MedPAC Says Agents Make More Money Enrolling Clients in Medicare Advantage

A report released Thursday showing how health plan agents receive hefty financial incentives to steer beneficiaries into Medicare Advantage (MA) plans — rather than traditional Medicare and Medigap — prompted several members of the Medicare Payment Advisory Commission (MedPAC) to call for dramatic changes in the enrollment system.

“I think we have a system here … that is inherently flawed,” said Commissioner R. Tamara Konetzka, PhD, a public health sciences professor at the University of Chicago, during a MedPAC public meeting. “It will never be a good system for beneficiaries [even if] we can regulate it to death … It can’t be fixed, because agents are going to recommend things in their own interest and the interest of the companies they work for.”

“I say, blow it all up. We need a new system that actually works for beneficiaries,” she added.

Commissioner Lynn Barr, MPH, of the Barr-Campbell Family Foundation in Lahaina, Hawaii, said she recently enrolled in Medicare herself and found the process extremely confusing. “It seems to me that we’re not doing beneficiaries justice by putting them through this process. It’s not in their best interest and it’s too slanted against them.”

Ledia Tabor, MPH, a MedPAC senior analyst who delivered part of the report, noted that “agents have a financial incentive to enroll beneficiaries” in MA prescription drug plans.

She explained that an agent selling an MA plan to a new beneficiary makes $626 in commissions that year, but only $450 for selling a Medigap plan with a Part D drug plan. If the beneficiary stayed in that MA plan, the agent would continue to receive commissions of $313 for each subsequent year, but only $225 for each year the beneficiary stayed in the Medigap and Part D plans.

“Over a 5-year period, an agent would make $528 more for enrolling a beneficiary into an MA plan rather than a Medigap with a Part D plan,” she said.

Agents can also receive bonuses from their health plan companies for meeting enrollment benchmarks, administrative payments for marketing, or payments for conducting risk assessments of their clients’ health, said Jennifer Druckman, JD, MHA, a MedPAC principal policy analyst.

That prompted several commissioners to wonder if those health risk assessments may help identify chronic conditions that, when the client is enrolled in an MA plan, would generate higher risk-adjusted monthly payments for the plans from Medicare funds.

When not paired with actual care and services recorded in patients’ charts, plans’ high-risk categorization of patients’ health conditions has resulted in numerous accusations of upcoding fraud from the HHS Office of Inspector General.

Health risk assessments “could definitely change the amount that the insurance company is being paid,” said Commissioner Greg Poulsen, MBA, senior vice president at Intermountain Healthcare in Salt Lake City.

Tabor replied, “We have heard that insurers may work with brokers to do health risk assessments that could identify beneficiaries that would need further clinical review to identify conditions that could be used to affect future payments.”

Paul Masi, MPP, MedPAC’s executive director, noted that agents’ assessments by themselves wouldn’t mean the health plan would automatically place the beneficiary in a risk category that would result in higher payments to the plan.

“It may serve as information to prompt further clinical diagnoses, but at this point, we don’t know very much about actually how they’re being used, and so we want to tread cautiously,” he said.

Another issue noted in the report is that when a beneficiary wants to be placed in traditional Medicare with a supplemental Medigap plan, agents also have an incentive to place them in the most expensive one, because their commission — a percentage of their monthly premium — is higher.

Commissioners also said some plans have stopped paying agents any commission for enrolling in a Part D plan, which beneficiaries with Medigap need to provide drug coverage.

“This is intentionally or not a way to kill traditional Medicare,” said Commissioner Larry Casalino, MD, PhD, MPH, of Weill Cornell Medical College in New York City. “Without [prescription drug] plans, traditional Medicare will cease to exist.”

Commissioner Cheryl Damberg, PhD, MPH, a health plan policy expert at RAND Corporation in Santa Monica, California, summed it up: “The incentives are wrong on so many different levels.”

Some of the commissioners noted that their own parents, and even themselves, are so baffled by the complexity of choices and decisions that often beneficiaries don’t even know what type of plan they are in.

Barr noted that the system of using agents should be replaced by “a public system to help beneficiaries.” She added that the money that plans pay brokers, much of which comes from Medicare, should “pay employees of the government to actually do this work.”

At one point in the discussion, Commissioner Brian Miller, MD, MBA, MPH, of Johns Hopkins University in Baltimore, objected to the idea that older adults can’t handle the process and need independent help.

“We really need to be careful in our conversation here because we’re incorrectly assuming that Medicare beneficiaries have no agency and need a paternalistic central authority to help them make decisions,” he said. They make “other large purchases with complex trade-offs assisted by financially interested third-party intermediaries; for example, home purchases or new or used cars.”

But that prompted pushback from several commissioners who said Medicare is nothing like a used car.

Poulsen noted that in many cases, beneficiaries think they are talking to a Medicare representative when they talk with a broker or agent working for a for-profit plan.

“It may not be allowed by law, but it happens,” he said. “I don’t disagree with your premise that it could work. I disagree with your premise that it does work.”

Barr also took issue with Miller’s remarks. “If I’m buying a car, I can look at the price. I can compare, right? I cannot compare these plans without help. I’m a Medicare commissioner who is recently enrolled in Medicare, and this is a whole different thing.”

Several commissioners pointed to references in the report to a study from the Commonwealth Fund from 2022 that showed that one in three beneficiaries used an insurance agent to enroll in a plan, but only 5% used the State Health Insurance Assistance Program (SHIP), a nationwide network of federally funded volunteer and paid counselors who help beneficiaries make informed Medicare choices.

Commissioner Gina Upchurch, RPh, MPH, founder and executive director of Senior PharmAssist in Durham, North Carolina, who is a SHIP counselor, said the program is “woefully underfunded.” Nationally, the program receives just $55 million annually from the federal Administration for Community Living, according to the MedPAC report.

And even with their annual required training, counselors can’t keep up, she said. “A lot of them are quitting because it has gotten so complex.”

MedPAC Chair Michael Chernew, PhD, of Harvard Medical School in Boston, said that the session on MA and enrollment was the first of many to be held throughout the year. “We are at the beginning of this whole work stream.”

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