According to a recent Senate report, Medicare Advantage’s “secretive maze of marketing and enrollment incentives” costs taxpayers more money and requires reform.
More than half of the Medicare market is served by Medicare Advantage, or MA, a private-plan alternative to traditional Medicare. In his report, ranking Democrat on the Senate Finance Committee Sen. Ron Wyden asks for changes to the marketing strategies of MA.
In particular, Wyden wants to establish a fixed price for agents and brokers instead of commissions, make them fiduciaries who must operate in the best interests of their clients, and grant the Centers for Medicare & Medicaid, or CMS, the power to supervise lead generators and marketing firms.
The report was released at a higher total cost to taxpayers, as Massachusetts has supplanted traditional Medicare as the main provider of Medicare coverage. Additionally, through 2027, over 10,000 people will turn 65 and qualify for Medicare every day, opening up a lucrative market for private insurers to profit from a demographic bubble. According to the research, over 35.7 million people are expected to be registered in MA plans by 2025.
According to CMS, government payments to MA plans are anticipated to rise by an average of 5.1% in 2026. According to research and public policy firm KFF, the rate increase, along with underlying assumptions about economic circumstances and MA enrollment coding trends, will result in a 7.2% overall increase, or an additional $35 billion for MA in 2026.
“Medicare Advantage is so profitable because it’s overpaid, and there’s enough money sloshing around in it that an entire industry grew up around marketing [Medicare Advantage],” said Laura Skopec, senior research associate at the Urban Institute. “It’s such a competitive arms race.”
According to a Medicare Payment Advisory Commission report to Congress, Medicare already pays 6% more on Medicare Advantage members than it would if those beneficiaries were enrolled in regular Medicare. In 2023, the difference is expected to amount to $27 billion.
The overall burden on taxpayers and the trust fund that supports Medicare rises as a result of CMS paying Medicare Advantage plans more per person than traditional Medicare and as the number of Medicare Advantage customers rises.
According to Cobi Blumenfeld-Ganz, CEO of Chapter, a Medicare navigation company, “the Medicare Advantage marketing ecosystem has evolved to prioritize the financial interests of middlemen over seniors’ well-being.” “The solutions aren’t complicated – we need a system where advisers act as fiduciaries, all plans are equally accessible and financial incentives align with what’s best for seniors, not what maximizes commissions and marketing fees.”
“It should be mandatory for Medicare brokers who recommend coverage to prioritize the needs of customers over those of insurance companies. Medicare decisions frequently have long-term effects and are made once in a lifetime. In addition to being good policy, requiring brokers to act as fiduciaries is the very least that seniors should receive when making what could be their most important healthcare choice, Blumenfeld-Ganz stated.
Increased expenses for administration
According to the Wyden research, Medicare Advantage plans spend an average of 10% of their annual budgets on administrative expenditures, compared to less than 2% of traditional Medicare’s budget.
Spending on “agents and brokers fees and commissions” climbed from $2.4 billion in 2018 to $6.9 billion in 2023, representing a 19% compound annual growth rate, according to data from all Medicare Advantage plans. In contrast, spending on “direct sales salaries and benefits” grew by $2.2 billion, or 7%, during the same time period. According to the Wyden report, enrollment in Medicare Advantage rose to 32.2 million during that time, representing an annual growth of 7%.
CMS recommended modifications to Medicare Advantage plans’ agent and broker remuneration in 2024 with the goal of limiting marketing support fees and ensuring that compensation did not exceed preexisting limits.
A Texas federal court, however, decided in July 2024 that the rules were arbitrary and capricious, went beyond CMS’s power, and circumvented the Administrative Procedures Act’s standards. The court also halted the implementation of the rules against the Department of Health and Human Services, or HHS, which includes CMS.
Bombing elderly, which is more expensive
“Because of insufficient protections against aggressive marketing practices, these beneficiaries are increasingly being steered toward plans that don’t meet their needs as companies spend more to incentivize marketing and lead-generation, increasing program costs,” according to Wyden’s report.
When a new Medicare Advantage enrollee enrolls, agents and brokers typically receive $626 in commissions nationwide; if the enrollee continues to be enrolled in the plan, they typically receive $313 in renewal commissions. If the individual signs up for standard Medicare, no commission is paid.
Legislators, watchdogs, and regulators are finding it more difficult to sort through this complicated web as insurers hire more middlemen, such as marketers and lead generators, and spend more money on marketing initiatives. According to the Wyden research, expenses for taxpayers and elderly are rising in the meanwhile.
According to the Wyden report, older persons are inundated with phone calls, mailings, and other encounters because to the “secretive maze of marketing and enrollment incentives”. Marketing affiliates who receive compensation for directing customers to particular insurers, whether or whether they are suitable for them, may cause harm to consumers.
Consequently, the Wyden report stated that Medicare Advantage’s excessive marketing expenditures hurt taxpayers and lead to higher premiums and overall Medicare costs.
“One sign of the issue with [Medicare Advantage] is the volume of marketing activities. “The federal government is paying Massachusetts far more than it costs,” stated Matthew Fiedler, a senior fellow at the Brookings Institution’s Center for Health Policy. “Unless and until the federal government changes how it pays MA, this marketing activity is going to continue.”
“Enforcement is challenging.”
According to the Wyden report, offshore contact centers could need to be prohibited due to the possibility of misuse, and Medicare Advantage plans should only enter into contracts with marketing and lead-generation firms that CMS has approved.
The State Health Insurance Assistance Programs (SHIPs), Senior Medicare Patrol (SMP), 1-800-MEDICARE, and ombudsman programs are among the impartial information sources that the report recommended recipients use.
“It’s not that the proposals themselves are unrealistic, but the enforcement is difficult,” Fiedler stated. “I don’t think CMS will take any action on this. It’s not a pointless exercise, but it’s unlikely to result in improvements right now.
CMS stated that it was examining the study and was dedicated to enhancing Medicare Advantage enrollment and marketing for beneficiaries.
The Better Medicare Alliance, a trade group for Medicare Advantage, stated that it has previously suggested that lawmakers prevent such intermediaries from sharing beneficiary contact information, create a code of conduct and “best practices” for third-party marketing organizations with ongoing CMS and health plan oversight, and strengthen ongoing enforcement of deceptive marketing practices to guarantee adherence to CMS regulations.
“All seniors should have access to clear, reliable information so they may make educated decisions regarding their Medicare alternatives. Because Medicare Advantage offers beneficiaries better care and health outcomes at a cheaper cost, more seniors are choosing it today, according to Mary Beth Donahue, president and CEO of the Better Medicare Alliance.
“Medicare Advantage marketing is already subject to rigorous oversight to protect seniors,” Donahue stated in a statement circulated by email. However, more can be done. To guarantee that seniors and individuals with disabilities receive objective and accurate information to help them make educated health care decisions, all parties involved in Medicare Advantage marketing should be held to the same high standards.
