October 18, 2023

At Hearing, Warren Slams Giant Medicare Advantage Insurers for Using Taxpayer Dollars to Trick Patients and Deny Care

“Giant Medicare Advantage insurers are overcharging the government, they are peddling false promises, and then they're turning around and denying care to seniors and people with disabilities.”

Hearing Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) called out giant Medicare Advantage (MA) insurers for using deceptive marketing tactics to lure seniors into the wrong plans and drown out competition from smaller insurers that may offer better coverage. Senator Warren called on the Centers for Medicare and Medicaid Services (CMS) to act within the fullest extent of its authority to crack down on MA insurers that game the system to overcharge the government and to ensure insurers publish accurate data on patient care and out-of-pocket costs. 

Transcript: Medicare Advantage Annual Enrollment: Cracking Down on Deceptive Practices and Improving Senior Experiences
U.S. Senate Committee on Finance 
Wednesday, October 18, 2023

Senator Elizabeth Warren: This week, millions of people will begin the process of choosing a Medicare plan through open enrollment. One option is to stay with traditional Medicare. The other is to enroll in one of the many Medicare Advantage plans, or MA, as people often refer to it, which allows these for-profit health insurance companies to offer Medicare coverage.

In theory, these private companies should compete on the merits of the coverage they offer. Instead, big MA insurers, with a war chest of advertising money, use deceptive marketing tactics to lure seniors into the wrong plans. These companies exaggerate benefits, they claim that seniors can keep seeing doctors that are actually out-of-network, and they deceive seniors about how much they’ll spend out-of-pocket for care.

This is harmful to seniors, and that’s a big part of what this hearing today has been all about. But I want to focus on a different point. It also drowns out competition from smaller insurers, even when they offer a better product. 

So, Ms. Hoglund, you are the CEO of Security Health Plan. This is a small, community-based plan that participates in Medicare Advantage. So, let’s start with, how does your marketing budget compare to the marketing budget for, say, UnitedHealth or Cigna?

Krista Hoglund, Chief Executive Officer of Security Health Plan of Wisconsin: Well, I obviously don't know the specifics of what that number might be. But I can tell you, it’s, it's pennies on the dollar fraction, fractional of what we would have to spend. 

Senator Warren: So everybody's out there trying to sell their plans to people, and some folks have got huge marketing budgets, and you've got a little sliver of that. So where did these big insurance companies get the budget for all of this advertising? 

Well, think about the structure here. The government pays MA plans a set amount of money per beneficiary. If a beneficiary is sicker, then the amount of money the government pays can go up, and then whatever insurers don’t spend on care, they get to keep in profits. Now, as a result of this structure, giant insurance companies have built entire businesses around making beneficiaries look as sick as possible by stuffing their medical records with as many diagnosis codes as possible, which means the government pays the insurers more money. This is called “upcoding,” and, government watchdogs have uncovered hundreds of billions of dollars in overpayments that result from insurance companies gaming the system like this. 

Ms. Hoglund, are Medicare Advantage plans permitted to spend the money they make off this upcoding on advertisements?

Ms. Hoglund: There's some amount of discretion in how the, the dollars can be spent. I do want to say, I really do appreciate this question and how you framed it. And we would agree with you that we should be competing on the merits of coverage, not on, you know, the financial incentives. We certainly believe at Security Health Plan or around care, not coding, with care as the focal point. 

Senator Warren: I am very glad to hear this because my understanding is these plans can spend about 15% of the money they get from the federal government, these are your tax dollars at work, on overhead and marketing. And nothing prohibits them from using the payments they get from gaming the system to actually draw more people in so they can keep that practice up. 

So the way I think of this is the Medicare Advantage plans that game the system get billions of dollars in overpayments, they then turn around and use that money to flood seniors with deceptive ads to lure them to join their plans. 

But there's one more twist in this. Once people sign up once the companies make them look as sick as possible. These giant insurance companies refuse to deliver on the care that they actually promised. Now in 2019, the Health and Human Services Inspector General found that Medicare Advantage insurers improperly denied payment for care in roughly one out of five claims, leaving seniors with piles of unpaid medical bills. And just two months last year, the giant insurance companies Cigna used a computer algorithm to instantly deny payment for 300,000 claims, even though trained doctors are supposed to make those determinations. 

Miss Hoglund, giant Medicare Advantage insurers are overcharging the government, they are peddling false promises, and then they're turning around and denying care to seniors and people with disabilities. So this is why CMS has taken steps to start to crack down on deceptive marketing and unfair denials of care. Do you think that the government's proposals go far enough?

Ms. Hoglund: No, I think there is more opportunity. And again, that's why we're here today. One of the things that we specifically have suggested around the marketing tactics that are currently out there and the additional payments that we see going to FMOs or middlemen is to really require some additional transparency, so that it's very clear what all the dollars are and how they're flowing and understanding who might be the the bad actors, so that those can be addressed specifically. And then really thinking about, once we understand how the money flows, how do we put maximum, true maximum caps on some of these items, so that they can continue to be leveraged for financial gain?

Senator Warren: Well, I very much appreciate it, very much appreciate your help in trying to expose these problems today and appreciate the help from all of you. 

You know, it's simple. Responsible insurers don't lie and cheat seniors to make a buck. But it's clear that the big Medicare Advantage insurers aren't playing by the same set of rules as some of the smaller insurers. And I appreciate the steps that CMS has already taken, but they need to go further by making the Medicare Advantage insurers publish accurate data on patient care and out of pocket costs, and cracking down on practices like upcoding. Doing all of this to the full extent of their authority.