Medicare Advantage plans have engaged in marketing practices that rely on third-party marketers and other organizations that inflate costs for plan members and for taxpayers, according to a report from Senate Finance Committee Ranking Member Ron Wyden (D-Oregon).
“These practices result in a complex ecosystem of middlemen that evade oversight and regulation,” Wyden wrote. “Seniors and people with disabilities may be misled by aggressive marketing practices and steered by third parties into MA plans that do not meet their needs.”
The report, “Pushing Medicare Advantage on Seniors: Unraveling the Complex Network of Marketing Middlemen,” was published March 25.
In a press release about the report, Wyden highlighted three key findings:
- The committee found that health insurers spending on agents’ and brokers’ fees and commissions almost tripled, rising from $2.4 billion in 2018 to $6.9 billion in 2023.
- State and federal regulators have limited oversight of marketing practices, especially with the increased use of third-party marketers and other subcontractors.
- The Medicare Advantage marketing boom has encouraged MA insurers and brokers to enroll seniors aggressively into plans that may not cover their preferred doctor or cover key health benefits.
MA insurers are substantially overpaid compared with what traditional Medicare pays for care, according to the Medicare Payment Advisory Commission (MedPAC), which advises Congress. MedPAC estimates that MA payments were 22% higher in 2024 than traditional Medicare spending, a difference that amounted to $83 billion in annual spending, MedPAC reported in MedPAC, Report to the Congress: Medicare Payment Policy, March 2024.
For those who enroll in traditional Medicare, CMS spends less than 2% of its budget per year on administrative costs, Wyden noted. But MA plans spend an average of 10% of their annual budgets on such administrative costs, he added. Wyden is the ranking member of the Senate Finance Committee.
An important recommendation in Wyden’s report is that agents and brokers serving MA enrollees should have a fiduciary requirement toward those they enroll. “Requiring agents and brokers to have a fiduciary responsibility means that they have to put the consumer’s needs first even though the agent and broker is paid a commission by the insurer,” Wyden explained.
Also, the federal Centers for Medicare and Medicaid Services (CMS) should have the authority to regulate marketing organizations and those that generate sales leads for agents and brokers, the Wyden report noted.
In his report, Wyden showed that payments for marketing and administrative services have outpaced MA enrollment growth, and that payments for certain types of enrollees (such as those in Dual-Eligible Special Needs Plans (or D-SNPs) can be five to 10 times greater than those who enroll in other MA plans.
“On top of these costs, insurers have found loopholes to pay brokers and their back-end administrative support companies more through questionable assessments and other post-enrollment services,” the Wyden report added.
In March, KFF reported that more than half (54%) of all Medicare members were enrolled in MA plans, and 46% were enrolled in traditional Medicare plans. The KFF report projected that 64% of all Medicare members will be enrolled in MA plans by 2034.
As MA plans grow, the Wyden report showed that beneficiaries are increasingly being steered toward plans that may not meet their needs because MA insurers are spending more to incentivize marketing and the generation of sales leads, thus raising the costs of the Medicare program.
To address these problems, the Wyden report recommends requiring CMS to provide unbiased sources of information to beneficiaries, including information from the State Health Insurance Assistance Programs (SHIPs), Senior Medicare Patrol (SMP), 1-800-MEDICARE and state departments of insurance.
Also, CMS should ban marketing and other administrative service fees that influence agents and brokers to recommend certain MA plans that drive up taxpayers’ costs, the Wyden report noted. Such fees can be as high as $1,000 or more and, therefore, could influence which insurer a third-party marketing organization would recommend to a senior considering an MA plan, the report added.
Congress should give CMS the authority to regulate marketing organizations and those that generate leads for agents and brokers to ensure that agents and brokers are not using deceptive or high-pressure sales tactics, the report added. Also, MA plans should be allowed to contract only with marketing and lead generation companies that CMS approves, the report noted, and CMS should set a fixed fee for all MA plan enrollments that is indexed to inflation and not toMedicare program enrollment growth.