CMS handles violations of our marketing guidelines



NAIC – Private Plans Sub-Group

Public Hearing

September 11, 2007

Testimony of Abby L. Block

Director, Center for Beneficiary Choices

Center for Medicare and Medicare Services

Thank you for the opportunity to testify today on the topic of Medicare private plans and the joint roles the Centers for Medicare and Medicaid Services (CMS) and the states play in overseeing these plans. On behalf of CMS, I would like to say first how much I value this critically important partnership we have forged with the states to protect and promote the welfare of Medicare beneficiaries.

In fact, I am pleased to see that that Mary Beth Senkewicz from the Florida Office of Insurance Regulation is testifying this afternoon. The work that CMS and her agency have done together is an example of the great potential of federal-state partnerships. Though we regret there have been a number of problems with plan sponsors in Florida, CMS and the state of Florida have worked together to protect beneficiaries by taking actions against plans in financial difficulties, issuing corrective actions, and in some cases terminating underperforming and non-compliant plans.

New Plan Choices for Beneficiaries

Over the last decade, changes to Medicare have enabled us to offer a managed care program that is more accessible, efficient, and attractive to beneficiaries seeking options to meet their healthcare needs. These expansions include regional preferred provider organizations plans (RPPOs), special needs plans (SNPs), Medical Savings Account plans (MSAs), and private fee-for-service plans (PFFSs).

Beneficiaries have responded eagerly to many of the new plan options, contributing to tremendous growth in enrollment. The largest increase in number of plans and enrollment has been among PFFS plans, which allow unrestricted access to providers willing to provide services and accept payment on a Medicare fee-for-service basis. In 2007, there were more than 1.3 million enrollees in 482 individual market plans, compared to just 371,000 enrollees in 183 plans in 2006.

In general, beneficiary satisfaction with plans has grown. According to the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Survey, Medicare managed care beneficiaries who rated their overall experience with their health plan a 9 or 10 on a 10-point scale rose from 56% in 2005 to 60% in 2006. At the same time, we take beneficiary complaints very seriously. We work hard to respond quickly to individual concerns and to analyze complaint trends to determine whether they reflect systemic problems or isolated incidents.

CMS Oversight of Private Plans

In order to balance the growth in plan offerings with the highest level of beneficiary protection and to ensure that Medicare program stakeholders can have confidence that the programs being administered by CMS are effectively overseen, CMS has a multi-pronged regulatory and oversight strategy that melds together day-to-day monitoring activities and program compliance audits.

Every contractor is assigned to a CMS plan manager that is familiar with the organization’s structure and business practices. On a day-to-day basis there is an exchange of information about emerging issues which generally are quickly resolved. Across plan managers, across the regional offices and CMS headquarters, we evaluate complaints and other problems for patterns and trends that suggest an issue may be more complex or pervasive, and suggest that in addition to corrective actions at the plan level perhaps additional policy guidance or monitoring strategies are needed.

In addition to day-to-day monitoring and activities, CMS conducts Medicare program compliance and financial audits. Annually, CMS undertakes a risk assessment process that enables the Agency to focus its program audit resources on auditing Part C, D and employer organizations that are identified as representing the greatest risks to Medicare beneficiaries and the Medicare program. The Office of the Actuary and Office of Financial Management annually audit at least one-third of organizations’ financial records, including data relating to Medicare utilization and costs. CMS has developed and is currently testing a new audit program for use in these financial audits. This program includes an analysis of actual costs, which may enable CMS to make more accurate payments to plan sponsors.

Our guidance requires that adequate information be available for beneficiaries and providers about these new plan offerings. Our policies put the onus on plans to provide and demonstrate real value added to beneficiaries – especially those who enroll in private fee-for-service plans, as this product is unfamiliar to beneficiaries and providers, and they can be easily confused about how it works. For example, private fee-for-service plans are required to include disclaimer language in every piece of marketing material, which makes it clear that providers are not required to provide service under the PFFS product, unlike HMOs and PPOS that have provider networks. Plans that violate marketing requirements are subject to corrective action plans (CAPs), intermediate sanctions such as marketing or enrollment freezes, and civil monetary penalties.

Concerning all plan types, to increase transparency regarding plan compliance and CMS oversight, CMS will make summary information on CAPs available to the public through the CMS website. Later this fall, we will post the first iteration of this data. Over time, we will work to improve the website, adding more information and depth of detail.

Finally, CMS policies require plans to ensure agents and brokers are properly trained in both Medicare requirements and the details of the products being offered. We are working to create a database of agent information, with the goal of providing comprehensive agent information to states in a standardized format.

Collaboration with States

Though CMS has worked hard to develop a strong federal regulatory framework for Medicare Advantage plans, its success is bolstered by the partnership between CMS and the states. In fact, strengthened relationships with state regulators are critical to ensuring private plans and their sponsors act within the rules that govern this program.

One of the most important developments in this partnership has been the co-signature of Compliance and Enforcement Memorandums of Understanding (MOU) between CMS and States. We are proud to have worked cooperatively with NAIC and State Departments of Insurance to develop the model MOU, which enables CMS and State Departments of Insurance to freely share compliance and enforcement information, to better oversee the operations and market conduct of companies we jointly regulate and to facilitate the sharing of specific information about marketing agent conduct. Since it was completed in November 2006, forty states, Puerto Rico and the District of Columbia have signed the MOU.

We have already begun to see the positive results of information sharing under the MOU:

• CMS was able to assist the state of Kentucky with addressing concerns about a PFFS plan that had access to care issues. The CMS plan manager sent a request to the plan’s compliance officer to let the plan know they needed to do outreach to educate providers, and to tell them that they should not be marketing in areas where there was no access to care. Extracts from this communication were shared with the Kentucky Department of Insurance.

• CMS can immediately share name-specific agent/broker complaints with state Departments of Insurance (previously the Part C complaints had to be routed through PI and then the MEDIC to the state; this is a separate process from the routing of FWA complaints).

• CMS was able to share information about what we were doing in reference to a “Call Stop” issue with a plan in Wisconsin. Callers could not get through to the plan and the DOI was receiving a large volume of complaints.

As part of the collaboration between CMS and states, CMS is giving MOU states access to Part C and D compliance and enforcement information that the Agency maintains in its Health Plan Management System (HPMS). The types of information that will be available on this website include:

• Summaries of CMS program audits;

• Civil monetary penalty letters;

• Intermediate sanction letters (e.g., freezing marketing and enrollment activity);

• Letters announcing the Agency’s intent to terminate a Medicare managed care or prescription drug organization contract;

• Letters announcing the Agency’s intent to non-renew a Medicare managed care or prescription drug organizations contract; and

• Individual complaints received by CMS where individual marketing agents or persons are named.

This month, Medicare Advantage and Part D organizations will be reporting sales event information to CMS. This includes the dates, times and locations of planned sales events that will be conducted by both captive and independent sales agents. CMS and its contractors will secret shop many of these sales events. We will be sharing this sales-event-related information as well as the testing tools that CMS uses to evaluate Medicare sales and marketing presentations, with MOU states later this fall.

CMS and Federal Oversight Authority

As I have discussed here, the collaborative work between CMS and the states is critical to the management of an effective program and to protecting the beneficiaries. At the same time, I must underscore the importance of maintaining oversight of Medicare managed care programs by the federal government. State regulation of these plans is neither appropriate nor feasible.

First, Medicare Advantage is managed and almost entirely subsidized by the federal government. Accountability for programs funded with federal dollars must remain with the federal government. Some have likened Medicare Advantage to Medigap plans when suggesting that states assume enforcement authority. These are inappropriate comparisons. Medigap plans are paid for entirely by the individual purchaser and supplement Medicare. Medicare Advantage plans instead provide all original Medicare benefits and in some cases additional benefits and are paid for substantially or totally by the federal government.

Second, in order to run the Medicare Advantage program, CMS contracts with MA plan sponsors. These contracts establish the terms and conditions under which plan sponsors will provide coverage to beneficiaries. If CMS does not retain exclusive jurisdiction over these products, including the authority to monitor compliance and enforce requirements, it cannot effectively manage its contracts and day-to-day program operations.

Third, Medicare Advantage is a national program with one set of rules and regulations that all plan sponsors must follow throughout the country. This allows national insurance companies to offer a wide range of options to beneficiaries in all states. If CMS were to devolve oversight of Medicare Advantage to the states, plan sponsors would be required to meet each different state’s regulatory requirements, making the program significantly more difficult and costly to manage, and potentially jeopardizing the availability of plan options throughout the country.

For these reasons and others, CMS needs to maintain authority over Medicare Advantage and the enforcement of private plan contracts. Concurrently, however, CMS and the states have an obligation to find and develop fruitful exchanges that will advance the goals of the program and most importantly, protect beneficiaries. In closing, I want to reiterate the importance of the partnership and look forward to working together in the interest of Medicare beneficiaries.

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