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.
Testimony of Abby L. Block
NAIC Private Plans Subgroup
September 11, 2007
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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 multipronged 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
Testimony of Abby L. Block
NAIC Private Plans Subgroup
September 11, 2007
Page 3 of 5
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:
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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:
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Summaries of CMS program audits;
Civil monetary penalty letters;
Intermediate sanction letters (e.g., freezing marketing and enrollment activity);
Testimony of Abby L. Block
NAIC Private Plans Subgroup
September 11, 2007
Page 4 of 5
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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 salesevent-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.
Testimony of Abby L. Block
NAIC Private Plans Subgroup
September 11, 2007
Page 5 of 5
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.