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When Medicare introduced Part D coverage to pay for prescription drugs in 2006, it gave seniors a golden opportunity to save money -- and crooks a golden opportunity to steal it.
The law offers Medicare beneficiaries a bewildering array of new health-insurance options. They can now choose from dozens of Part D prescription-drug plans to supplement Medicare, or they can opt out of traditional Medicare and enroll in a Medicare Advantage plan to get both medical and drug coverage from a private insurer. All of the new choices have resulted in "an immense amount of confusion," says Micah Roderick, of the Illinois attorney general's office. They've also led to an epidemic of fraudulent sales practices, ranging from sales abuses to criminal activity:
To reap big commissions, some insurance agents sell seniors Medicare Advantage plans without explaining the limitations, and even sign people up without their knowledge.
Posing as Medicare representatives, unscrupulous agents use Part D to get a foot in the door -- or even into a whole senior high-rise building. Then they tout a slew of high-priced insurance policies, including annuities, life insurance, gap coverage for Medicare Advantage and other products that people may not need.
Once they have personal information about their victims, some of these renegade agents steal their identities.
In other cases, regulators have uncovered fraud rings selling fake drug-discount cards and bogus coverage for home health care. It's a huge racket, says Paul Greenwood, head of the elder-abuse prosecution unit for the San Diego district attorney's office. "These crooks realize there's money to be taken from elderly victims looking for a way to save on health-care costs."
Medicare Advantage rip-off
Medicare Advantage plans can be an attractive solution for many seniors. But such plans are also ripe for fraud because the government gives private insurers generous subsidies to sign people up.
To grab a piece of the action, insurers pay agents hefty commissions. Typically, agents earn $60 to $80 for each person they enroll in a Medicare Part D prescription-drug plan. But they get a whopping $400 to $500 for enrolling someone in a Medicare Advantage plan, according to a report by the Medicare Rights Center and California Health Advocates. "It's a quick one-time sale, and it's a lot of money," says Oklahoma insurance commissioner Kim Holland, who has been cracking down on Medicare Advantage sales abuses. The result may be a hard sell, with agents pushing Medicare Advantage rather than Part D. At worst, those commissions may be an incentive to commit fraud.
Barbara Jean Davis, 72, and her husband, Esty, 75, who live in Wilmington, N.C., had been covered by Medicare and retiree health benefits through Barbara's former employer, DuPont. Their premiums and co-payments were reasonable, and without the coverage, Esty, who suffers from a number of ailments, would have had to pay hundreds of dollars a month for his medications.
About a year ago, Barbara was contacted by an insurance agent offering a Humana Medicare Advantage policy, subsidized by the government, with a zero-dollar premium. Suspicious but curious, Barbara invited the agent to her home. In the middle of his pitch, Barbara and Esty received a phone call and found out that one of their best friends had suffered a heart attack.
Distracted, Barbara tried to get rid of the salesman. But he persuaded her and Esty to sign papers that would give them a "head start" should they decide to buy the Humana policy later. "He made it sound like we hadn't signed up for anything yet," says Barbara.
But the next time she ordered Esty's prescription, the pharmacist told her the DuPont insurance was no longer in effect. The agent "had canceled my insurance and signed me up with Humana without my say-so," says Barbara.
She didn't pursue action against the agent, focusing instead on getting her previous coverage back. Barbara canceled the Humana plan and sought help from Pat Pane, a specialist in medical-claims assistance. It still took four months for the Davises' Medicare and DuPont coverage to be reinstated.
Egregious as it sounds, the Davises' experience isn't uncommon. In Georgia, for example, "several individuals are facing criminal prosecution, a number of others are under investigation, and a special task force is dealing with this issue," says state insurance commissioner John Oxendine.
Easy pickings
One issue, says Oxendine, is that the law makes it surprisingly easy to enroll someone fraudulently in a Medicare Advantage plan. With most insurance products, you know you're purchasing something because you have to pay a premium, says Oxendine. But you can enroll in a Medicare Advantage plan without writing a check because the federal government can pay the premium for you. Explains Oxendine, "If I had certain information about you, I could sign you up for Medicare Advantage and be paid a commission, and you wouldn't know it until you filed a claim."
In some cases, insurance agents who had an individual's Social Security or Medicare number signed him or her up without ever laying eyes on their "client." Says Oxendine: "We've even found cases of dead people being enrolled in Medicare Advantage plans."
In another ploy, individuals are asked to sign a paper ostensibly to let an agent get credit with his boss for making a sales pitch; in reality, they're signing up for the product. Some agents have enrolled individuals by using signatures from the sign-in sheet at a free-lunch seminar, or by posing as agents from Medicare, says David Lipschutz, of California Health Advocates.
If you discover that you (or your parent) have been fraudulently enrolled in a Medicare Advantage plan, contact your State Health Insurance Assistance Program (go to www.shiptalk.org for local links). Counselors can help you determine your next step. Now is a perfect time to act; if you already have a Medicare Advantage plan with drug coverage, you have until March 31 to switch to another plan...
Also contact your state insurance department and attorney general's office, which can punish agents for sales abuses. "We've arrested agents and publicized it," says Oxendine. "If you hear about somebody being handcuffed and put into a patrol car, it does have a deterrent effect."
