regulate the activities of over 80,000 agents, monitor the financial

solvency and market conduct of over 1,600 insurance companies and my twelve

member law enforcement team responds to more than 700 insurance fraud and

abuse allegations each year. We act swiftly and aggressively on behalf of all policyholders against any carrier, agent or broker that has acted unlawfully or otherwise

not delivered on their promise to policyholders.

Since the roll-out of Medicare Part D in November of 2005, the Oklahoma Insurance Department has responded to an unacceptable number of complaints caused

by the inappropriate and sometimes fraudulent marketing of Medicare Part C and

Part D products by certain insurance companies and their sales producers. We have

received hundreds of complaints from confused, unhappy and frightened citizens

who have been mislead or deceived during a sale.

The passage of the Medicare Modernization Act has made access to affordable

medications possible for 20 percent of Oklahoma’s population, a large measure of

whom depend solely on social security for their livelihood. The creation of new and

affordable programs under Medicare Parts C and D means that many of our Nation’s seniors no longer have to choose between a meal or their medication. But it

is this reality—a pressing demand for coverage and a growing supply of available

plans (54 in Oklahoma alone!)—that necessitates adequate regulatory oversight.

Yet the MMA’s preemption of states’ authority to oversee the licensure, market

conduct and financial solvency of Medicare Part D agents and carriers and the marketing practices of Medicare Advantage insurers has allowed them to exploit this

exemption from regulatory oversight. Our seniors are plagued by aggressive and frequently misleading advertising, agent high pressure sales tactics, and a lack of responsiveness if not outright neglect from their insurance company. A letter I received just this month from a senior care-giver offers a poignant illustration of the

problems. I quote directly from her correspondence: ‘‘WellCare employees are stationed on every other corner in the neighborhood. They are approaching people in

the street, including our residents, to sign them up for WellCare Services. They do

this is a very aggressive manner. They do this without establishing the care needs

or the current providers of the patients’’. She writes that 90 percent of their residents suffer from chronic illness and that their ability to form competent judgments

is impaired. She also writes that she sent a letter expressing her concerns to Well

Care in October of 2006 and has received no response. She told me personally that

her CMS regional office’s regional manager did not know how to adequately address

the problem. While the sales activities have relented somewhat, she says that

WellCare is not facilitating disenrollment in a timely manner and patient care is

being denied.

As you are aware, we recently completed a targeted market conduct examination

of Humana, one of America’s largest providers of Medicare Advantage plans, in response to an escalation in number and nature of unresolved complaints involving

the sales tactics of agents selling their products. When finally completed, the examination exposed chronic and blatant disregard for state regulation and for senior policyholders, and the inadequacy of Federal oversight.

That examination focused on the current limits of our authority regarding Medicare Advantage and Part D products—insurers’ obligation to properly license their

sales agents. However, the full scope of market conduct oversight customarily performed for the benefit of insurance consumers goes well beyond licensing. Insurance

Departments monitor compliance of an insurer’s handling of complaints; claims

practices; marketing and sales materials and advertising; producer licensing as well

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as appointed agent training and conduct; underwriting and rating practices; policyholder service; and company operations and management. Our rigorous examination

standards ensure that consumer protections are kept at the forefront of an insurers’

enterprise—equally balanced with their profit motives. Our inability to assert this

balance has resulted in a travesty of security for Medicare beneficiaries.

Since the presentation of my testimony in May, I have met with Humana executives who outlined new processes and heightened compliance oversight of their

Medicare business stream. While we are still in disciplinary discussions with the

company and will continue to monitor their activities closely, I am somewhat encouraged by their actions to devote increased resources to assist and protect their

Medicare plan policyholders.

However, the problems identified with Humana are certainly not unique to them,

but rather a glaring example of what is occurring on a regular basis as companies

pursue market share in an unregulated environment. Insurance Departments across

the Nation are receiving complaints of a similar nature from seniors, their families

and caregivers against many insurers, including other dominant players WellCare,

Coventry, Pacificare and Pyramid Life.

While I applaud CMS for their recent efforts to compel insurers to refrain from

marketing activities while they attempt to address the issues I raised during my

testimony to the Senate Special Committee on Aging, their efforts are simply no

substitute for the 136 years of state based insurance regulation that has resulted

in our sophisticated and expansive and incomparable understanding of insurance

company financials, operations and marketing. Congressmen, we put this expertise

to use every day, acting quickly and appropriately on behalf of the industry and the

consuming public. Given our seniors’ chronic and continuing complaints against insurers, why are State Insurance Department’s experience, assistance and protections being denied those in need at their continued peril.

I opened my remarks telling you I want people to want to be insured. It’s a challenging proposition, but an important goal in ensuring the financial security of

Oklahomans and the future prosperity of Oklahoma. But I can tell you that my

progress is severely impeded when my public is fearful that their insurer or their

insurance product is bad; when they begin to question whether going without coverage is safer and lest costly than simply going without.

So today I ask again, that Congress unencumber me from the unproductive, unnecessary, and dangerous preemptions that expose my citizens to the neglect and

abuse I have described and let me do my job. Allow me to fully deploy the substantial and immediate resources of my office to protect the interests of all policy-holders, regardless of their age and regardless of the private health plan they purchase.

I am not interested in territorial squabbling or finger-pointing. I am interested in

working together for the benefit of my folks back home. If government cannot protect our most vulnerable—our children, our frail, our disadvantaged, our elderly—

of what use are we? Let’s do our job. Thank you.

Mr. STUPAK. Thank you for your testimony.

Mr. Poolman, the North Dakota insurance commissioner, your

opening statement please, sir.

STATEMENT OF JIM POOLMAN, COMMISSIONER, NORTH

DAKOTA INSURANCE DEPARTMENT

Mr. POOLMAN. Thank you, Mr. Chairman, and good afternoon

and good afternoon, Mr. Whitfield, and members of the committee.

I am pleased to appear before you today and truly appreciate the

opportunity to articulate my concerns about MMA and specifically

abuse in the Medicare Advantage plan marketing. And thanks also

for, hopefully, taking action. My name is Jim Poolman. I am the

elected commissioner in the State of North Dakota. I took office in

January 2001, and given that length of tenure in office of seeing

firsthand the implementation of the Medicare Modernization Act, I

sit before you today to urge you to restore the regulatory authority

over these programs and consider using the current Medigap insurance regulatory model as the model going forward.

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And I do want to say that I believe in Medicare Modernization

Act and I believe in what you folks have done to get prescription

drugs under part D to the citizens across the country. I have about

105,000 out of 640,000 that are eligible for Medicare. Not, what I

am trying to tell you is the North Dakota experience that we have

gone through in the implementation of Medicare Modernization.

From the earliest days of the roll-out we saw widespread confusion and frustration on the part of seniors in North Dakota. As the

roll-out progressed it became increasingly clear that the Centers for

Medicaid and Medicare Services was ill-equipped to adequately address the conflicts that arose for this vulnerable population. For example, our contact with customer service staff at Medicare is typically unproductive. Not only do they lack the answers or information we need but they are also inadequately trained and on occasion CMS staff members have simply hung-up the phone on beneficiaries or those folks in our SHIP program who are trying to help

beneficiaries.

Companies and agents have capitalized on the confusion associated with the new products by using aggressive sales practices that

in my estimation are misleading at best, and fraudulent at worst.

I have examples of tactics ranging from agents refusing the leave

people’s homes or giving them misleading information to actually

sending money to an insurance company on behalf of that potential

policyholder that was not their money. We even have seniors who

were switched from traditional Medicare to an MA plan simply because they signed their name on the entrance of a mass enrollment

event.

In addition, we have an example of a woman who was switched

from one plan to another plan without consent only to find that she

does lack coverage but the company she was switched to had no

record of her enrollment. The back story is incredible. CMS confused her with another person of the same name who may have

switched plans. This woman has made multiple complaints to CMS

and to the company and still her situation is not resolved. She is

paying for her drugs out-of-pocket on a very limited Social Security

check. That is not the goal of Congress when setting-up MMA.

Even though CMS has long been aware of the conflicts and bugs

in the system they have not been resolved and they are worse. Instead of becoming more responsive, CMS has adopted a ‘‘do not call

us’’ attitude. That requires us to spend countless hours on the telephone with them only to be referred to the company, specifically,

for help.

The ramifications of this situation are varied. From a State senior health insurance counseling program standpoint my staff has

fielded over 3,800 client contacts. And of those contacts, 75 percent

of them are dealt with enrollments or dis-enrollments of Medicare

Advantage plans. The data tells us this, nine out of 10 clients that

contact our SHIP program were the result of some type of problem

with the Medicare Modernization Act, either part D or Medicare

Advantage. Only one out of ten client contacts are basic Medicare/

Medigap, prescription assistance, long-term care, Medicaid questions that are SHIP staff or SHIP counselors were answering prior

to MMA. Three out of four problem-type calls involved Medicare

Advantage plans that are related to enrollments or dis-enrollments,

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strongly suggested inappropriate sales and/or inefficient administration of the policies. By comparison, one out of three problem

calls involving part D plans are related to enrollments or dis-enrollments.

From our perspective the situation in untenable, it becomes difficult to do the good work that we desire to help our senior population. As insurance commissioner my main duty is to protect insurance consumers. However, under the current circumstances seniors in North Dakota are being shortchanged by CMS and the current MMA. Clearly, these companies need more rigorous oversight

and CMS is not prepared or seemingly unable to do the job. With

all due respect, I find it highly unlikely based on our experience

during this situation that CMS will be able to do better as Ms. Norwalk suggests in a recent press release.

Today I again urge you to restore and expand State insurance

regulatory oversight over these programs and consider the regulation of Medicare Supplement insurance as a potential model. By

adopting the Medigap model consumers will still have a variety of

plans to choose from that will be standardized. Competition will remain strong as in the current Medigap market of which I believe

in. State regulators would be able to adequately safeguard consumers.

The bottom line is if State insurance regulatory is restored all of

the stories you have heard about abuse of marketing tactics would

be prohibited by State law, monitoring questions by State insurance regulators, and controlled by State-based insurance regulation. By restoring State authority you, in fact, untie my hands and

allow me to take whatever steps appropriate to safeguard the seniors in my State.

Mr. Chairman and members of the subcommittee thank you

again for holding this hearing and this issue is one that affects not

only seniors in my State but obviously all of your States. And I

hope that the information that I have shared with you and that the

information that we will share in a give and take on questions will

be helpful. Together, Mr. Chairman, we can work together to fill

in the gaps that will protect seniors across the country.

[The prepared statement of Mr. Poolman follows:]

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Mr. STUPAK. Thank you and thank you for your testimony.

Now, we will go to questions now. Ms. Block, if I may start with

you. I would assume that CMS does not approve what happened

at Judiciary House as best practices, correct?

Ms. BLOCK. We totally, totally disapprove.

Mr. STUPAK. OK. Then I know you have worked with industry

but has CMS taken any steps to alert Medicare beneficiaries of potential deceptive sales practices. Alabama is talking about putting

together a fraud alert. Ms. Healey testified about that. But has

CMS thought about doing that?

Ms. BLOCK. Actually, we have put together fraud alerts and

we——

Mr. STUPAK. But sent them to the beneficiaries?

Ms. BLOCK. Those alerts, yes, those alerts are sent out. They are

sent out through the SHIPs and through other outreach programs.

So, yes, we have alerted beneficiaries.

But in addition to that I would say that it is really incumbent

upon us working in collaboration with the States and I would really like to stress that CMS appreciates the opportunity to work collaboratively with the States. We value what the States have to——

Mr. STUPAK. Well, these two commissioners would like Congress

give them the authority through CMS to regulate the policies within their own States. Do you have any objection to that?

Ms. BLOCK. Yes, I do.

Mr. STUPAK. You object to that?

Ms. BLOCK. Yes, I absolutely do.

Mr. STUPAK. Why would you object to that?

Ms. BLOCK. I object to that because this is a Federal program

funded by Federal money.

Mr. STUPAK. Right, Medicare, Medigap——

Ms. BLOCK. Unlike Medigap which is privately paid for, each

beneficiary pays their premium, Medicare Advantage is highly subsidized, it is a Federal program and it needs uniform consistent

standard Federal oversight.

Mr. STUPAK. Then why don’t we have standards in the policies

that can be offered and for practice for the agents who sell these?

Why don’t we have that Federalized and standard so the policy

whether it is in Oklahoma or North Dakota are the same and beneficiaries would know exactly what they are receiving then?

Ms. BLOCK. That is a question that has been debated from a policy perspective for many years. I used to run the Federal Employees Health Benefit.

Mr. STUPAK. Right. I am well aware of that.

Ms. BLOCK. I did that for many years. We in that organization

looked carefully and at one time considered proposing standardized

benefits. We decided after careful analysis that that was not the

best way to run a consumer choice program. And I don’t believe

that it is the best way to do it in the Medicare Program either.

Mr. STUPAK. How many insurance companies are selling these

Medicare Advantage policies? Do you know?

Ms. BLOCK. In terms of the total number of insurance companies,

I always have trouble with this number because there are plans

and then there are sponsoring organizations.

Mr. STUPAK. OK. Is there about 150, is that about right?

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Ms. BLOCK. Yes, I would say that, that is probably about it.

Mr. STUPAK. OK. One 150 and you said you have 98 corrective

actions going right now with these 150 companies? That is like

two-thirds.

Ms. BLOCK. There are significant numbers of corrective actions

but not all of them, by the way, are marketing-related by any

means. Corrective actions can be put in place for many different

reasons.

Mr. STUPAK. But there is a concern that CMS is looking at twothirds of these 150 companies that are selling policies about the delivery of the product, right?

Ms. BLOCK. Well, again, many of those corrective action plans

come about through routine audits, through focused audits, and

they cover the whole range of compliance with all of CMS’ requirements. And, in fact, the fact that we have that many corrective action plans in place, means that we are carefully monitoring these

plans——

Mr. STUPAK. Or it means it is not——

Ms. BLOCK. That there is oversight——

Mr. STUPAK. Or it means they aren’t working real well.

Mr. STUPAK. Right or it also could mean that it doesn’t, it is not

working as well as intended to be.

Let me ask you this, has CMS ever imposed a monetary penalty

on a plan for any marketing abuses?

Ms. BLOCK. Not for marketing abuses specifically——

Mr. STUPAK. So the civil penalties that suggest——

Ms. BLOCK. Sanctions against plans for marketing abuses.

Mr. STUPAK. Well what are the sanctions? What would be a sanction?

Ms. BLOCK. A sanction would be freezing marketing, freezing enrollment. We did impose those penalties against a plan in Florida.

Mr. STUPAK. OK. So if you freeze it they still are allowed to get

the benefits of that monthly payment and things like this, correct?

Ms. BLOCK. For existing members, yes.

Mr. STUPAK. Well, where is the penalty then?

Ms. BLOCK. Well, the penalty is that they can’t increase their

membership.

Mr. STUPAK. You imposed a penalty because they did something

wrong and if I have a captive audience here and I am frozen, I am

still being rewarded for my deceptive practices because I have this

group here that has the problems, right? So where is the penalty

here?

Ms. BLOCK. Let me say this. The ability to impose penalties and

the penalties that can be imposed range depending upon the offense, and so——

Mr. STUPAK. Sure. My problem is I never see CMS issue a penalty.

Ms. BLOCK. When you impose civil monetary penalties you need

to demonstrate very specifically, and by the way those penalties

have to be approved by the Justice Department.

Mr. STUPAK. Sure.

Ms. BLOCK. You have to be able to demonstrate real harm to

beneficiaries so you don’t impose those kinds of penalties, you can’t

impose them for what would be considered to be administrativeVerDate 11-SEP-98 10:34 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00188 Fmt 6633 Sfmt 6633 Q:\DOCS\110-60 SCOM1 PsN: SCOM1
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type violations. And that is where corrective action plans are used.

In order to impose a civil monetary penalty and we did that by the

way for the late delivery of ANOX. We imposed civil monetary penalties on a number of plans and we did that because we believed

that there was, in fact, and could justify to the Justice Department

that there was direct harm to beneficiaries because by not receiving the information they needed timely they could not make an appropriate decision in terms of their choice of plan for the next year.

Mr. STUPAK. Civil monetary penalties are not approved by the

Department of Justice. Department of Justice just really checks to

see if they might interfere with their open investigation, right? You

don’t have to get Justice Department approval?

Ms. BLOCK. My understanding is I have to go through the Department of Justice every time I want to impose that kind of penalty.

Mr. STUPAK. To make sure you are not interfering with a——

Ms. BLOCK. That is a time-consuming process.

Mr. STUPAK. Oh, I agree.

Ms. BLOCK. What I want to do, believe me, is fix these problems

just as quickly as I possibly can. I want to address every problem

and I want to fix it and I want to fix it right now.

Mr. STUPAK. Well, but let us be clear here. Justice Department

doesn’t approve or have to approve the civil penalties. All Justice

Department wants to know is whether or not you are interfering

with an ongoing investigation.

Ms. BLOCK. I am sorry but if I want to be exact they have to review them.

Mr. STUPAK. OK. Are there any enforcement in the so-called

guidelines you are putting forth, CMS putting forth, these guidelines? What is going to be the sanction if you violate these guidelines?

Ms. BLOCK. The sanctions will be appropriate to violations and

I guarantee you that they will be appropriate to the violations if

there are violations.

Mr. STUPAK. Any sanctions on the company that Judiciary House

here that we had today? Are you considering any sanctions against

that company?

Ms. BLOCK. That company is under a corrective action plan. All

of those corrective action plans remain in place and further, by the

way, all investigations also remain in place.

Mr. STUPAK. My questions was sanctions.

Ms. BLOCK. Criminal action against any of those agents, those

things are in no way impeded and there are criminal penalties that

can be taken against agents who are——

Mr. STUPAK. Judiciary House, the one we heard from today, any

sanctions, any criminal penalties, any recommendations made by

CMS on that example we had today?

Ms. BLOCK. We have learned very recently of that particular incident and the plan as far as I know did everything it needed to do.

It terminated its relationship with those unscrupulous agents. That

is what you would expect would happen. The relationship was terminated. Those people are no longer working for that organization.

Mr. STUPAK. OK. My time is way over but, what would you do,

Mr. Poolman and Ms. Holland, if Judiciary House occurred in your

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State and if you had the authority? What would you do? What

sanctions do you have?

Mr. POOLMAN. Well, clearly, what would happen is we would go

after the agent which I think happened in the District of Columbia,

but the interesting thing about this is that there is a contractual

relationship between an agent and a company and if the regulatory

process was set-up just like any other company. Let us say it is a

life insurance company selling an annuity and somebody was

duped into buying an annuity we could, therefore, go back and

make the company make the transaction right to begin with. And

that is the authority we don’t have right now. We don’t have any

market conduct authority to hold those companies accountable. If

we did, then the company would be held accountable in making the

transaction right, getting that particular person or persons in this

case, dis-enrolled from the program and enrolled in the right kind

of program and holding that company accountable in doing so.

Mr. STUPAK. Thank you. Ms. Holland. Sure.

Ms. HOLLAND. If I may add something to that, I referred to in

my testimony an exam that we conducted on Humana because of

people’s complaints.

Mr. STUPAK. Right.

Ms. HOLLAND. We actually found that in the course of that examination that there were 68 agents selling products in our State who

were not licensed. They had no appointments but again as Commissioner Poolman indicated that we were unable to address that

with them other than to tell them we expected their agents to be

appointed. The examination actually identified numerous other

failures on the part of the company, things that we would have addressed immediately had we had the authority.

And so I brought that examination to Ms. Block personally in

March. I was interested to hear today that she indicated that they

require agents to be licensed by their companies, so we certainly

will be pursuing those agents, and I hope now that I know that

CMS will be pursuing actions against those companies, Humana,

specifically, for permitting 68 agents to be selling products in my

State without a license.

Mr. STUPAK. Thank you. I am way over on my time.

Mr. Whitfield, for questions.

Mr. WHITFIELD. Ms. Holland and Mr. Poolman, both of you in

your testimony made it quite clear that you did not feel that CMS

was adequate in protecting the citizens of Oklahoma and North Dakota, respectively as it relates to Medicare products. But Ms. Block,

in her testimony talked about these Memorandums of Understanding with, I think she said 26 States and Puerto Rico. Has North

Dakota entered into a Memorandum of Understanding with CMS

and Oklahoma also? And in her testimony she, maybe I didn’t hear

her correctly but I understood her to say that this Memorandum

of Understanding gives the States the complete authority to go in

and deal with problems with insurance agents. Is that not correct?

Mr. POOLMAN. Congressman, no, that is not correct. Being very

frank it is basically as I understand it an information sharing

agreement. There is no absolute downside to signing a Memorandum of Understanding with CMS when we have a responsibility in

my State, a constitutional responsibility to protect the people of

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North Dakota. So to share information and in getting that information is incredibly important to us.

Mr. WHITFIELD. All right.

Mr. POOLMAN. To be able to effectively regulate the agents out

of it, it gives us no authority on the company side to be able to hold

those folks accountable.

Mr. WHITFIELD. Ms. Holland.

Ms. HOLLAND. Yes, just as an example the MOU came about it

because of our concerns about being able to address agents within

our jurisdiction. It was the NAIC that really initiated the conversation with the MOU. That sat on the desk of, completed on the

desks of CMS until I called and said I had an examination report

and I would not deliver it until I had that MOU. And that spawned

the delivery of the MOUs for the States that received them. But

up until that time we had been waiting for some months for that

MOU which the States had signed, those that participated, and

still had not received that information. But again all it does is, as

Commissioner Poolman said is agrees to an exchange of information.

Mr. WHITFIELD. Well, you heard the commissioner from or deputy commissioner from Mississippi saying that in his State it was

unclear whether or not they had the legal authority to terminate

a license. What about in North Dakota and Oklahoma, what is

your decision on that?

Mr. POOLMAN. Because we do not have authority over the product, if you were to pull a license for the sale of a product that you

don’t have regulatory authority over there is some confusion. And

if we pull a license, Congressman, there is an appeals process that

those folks can go through, in fact, they can go to the district court

and then the Supreme Court to appeal that. So we have to have

very solid legal ground.

In some of the cases that you have heard today I think we could

eventually go after those folks and we are in North Dakota, by they

way. We have open investigations in going after those agents that

are unscrupulous in this regard. And we think we have the authority when it comes to agents but it has not been tested yet, and we

want to make sure it is very clear authority.

Mr. WHITFIELD. And you, same thing, Ms. Holland.

Ms. HOLLAND. We are pursuing it aggressively. Quite frankly I

have an anti-fraud unit on, actually a law enforcement team on

staff and I send my law enforcement team out to pursue any misbehavior, certainly.

Mr. WHITFIELD. Well, Ms. Block, you have heard these concerns

expressed by the insurance commissioners in these States, do you

feel like they do not have a right to terminate the licensing of these

insurance agents?

Ms. BLOCK. I believe they have an absolute right. We strongly

encourage them to do that and we would like to work collaboratively with them to identify and track-down and pursue everyone

who is acting inappropriately or illegally in any State.

Mr. WHITFIELD. OK. So then what is the problem, why have we

not been able to work together? Or have we been able to work together? Mr. Poolman.

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Mr. POOLMAN. Well, Congressman, it is not a matter of not working together, it is a matter of where does the authority lie to protect the people in my State and other States? And as I have said

to you before we believe we have authority when it comes to

agents, but the problem is, is making the consumer right and

whole in the end of a transaction that has gone wrong. And if we

have the ability to regulate from a market conduct standpoint,

from a advertising standpoint, those types of things, we then have

some leverage with the company to make them market right in our

State.

Mr. WHITFIELD. You and Ms. Holland then would be objecting to

the preemption of the State’s authority in this area? Do you interpret that the Federal act that established these Medicare Advantages preempts State law in this regard?

Mr. POOLMAN. Congressman, before Medicare Modernization Act

we had regulatory authority over benefits, appeals processes, rates,

all of those types of things. Now we have basically regulatory authority over some licensing and solvency, and that is it. Nothing related to market issues.

Mr. WHITFIELD. So your authority has been diminished significantly in your view.

Mr. POOLMAN. Yes, sir.

Mr. WHITFIELD. OK.

Ms. HOLLAND. And I think an example of that was one of the

gentlemen today when you—from the carrier that was defending

his—the agent population say, reminding everybody that those

were independent agents not his agents, which I thought was such

a disingenuous comment because quite frankly an agent is always

an agent of the company by licensure, by contract. But under the

MMA, appointments, that critical link that actually creates that

contract, have been discontinued.

So indeed we have free agents out there where we can address

the agent but if it is an unlicensed agent I can’t find that person

unless I do an examination on the company.

And if I try an examination on the company, like I did with

Humana, they are digging their heels in and screaming preemption

every opportunity they get.

They have. It was through our persistence and insistence.

Mr. WHITFIELD. Yes. Well, normally I think the American people

when they think about authority, they fear Federal authority more

than State authority. You take the IRS, the FBI, the Justice Department, but in this instance it appears that CMS is either not

being aggressive in dealing with this, the fear is not there, in this

particular instance. But with that my time has expired, Mr. Chairman.

Ms. HOLLAND. Well, may I just respond to that in one respect because I have all due respect for Ms. Block and her comment about

really wanting to do something. I think that is sincere. I think it

is a reality of resources. I don’t have a CMS representative in my

State. If one of my beneficiaries calls from Tahlequah, OK and

needs help I can send one of my law enforcement officers out there

in an hour to see what is going on. I have to call CMS and they

are not going to come to Tahlequah, OK and deal with my senior

population.

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I think that is what we are trying to suggest to you is that we

have got the resources on the ground that have been there. We

have been dealing with these issues on these products, health care,

whatever the products are, for again, 136 years. What has

changed? The idea of it being Federal dollars is another area that

appears disingenuous to me it is taxpayer dollars. And those seniors are paying those taxes and those seniors are paying premiums.

And I am paying those taxes. So we should all be working together.

Mr. STUPAK. Mr. Burgess.

Mr. BURGESS. Thank you, Mr. Chairman. Ms. Block, let me just

ask you the statement was made by, I don’t remember which commissioner, it may have been, in fact, made by both commissioners

that it seemed that CMS was unable or unwilling to do the job as

far as enforcement. How would you respond to that statement?

Ms. BLOCK. CMS is perfectly willing to do the job and has every

intention of doing the job. And again I will suggest that the best

way to do the job is through a partnership of the Federal Government and the States that have a critical role to play and we would

like to strengthen that partnership and do the job effectively together.

Mr. BURGESS. I think we just heard in some of the very last

statements made by the commissioner from Oklahoma about, they

are there. They are on the ground. They have the enforcement officials who are on duty and at their beck and call, so I guess I would

ask the question why not use their offices as a force multiplier for

CMS in order to reign in unscrupulous behavior.

Ms. BLOCK. But we do. I don’t know how I can stress to this committee that the States have jurisdiction over the licensed agents in

their States. And to address the issue that Ms. Holland raised we

absolutely require that all agents be licensed and where there is

a violation of that we have mechanisms to deal with that with the

sponsoring organization.

Mr. BURGESS. Now, can anyone on the panel provide this committee with documentary evidence where that licensing authority

did not exist, an enforcement action followed as a result of that?

Or that those licensing obligations were abrogated and an enforcement action was taken on behalf of either CMS or the State Department of Insurance?

Ms. HOLLAND. No, I think we acted within our authority to address the licensure issues but licensure, the specific licensure of

any one agent is intrinsically tied to their relationship with the

company. And the current MMA has severed that tie at least in

terms of our ability to tie that agent back to the company and compel the company, through sanctions and otherwise, for getting the

behavior that we want.

Mr. BURGESS. Ms. Block, you are nodding your head, you agree

with that statement?

Ms. BLOCK. Yes, I am. Ms. Holland is addressing an issue that

is generally referred to as appointments.

Mr. BURGESS. I am sorry.

Ms. BLOCK. And I thoroughly understand the issue.

Ms. HOLLAND. Appointments.

Ms. BLOCK. Appointments and what we are proposing, and we

would hope to move very quickly, in order to be able to deal with

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this, is that we will require every plan selling Medicare Advantage

products, particularly Private Fee-for-Service products, to provide

to CMS the names of all of their licensed agents and all of their

agents need to be licensed. We will then in turn make those names

available to every State on request so that we will develop a centralized, presumably, Web site access. That would be the easiest

way of doing it, to put it on a Web site so that every State insurance commissioner will be able to look at that Web site and will

be able to see the name of every agent who is working for every

company selling in their State. That is something, it is not in place,

yet.

Mr. BURGESS. It is not, OK.

Ms. BLOCK. But it is going to be in place very soon, I guarantee.

Mr. BURGESS. All right. Well, it has been 21⁄2 years since, I guess

a year and a half, since the implementation of the part D program

and it is probably time that that occurred.

How is the Medicare Advantage Program different from say the

multi-state insurance company that would be governed under the

ERISA statutes. Is it a similar situation with the preemption? Is

it a parallel universe that the Medicare Advantage plans occupy?

How does that work?

Ms. BLOCK. They are not governed under ERISA, they are governed under Medicare statute and regulation, and that is why, in

my oral statement and I believe I go into even more detail in my

written statement, I describe the very rigorous review process that

every plan and every plan’s benefit package goes through at CMS

because CMS has the authority to oversee these plans and before

a plans benefit package is accepted, it is reviewed by CMS and

would go through that process every single year.

Mr. BURGESS. Let me just interrupt you because the chairman is

not going to be nearly as indulgent with me going over as he is

with other members of the committee.

Do you have similar problems, let me just ask the commissioners

do you have similar problems with ERISA plans that you have with

the Medicare Advantage plans?

Mr. POOLMAN. Congressman, I think that is a great question and

it is a great point. Let me give you an example, if a consumer calls

my office and they are under a self-funded plan that has been created by a business and they can’t get their claim paid? I have to

essentially refer them to the Department of Labor who administers

ERISA. I have no authority to go enforce that company or force the

insurance company that is administering that plan to pay that

claim even if it was right to be paid. It is very similar to what is

happening here. And it is a black hole of regulation because those

folks get no response from the DOL either.

Mr. BURGESS. Yes, I think I fell into that black hole as a practitioner once.

Mr. POOLMAN. Yes, you did.

Mr. BURGESS. But do we see the abuses in the ERISA system

that we have been talking about here this afternoon?

Mr. POOLMAN. As, Congressman, as more companies are getting

away from fully insured plans because of the standardization of

those plans and creating their own benefit plans we are seeing

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more abuses in that regard and we are having to shuffle them off

to the Federal Government and they are essentially calling you.

Mr. BURGESS. Is there, and that is fine, I will take those calls.

Is there a risk of a learning curve with people observing what is

happening with the Medicare Advantage plans that are having a

spill-over effect to the ERISA plans, the race to the bottom, if you

will?

Mr. POOLMAN. The difference, Congressman, is that ERISA plans

are created by business owners and I would sense a much less vulnerable population then the folks buying typical Medicare Advantage plans because they are seniors that are in many cases duped.

On the ERISA side it is a business owner setting-up a plan and

they are far more sophisticated purchasers when buying a selffunded plan for their business.

Mr. BURGESS. OK. Let me just ask one last question now I know

in the State of Texas, I believe the insurance commissioner is an

appointed position by the governor, and you are both elected, is

that correct? If I were to want to vote for either one of you in the

primary election would I vote in the Democratic or Republican primary?

Ms. HOLLAND. One of each, Congressman.

Mr. BURGESS. One of each.

Mr. POOLMAN. You have a bipartisan representation here. I am

a Republican and my colleague is a Democrat.

Mr. BURGESS. I was just trying to figure out a way to ask that

question delecately.

Mr. POOLMAN. I am very open with that and that, well, I will let

it go at that.

Mr. BURGESS. Thank you, Mr. Chairman.

Mr. STUPAK. Ms. Holland, Mr. Poolman, when Ms. Block was

talking about this Web site with the insurance agents on it, is that

going to solve the problems here?

Ms. HOLLAND. I think there is a couple of things here. First of

all, the National Association of Insurance Commissioners maintains a National Insurance Producer Registry, the NIPR.

Mr. STUPAK. It is already there.

Ms. HOLLAND. It has every licensed agent on it, it is notified of

terminations and so forth. It is accessible to companies and regulators. It is not accessible to the general public, however, anyone

can call us and we can access that information. We all share information through State-based regulatory systems, as well, which requires companies to send us an appointment, when they appoint an

agent.

Mr. STUPAK. Right.

Ms. HOLLAND. An appointment is necessary to get a license. If

that appointment is cancelled for any reason the company has to

report that and why. In the absence of that appointment process

again, we won’t have that information.

Mr. STUPAK. And the Medicare Modernization Act took away the

appointments, right?

Ms. HOLLAND. Right, it does not require an appointment, no. The

problem and the only thing that I would suggest in the example

that Ms. Block gave is the 68 agents who were doing business in

my State wouldn’t be on her report, and I still wouldn’t know about

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them. It was only through the process of my investigation and examination of that company that that came to light.

Mr. STUPAK. But if we put the appointment rule back in.

Ms. HOLLAND. That would work. It would help tremendously.

Mr. STUPAK. And would that also give you some jurisdiction or

control over these policies that are being sold? It doesn’t, it is only

the agents, right?

Ms. HOLLAND. Well, no, it does allow us to hold the company accountable for that.

Mr. STUPAK. For their agent which you cannot do right now.

So really to solve this issue, you really need, No. 1, the appointment rule back so you have some control over the agent with company. Second, you have to have some control over product being

sold.

Ms. HOLLAND. Indeed.

Mr. STUPAK. If CMS put forth a Web site that listed oh, corrective actions, and Ms. Block mentioned corrective action plans that

they are looking at right now for 98 companies, complaints, dis-enrollment data, would that be helpful?

Ms. HOLLAND. I think any information about company activities

and actions is helpful to regulators. We are always interested.

Mr. POOLMAN. Mr. Chairman, I think any of that information as

Commissioner Holland said is important. We have some questions

about the corrective action plans and the oversight function of CMS

and who is going to make sure that are they going to report back

to anybody that who has taken what steps to make sure and what

happens if they are not? What is the process that they are going

to go through? That will come through some communication, I am

sure, with CMS, but we are hoping that there is vigorous enforcement of self-corrective action plans that is out there. And if not,

what is the, then the flip side of that in terms of punitive intentions against the company that is not following their own corrective

action plan?

Mr. STUPAK. So, Ms. Block, why wouldn’t CMS put this information, CMS currently pulls information on nursing homes, home

health agencies, so beneficiaries and their families have the information about staffing levels, health outcome measures, and sanctions have been post. So why doesn’t CMS then put the corrective

action plans on the Web site, complaints, dis-enrollment and this

information available and not just for these insurance commissioners but for all seniors? Why wouldn’t we do the same thing?

Ms. BLOCK. We are in the process of doing that, sir, as we speak.

Mr. STUPAK. All right. That would be a good first step. How

about this idea about the appointment rule, would you be opposed

to giving them back they appointment rule on their MMA, that the

commissioners asked for?

Ms. BLOCK. There has been a great deal of discussion about that

and it is still under discussion, but let me say I need to clarify because I think what I am proposing was not completely understood.

What I am proposing is that we would post the name of every

agent who is selling attached to the name of the company for whom

they are selling. So, Ms. Holland would be able to make the connection between John Jones and WellCare or Humana or whatever

other companies John Jones is selling for. So she would have that

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information and she would know that John Jones, if she is having

a problem with him, is an agent for a particular company. That is

the information that we are talking about making available.

Mr. STUPAK. Would that solve the problem, Ms. Holland?

Ms. HOLLAND. Well, an independent agent can sell product from

any number of companies.

Mr. STUPAK. Sure.

Ms. HOLLAND. If you are not required to obtain an appointment

and then subsequently not licensed, they could be carrying out a

portfolio of any number of companies and have no attachment to

any one company until such time as they presented an application

for processing. At that time, that is backwards.

Mr. STUPAK. OK.

Ms. Block, will you make available those 98 action plans that you

are currently under right now that you have proposed?

Ms. BLOCK. Yes.

Mr. STUPAK. OK. And you will make them available to the committee then forthwith?

Ms. BLOCK. Yes, sir.

Mr. STUPAK. OK. Mr. Whitfield, did you have some questions?

Mr. WHITFIELD. Mr. Chairman, I don’t have any questions, but

Mr. Poolman, in his testimony, enclosed some letters that were

sent to Humana regarding a specific issue and in order to just complete the record we have copies of the response from Humana to

Mr. Poolman and just ask Humana’s consent that they be placed

in the record to complete the record.

Mr. STUPAK. OK. My only concern, Humana, in the letter is that

dated June 2, 2006, said they only had 44 residents of North Dakota and Commissioner Poolman’s testimony on page 6, I believe,

you mention there are 130 seniors from North Dakota. So I am just

trying to figure out the discrepancy.

Mr. WHITFIELD. Well, I am not speaking for the truthfulness of

the document.

Mr. STUPAK. Oh.

Mr. WHITFIELD. I am simply saying that he asked the question

and we are putting the document in so that people could.

Mr. STUPAK. You don’t mind that it goes on record.

Mr. POOLMAN. Mr. Chairman, that is fine with me.

In all due fairness to the company they deserve the opportunity

to respond. In this case there were two separate privacy incidents,

in breach of privacy, and I think my testimony refers to the aggregate not both instances separately.

Mr. STUPAK. Very good. OK. Without objection then that will be

entered in the record.

Any other questions for this panel? If not, let me thank the

panel, the commissioners and Ms. Block, for their time and their

testimony and their answers to our questions are very enlightening. I ask for unanimous consent that the hearing record will remain open for 30 days for additional questions for the record. Without objection the record will remain open. I ask unanimous consent

that exhibits 1 through 19 from our document binder be entered

into the record. Without objection, documents will be entered in the

record. That concludes our hearing. Without objections the meeting

of the subcommittee is adjourned.

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[Whereupon, at 1:52 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

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