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Testimony on

Medicare Advantage and Medicare Part D Programs

by

America’s Health Insurance Plans

Before the

National Association of Insurance Commissioners

Subgroup on Medicare Private Plans

September 11, 2007

I. Introduction

I am Alethia Jackson, executive director of federal affairs for America’s Health Insurance Plans (AHIP). AHIP is the national association representing approximately 1,300 health insurance plans that provide coverage to more than 200 million Americans.

Our members serve most beneficiaries in both the Medicare Advantage and Medicare Part D prescription drug programs. They have a long history of providing high quality health coverage to Medicare beneficiaries and are strongly committed to the long-term success of the Medicare Advantage and Part D programs. Our members also participate in other public programs and offer a broad range of products in the commercial marketplace.

We appreciate the strong interest of the National Association of Insurance Commissioners (NAIC) in the Medicare Advantage and Part D programs, as demonstrated by the establishment of the NAIC Subgroup on Medicare Private Plans to participate in the ongoing dialogue among policymakers about these programs. We are aware that the states have raised concerns about the oversight of Medicare Advantage and Part D plans, and we believe there should be stronger federal-state collaboration in certain areas without imposing duplicative and burdensome regulatory structures on the programs. We also are working with the Centers for Medicare & Medicaid Services (CMS) to strengthen federal program rules in areas that have been highlighted by the states, including broker/agent conduct. Today, we are focusing our testimony on three key areas:

• Trends in the Medicare Advantage and Part D programs, including the significant value they are delivering to beneficiaries;

• Actions our industry is taking, in collaboration with CMS and other partners, to ensure that beneficiaries are appropriately protected in the marketing process; and

• Steps for further improving the regulation and oversight of the programs.

Before examining these issues, we want to briefly emphasize that Medicare Advantage plans and Medicare Part D prescription drug plans have a number of unique characteristics that distinguish them from other health insurance products available to Medicare beneficiaries.

Medicare is a national program intended to serve all beneficiaries under the same rules – regardless of where they live – and provide the same beneficiary protections in all 50 states. The Medicare Advantage and Part D programs allow individuals to receive their Medicare benefits through private plans. Consistent with Medicare, Medicare Advantage and Part D programs have a national focus, in that they provide Medicare benefits to beneficiaries in all 50 states. By contrast, under Medicaid, each state establishes its own eligibility rules and benefit packages within broad federal guidelines.

Another unique feature of the Medicare Advantage and Part D programs is that they are supported by a combination of federal funds and beneficiary premiums. This differs from other health insurance coverage that individuals may have, such as Medicaid, which is jointly funded by the federal and state governments, and private insurance such as Medigap, where policies are supported by beneficiary premiums without any federal or state funding. Additionally, the Medicare Advantage and Part D programs also provide beneficiaries the option of choosing multi-state or regional plans. Although these plans cross state lines, they offer the same benefits and premiums for all enrollees.

II. Trends in Medicare Advantage and Part D Plan Participation

Recognizing the NAIC’s strong interest in protecting beneficiaries, we believe it is important to closely evaluate the track record of the Medicare Advantage and Part D programs. The Medicare Advantage and Part D programs offer Medicare beneficiaries a wide range of choices to meet their varying needs and circumstances. Notwithstanding some fluctuation in the Medicare Advantage market at the beginning of the program, following the enactment of the Medicare Modernization Act of 2003 (MMA), there has been stability in plan choices and strong growth in beneficiary enrollment.

To date, approximately 8 million beneficiaries – accounting for nearly 20 percent of all beneficiaries nationwide – have enrolled in Medicare Advantage plans and are receiving comprehensive, high quality, affordable coverage with benefits and innovative services that go well beyond the coverage offered by the Medicare FFS program. Overall, the Medicare Advantage program has experienced an enrollment increase of more than 50 percent since 2003.

Meanwhile, in the second year of the Part D program, approximately 24 million Medicare beneficiaries are directly enrolled in Part D plans and another 7 million have prescription drug coverage through an employer plan that is partially supported by the Part D program.

Surveys Demonstrate Beneficiary Satisfaction

Numerous surveys show that a large percentage of the Medicare population is pleased with the new Part D program and the benefits it is delivering. The positive attitudes of Medicare beneficiaries toward the Part D program are reflected in surveys sponsored by AHIP, the Medicare Rx Education Network, the Washington Post/ABC News, AARP, Medicare Today, JD Power and Associates, the Wall Street Journal, and the Kaiser Family Foundation.

Each of these surveys confirm that notwithstanding some implementation problems that occurred in early 2006, a significant majority of Medicare Part D enrollees are having a positive experience with their new prescription drug benefits. These surveys clearly show that most beneficiaries are satisfied with the program, are saving money on their prescription drugs, are not experiencing problems, and would recommend the program to others.

AHIP’s most recent Part D survey[1], conducted by Ayres, McHenry & Associates, found that 70 percent of self-enrolled beneficiaries would recommend that others sign up for the new Medicare prescription drug benefit and that 88 percent have had no problems using the new benefit.

The success of the newly revitalized Medicare Advantage program is highlighted by the findings of another AHIP survey[2], released in March 2007, regarding the important role Medicare Advantage plans play in providing health security to Medicare beneficiaries. This survey found that 90 percent of beneficiaries enrolled in Medicare Advantage are satisfied with their coverage overall. Other findings show that a large majority of beneficiaries are satisfied with the quality of care they receive (93 percent), the number of doctors from which they can choose (92 percent), the benefits they receive (89 percent), the coverage they receive for preventive care (87 percent), their out-of-pocket costs (80 percent), and the coverage they receive for prescription drugs (76 percent).

This survey also shows that 35 percent of beneficiaries – including 62 percent of low-income beneficiaries – enrolled in Medicare Advantage say they would skip some of the health care treatments they currently receive if the option of choosing a Medicare Advantage plan was taken away. Another 42 percent say they would pay higher out-of-pocket costs if the option of choosing a Medicare Advantage plan was taken away.

The Value of Medicare Advantage to Beneficiaries

The creation of the Medicare Advantage program has provided valuable opportunities for seniors and Americans with disabilities to benefit from the integrated systems of care, chronic care initiatives, and other innovations that health insurance plans have developed to improve patient care and enhance the overall quality of life for their members. The average Medicare beneficiary is likely to have two or more chronic illnesses. Moreover, studies show that 23 percent of Medicare beneficiaries have five or more chronic conditions and that these beneficiaries account for two-thirds of Medicare spending.[3] Recognizing that many Medicare beneficiaries suffer from multiple chronic conditions – such as diabetes, heart disease, cancer, asthma, and depression – Medicare Advantage plans meet a critical need by offering care coordination and management for diseases that commonly afflict these individuals.

This coordinated approach to health care delivery stands in stark contrast to the fragmented care beneficiaries receive in the Original Medicare program. A study cited in a June 21 article[4] in the Wall Street Journal noted that the typical Medicare beneficiary sees seven different doctors each year, with those in the top 25th percentile (i.e., those with the most chronic conditions) seeing an average of 16 different doctors annually.

Recognizing the need for better coordination and early intervention, health insurance plans have played a leadership role in developing strategies and programs to encourage prevention and evidence-based care to improve patient care for persons with chronic conditions. Our members are focused not only on ensuring that patients with chronic conditions live longer – but also helping them live healthier lives, with fewer symptoms, so they can fully participate in the activities they enjoy.

The effectiveness of these initiatives was highlighted in a recent report[5] by the California Association of Physician Groups (CAPG), which states: “It is the experience of more than 150 physician groups in California and the 59,000 physicians who are part of these groups that they are able to provide better health care to their patients who are in Medicare Advantage plans than those in traditional Medicare.” While discussing the specialized services that are needed for patients with chronic conditions, the report states that “these care management services are possible only in the context of the MA program and are virtually non-existent in traditional Medicare.”

In addition to improving patient care for chronic illnesses, the Medicare Advantage program provides many additional benefits that are not included in the Original Medicare Part A and Part B benefits. According to CMS, Medicare Advantage plans are providing enrollees with, on average, savings of $1,032 annually – through improved benefits and lower out-of-pocket costs – compared to what they would pay in the Original Medicare program.[6] This translates into aggregate savings of approximately $8 billion annually. Examples of the additional benefits Medicare Advantage plans provide to beneficiaries include:

• Protection against out-of-pocket costs: Ninety-three percent of all beneficiaries nationwide have access to Medicare Advantage plans that provide protection against out-of-pocket costs for Medicare-covered (non-drug) benefits of $2,500 or less. This protection is not available in the Original Medicare program. In addition, 55 percent of beneficiaries nationwide have access to plans with out-of-pocket limits of $1,000 or less.

• No cost sharing for preventive screening: All Medicare beneficiaries have access to a Medicare Advantage plan that does not require cost sharing for screenings for breast cancer, cervical cancer, and prostate cancer.

• Extra benefits not available in Original Medicare: Medicare Advantage plans are widely available that provide hearing, vision, and other benefits that the Medicare program does not offer. For example, all Medicare beneficiaries can choose from a Medicare Advantage plan that covers hearing benefits. Over 98 percent of beneficiaries can enroll in a Medicare Advantage plan offering preventive dental benefits.

• Comprehensive prescription drug benefits: Almost every Medicare beneficiary can choose from a Medicare Advantage plan that provides protection in the Part D coverage gap. Almost 90 percent of beneficiaries can choose a Medicare Advantage plan that provides Part D benefits for no additional premium. In addition, CMS has reported that beneficiary premiums for MA-PD plans are about $7 lower on average than for PDP plans in 2007, and will average $11 lower in 2008.

Research studies indicate that these additional benefits are particularly important to low-income and minority Medicare beneficiaries, especially those who fall just short of qualifying for Medicaid. In February 2007, AHIP published a study[7] showing that Medicare Advantage plans are the most popular option for beneficiaries with annual incomes between $10,000 and $20,000. Beneficiaries in this income category generally are not eligible for Medicaid and are less likely than higher income beneficiaries to have employer-sponsored retiree benefits – meaning that Medicare Advantage may be their only option for comprehensive, affordable coverage.

Other key findings of the AHIP study include:

• 49 percent of Medicare Advantage enrollees in 2004 had incomes below $20,000;

• among minority (non-white) beneficiaries in Medicare Advantage, 68 percent had incomes below $20,000, while 70 percent of African-American and Hispanic Medicare Advantage enrollees had incomes below $20,000; and

• in areas where Medicare Advantage plans were offered, 40 percent of low-income Medicare beneficiaries not enrolled in Medicaid or employer-based coverage chose a Medicare Advantage plan.

These findings demonstrate that Medicare Advantage plans are important to many minority beneficiaries and many low-income beneficiaries who cannot afford the high out-of-pocket costs they would incur under the Original Medicare program. These vulnerable beneficiary populations clearly benefit from the Medicare Advantage program and would be negatively impacted if these options were not available to them.

The Value of Medicare Part D to Beneficiaries

Part D prescription drug plans are exceeding expectations by offering more comprehensive benefits and lower premiums than were originally anticipated. According to CMS[8], beneficiaries who previously did not have drug coverage saved an average of $1,200 in 2006 by enrolling in Part D plans. For millions of Medicare beneficiaries – particularly those who have low incomes with no other source of drug coverage – this coverage ensures that they receive the medications they need at an affordable price.

According to a 2007 report[9] by IMS Health, Medicare Part D enrollees who previously had no drug coverage paid an average of 60 percent less for each prescription drug in 2006 than they had paid the previous year. Those who previously had other drug coverage received average savings of 17 percent on each prescription through their new Part D plans.

Plan sponsors are offering a range of prescription drug plans with high quality coverage, many of which go well beyond the minimum requirements of the MMA. Rather than establishing a one-size-fits-all benefits package, the Part D program creates incentives for plan sponsors to design different benefit packages that address beneficiaries’ needs with respect to cost, coverage, and convenience. As a result, beneficiaries in all 50 states have the option of choosing at least one Part D plan that covers a portion of the costs in the coverage gap. In 41 states, beneficiaries have at least one MA-PD option with coverage in the gap and a zero Part D premium[10].

Presented with these options, the vast majority of beneficiaries have selected benefit packages that differ from the minimum requirements set by the MMA. CMS data show that the standard defined benefit was selected by only 19 percent of beneficiaries in stand-alone prescription drug plans and by only five percent of beneficiaries in Medicare Advantage plans with prescription drug benefits last year8. All other beneficiaries are choosing plans that offer enhanced benefits or alternatives to the standard benefit.

The value offered by Part D plans also can be seen in the lower-than-expected premiums that beneficiaries are paying. CMS recently announced[11] that the average Part D premium paid by beneficiaries in 2008 will be approximately $25 per month. This is roughly 40 percent less than the original estimate of $41 per month for 2008. Beneficiary premiums in 2006 ($23) and 2007 ($22) also are significantly lower than the original estimates.

The Value of Competition in Medicare

In discussing the success of the Medicare Advantage and Part D programs, it is important to recognize that the program includes incentives that generate savings for the Medicare program and for taxpayers.

Under the competitive structure of the Medicare Advantage program, plans return 25 percent of the savings to the federal government when they bid below the benchmark; the remaining 75 percent is used to provide beneficiaries improved cost savings and supplemental coverage. According to CMS, the 25 percent that plans return to the government totals approximately $26 per beneficiary per month[12], or approximately $3 billion in 2007 alone.

Competition also is an important feature of the Part D program. Because beneficiaries have multiple choices, sponsors of Part D plans are forced to compete based on their ability to offer benefit packages that are most appealing to beneficiaries. This element of competition is critically important in encouraging innovation and holding down costs in the Medicare Part D program. In fact, the Congressional Budget Office (CBO)[13] announced earlier this year that the projected costs for the Part D program over the next seven years (2007-2013) are now $136 billion lower than the original estimate. CBO reported that a major factor contributing to the lower costs is that bids submitted by plan sponsors for 2007 under the program’s competitive structure are about 15 percent lower than the 2006 bids.

Looking forward, we believe it is important for policymakers to preserve the competition, choice, and innovation that have played such a crucial role in delivering savings and value to our nation’s Medicare beneficiaries. Reforms that limit the ability of Medicare Advantage and Part D plans to respond to consumer preferences and changes in medical science would stifle market innovation and undermine the success plans have achieved in delivering high quality, affordable coverage to Medicare beneficiaries.

III. Medicare Marketing Practices--Strengthening Beneficiary Protections

The NAIC and others have raised concerns about the marketing of Medicare Advantage and Part D plans. While data indicate that a high percentage of Medicare beneficiaries are satisfied with their coverage under the Medicare Advantage and Part D programs, AHIP and our members believe that it is unacceptable for any beneficiary to be adversely affected by inappropriate marketing conduct. AHIP members are strongly committed to providing clear and accurate information to beneficiaries to assist them in making sound decisions about their options in the Medicare Advantage and Part D programs. This includes a strong focus on continuous re-evaluation of marketing practices and responsiveness to consumer complaints in order to ensure that beneficiaries are well-served by brokers, agents and plan marketing staff who are involved in Medicare marketing and sales activities.

In May 2007, AHIP’s Board of Directors adopted a set of industry principles for protecting beneficiaries as they consider enrolling in the Medicare Advantage and Part D programs and ensuring that brokers, agents and plan marketing staff meet new qualifications and requirements. These initiatives build upon the extensive rules CMS already has established for marketing and enrollment activities by plan sponsors.

The AHIP Board statement includes safeguards and protections our members are adopting in the following areas:

Qualifications for Brokers, Agents, and Plan Marketing Staff: Plan sponsors are specifying the qualifications that brokers and agents and plan marketing staff must meet to market Medicare Advantage and Part D plans, clearly communicating these qualifications, and consistently applying them. Plans are using multiple strategies for accomplishing this, including:

➢ Performing background checks, including verification of required state licensure;

➢ Checking applicable databases for documentation of prior serious misconduct;

➢ Obtaining documentation substantiating that threshold test scores have been achieved on core competency training and ensuring that continuing education credits are available for licensed brokers, agents, and plan marketing staff. We have urged CMS to establish standards for training that require that specific topics must be addressed in detail including:

- Medicare fee-for-service eligibility and benefits;

- Medicare health plan and Part D plan types and structure, including the key differences between HMOs, PPOs, PFFS plans, SNPs, and Cost plans; and

- Permissible, prohibited, and required marketing practices, including non-discrimination rules and the prohibitions against door-to-door marketing; and

➢ Requiring brokers and agents and plan marketing staff to obtain threshold test scores on plan-specific training that provides detailed information about the plan types and benefits offered by the plan sponsor.

Annual Recertification and Targeted Retraining: Plan sponsors are establishing requirements for annual recertification for brokers and agents and plan marketing staff, such as achieving threshold scores on annual recertification tests and repeating core competency training, as needed. Plan sponsors also will address topics requiring special attention that may arise throughout the year through strategies such as targeted retraining and provide updated information on an ongoing basis through a variety of mechanisms including e-mails, web sites, or other means.

Threshold scores for annual training serve the goal of ensuring that brokers and agents and plan marketing staff regularly demonstrate their knowledge or expertise so they can fully and clearly inform beneficiaries about the details of their coverage options. Moreover, the targeted retraining ensures that brokers and agents and plan marketing staff will promptly receive in-depth information on specific issues that arise during the year.

Enrollment Safeguards: Plan sponsors are including steps in their marketing and enrollment processes to verify beneficiaries’ intent to enroll and understanding of the plans they are electing. Strategies for verification include:

➢ adding to the plan’s enrollment application attestations by the beneficiary or his/her legal representative or guardian and the broker, agent, or plan marketing staff that address the beneficiary’s understanding of the plan structure and benefits; and

➢ conducting oversight such as post-enrollment outbound calls from the plan sponsor to the beneficiary or his/her legal representative for face-to-face enrollments or systematic monitoring of recorded telephonic enrollments.

We understand that beginning this fall CMS is requiring that Medicare Advantage private fee-for-service (PFFS) plans make calls to beneficiaries who have enrolled to verify their intent to enroll and to ensure that they understand the coverage they have chosen. We also support requiring the additional safeguard of adding to all plans’ enrollment applications an attestation to be signed by the beneficiary and the broker/agent/plan marketing staff that addresses the beneficiary’s understanding of the plan structure and benefits and how they compare to the beneficiary’s previous Medicare coverage. Further, we support requiring post-enrollment outbound calls from the plan sponsor to beneficiaries selecting all products for face-to-face enrollments and systematic monitoring of recorded telephonic enrollments. These measures will help to avoid misunderstandings about whether beneficiaries actually intended to enroll in a plan and to reaffirm that beneficiaries understand the coverage offered by the plan they choose.

Monitoring Compliance: Plan sponsors are establishing processes for tracking and analyzing individual broker and agent and plan marketing staff performance in such areas as beneficiary satisfaction, rapid disenrollments, and complaints. This ongoing process of evaluation allows plan sponsors to promptly identify conduct that merits urgent investigation, such as provision of incorrect, misleading, or inaccurate information; unauthorized contact or home visit; fraudulent enrollment submission; or intimidation.

Investigating and Responding to Complaints: Plan sponsors are establishing processes for rapidly investigating complaints and taking immediate and decisive action when complaints are verified, including requiring inbound calls by the broker, agent, or plan marketing staff and beneficiary before each application is completed, re-qualification, suspension, or termination. We have strongly urged CMS to work with the NAIC to develop a uniform process and criteria for plan sponsors to report serious misconduct by licensed brokers, agents, and plan marketing staff in a timely fashion to state agencies overseeing broker and agent licensure.

Compensation: Compensation arrangements must comply with CMS Medicare Marketing Guidelines, including withholding or withdrawing payment for rapid disenrollments. We have strongly supported compensation requirements in the CMS Medicare marketing guidelines which are designed to reward brokers and agents when beneficiaries are satisfied with their choices and penalize brokers and agents who use marketing tactics that result in beneficiaries signing up for a product that they do not fully understand – and then disenrolling a short time later after learning more about the plan. We will take additional steps to ensure that beneficiaries understand the program they have joined and that brokers and agents have correctly answered their questions.

Provider Outreach: Plan sponsors are making available to physicians, hospitals and other providers detailed information about plan structure, benefits, rules and payment terms of the plans they offer. Plan activities will include strategies to educate providers prior to market entry and ongoing efforts to build and maintain relationships to serve plan members. CMS should increase outreach to educate providers about the types of Medicare Advantage plans and expand availability of CMS materials for providers.

On another front, last year AHIP released a new guide/workbook for helping Medicare beneficiaries make informed decisions about their prescription drug plan options. We received positive feedback from beneficiaries, advocates and other partners, and have released an updated version of this guide for 2008.

This consumer-friendly guide is designed to educate beneficiaries about the Part D program, help them examine their personal priorities and preferences, and assist them in navigating through their options. The guide begins with a “top 10” list of things beneficiaries should know about the new prescription drug benefit. It then guides beneficiaries as they focus on whether stand-alone prescription drug coverage or a Medicare Advantage health plan that combines hospital and doctor benefits with prescription drug coverage will work better for them. The guide, available at guide, includes sections on each type of coverage, with accompanying worksheets that encourage beneficiaries to set priorities and compare plans.

AHIP’s beneficiary guide complements a variety of resources CMS has developed – including the website – to inform beneficiaries about their plan choices in the Medicare Advantage and Part D programs.

IV. Medicare Advantage and Part D Regulation and Oversight

We appreciate the NAIC’s strong interest in the regulation and oversight of Medicare Advantage and Part D plans and believe that increased collaboration and communication between CMS and the NAIC is critical as implementation continues to move forward. AHIP and our members support a closer working relationship between federal and state regulatory agencies with respect to Medicare issues. We also support retaining and strengthening exclusive federal oversight of the Medicare Advantage and Part D programs.

Nationwide consistency of federal oversight: AHIP’s support for continued exclusive federal oversight of the Medicare Advantage and Part D programs is founded on the national character of the Medicare Advantage and Part D programs and infrastructure that is in place to strengthen program performance. Just as Medicare beneficiaries have the assurance that the Original Medicare program is implemented at the national level through a comprehensive system of federal rules, we believe that Medicare beneficiaries enrolled in Medicare Advantage and Part D plans should also have confidence that these plans are regulated through federal rules that are interpreted and applied by the federal government throughout the country. Marketing and other program requirements that apply nationwide to all Medicare Advantage and Part D plan sponsors are already in place through federal regulations, contract requirements, and guidance. Ensuring that the same standards are applied in the same way to all plan sponsors can only be achieved through centralized oversight. Providing for interpretation of standards and enforcement by each of the 50 states and Puerto Rico would undermine this goal and is likely to result in inconsistent interpretation and application of standards and hinder rather than strengthen program oversight to the detriment of beneficiaries.

Impact on multi-state stand-alone PDPs, Regional PPOs and multi-state MA organizations: We have serious concerns about provisions of H.R. 3162, the “Children’s Health and Medicare Protection Act of 2007,” which address regulatory and administrative issues in the Medicare Advantage program in a manner inconsistent with these principles. This bill, approved by the U.S. House of Representatives on August 1, proposes a new regulatory approach that would combine federal and state enforcement of program requirements and reduce the current scope of federal preemption. We oppose this approach because, based upon past experience, we believe that the practical consequences of these changes would be highly problematic, hindering rather than improving program administration and making the program less, rather than more, responsive to beneficiary interests.

Specifically, H.R. 3162 requires the Secretary of the U.S. Department of Health and Human Services (the Secretary) to request that the NAIC develop model regulations addressing specific Medicare Advantage and Part D activities and, after promulgation of the NAIC-proposed requirements in federal regulations, provides for state as well as federal enforcement. This mix of federal and state authority would have the unintended consequence of subjecting Medicare Advantage and Part D plan sponsors to conflicting interpretations of their obligations. This was the case in the past when federal and state regulators conducted reviews of Medicare+Choice marketing materials. In some cases, Medicare+Choice organizations received conflicting direction to revise proposed materials with the result that the production of materials was delayed until a federal/state dialogue could take place and agreement could be reached by federal and state officials. Such delays disadvantaged beneficiaries by hindering their access to information needed for informed decision-making about available plan options and for understanding plan rules.

Further, two valuable improvements that CMS has put in place to promote timely dissemination of beneficiary materials would be jeopardized – the opportunity for Medicare Advantage and Part D organizations to submit template materials for approval in advance of bid approvals and subsequently insert benefit and premium information; and the opportunity for organizations to use CMS model materials without modification and receive expedited (10 day) review. Both of these mechanisms for maintaining oversight of the content of materials while streamlining the approval process would become impractical if the materials are also subject to state review.

The multi-state structure of the Part D and Regional PPO programs and multi-state participation of a number of Medicare Advantage organizations raise additional concerns about an approach founded on both federal and state regulation. Many stand-alone PDPs and Regional PPOs are required to offer the same benefits and premiums and provide the same beneficiary service and protections across multi-state regions. State-by-state review has the potential to produce differing interpretations of rules across states that could result in state-by-state variations in beneficiary materials for the same plans and state-by-state variations in the application of other program standards. These variations could force stand-alone PDPs and Regional PPOs to invest substantially greater resources in achieving implementation while reducing rather than adding value for beneficiaries by reducing the funds available to enrich benefits. Similar problems would arise for organizations with MA contracts in multiple states that are now overseen through a federal lead-region process that coordinates across CMS regions.

Additionally, the effective and efficient administration of these programs relies, in part, on a high level of interaction between Medicare officials and other federal agencies such as the Social Security Administration — which collects Part B premiums and helps identify individuals who are eligible for the low income subsidy for Part D. The added complexity of state as well as federal participation in the oversight process would produce challenges for all parties.

Stronger federal requirements:

Action that has already been initiated by CMS and Medicare Advantage and Part D plan sponsors demonstrates that a solid foundation is in place for strengthening federal program rules and performance. AHIP and our members have taken a leadership role in responding to concerns that have been raised about broker and agent conduct. In addition to AHIP’s detailed Board Statement on this topic, seven Medicare Advantage plan sponsors voluntarily agreed in June to a suspension of private fee-for-service plan marketing in order to demonstrate accelerated implementation of additional CMS requirements that will apply to all Medicare Advantage private fee-for-service (PFFS) plans for 2008. These requirements include:

• Providing to CMS a list of all representatives marketing a PFFS product and authorizing CMS to make that list available to State Insurance Departments upon request;

• Demonstrating through passage of a written test broker and agent understanding of the Medicare program and the product they are selling;

• Including CMS-approved disclaimer language on all advertisements, enrollment materials, and materials used at sales presentations by employees or contracted brokers and agents;

• Making outbound education and verification calls to all beneficiaries requesting enrollment in a PFFS plan to ensure that they understand the plan rules;

• Providing enrollees with a complete description of plan rules, including detailed information on a provider’s choice whether to accept plan terms and conditions of payment;

• Providing to CMS lists of planned marketing and sales events sponsored by contracted brokers and agents as well as by plan sponsors; and

• Conducting provider outreach and education to ensure providers have access to plan terms and conditions of payment and that plan staff are readily accessible to assist providers with questions concerning the plan.

To build on these efforts, we support enactment of a number of provisions of the CHAMP Act in the form of increased requirements for federally implemented program oversight, rather than parameters for development of NAIC model regulations. Although several of these requirements are included in existing CMS guidance and are already applicable to Medicare Advantage and Part D plan sponsors or will be applicable for 2008, we believe that the importance of these beneficiary safeguards merits making them statutory. Specifically, we support adoption of additional requirements for federal oversight that would include:

• Adding more detailed requirements for conducting Medicare Advantage and Part D plan marketing activities including prohibiting unsolicited door-to-door marketing and prohibiting the cross-selling of non-health care-related products;

• Limiting marketing in certain settings (e.g., health care settings and educational events);

• Requiring beneficiaries to sign off on specific disclosures included in the application prior to enrolling;

• Requiring plan sponsors to call beneficiaries to confirm their intent to enroll; and

• Requiring brokers and agents to be trained and tested on specified content areas before marketing plans to beneficiaries.

In addition, AHIP is urging CMS to move forward with an initiative to make available to state insurance commissioners information about which brokers and agents are under contract to market Medicare Advantage and Part D plans. This initiative is focused on establishing a standard set of data elements, a nationally uniform reporting mechanism, and making the information available through the CMS web site to contribute to the ongoing efforts of state insurance commissioners to oversee the conduct of licensed brokers and agents. This effort is closely linked to our support for a collaborative initiative with CMS and the NAIC to establish uniform processes and criteria for reporting broker, agent, and staff misconduct to state agencies. These pro-active measures build upon the industry-wide initiatives outlined in AHIP’s May 2007 Board statement.

At the same time, we support the NAIC and CMS’ efforts to establish a national structure, based on a Memorandum of Understanding (MOU) that numerous states have signed, to promote information sharing between the states and CMS. Looking forward, we believe this approach provides a strong foundation for similar cooperation between CMS and the states on other issues of concern.

V. Conclusion

Thank you for the opportunity to testify on these important issues. AHIP and our members look forward to continuing a dialogue with the NAIC, CMS, the broker/agent community, beneficiary groups, and other key stakeholders on further strengthening the Medicare Advantage and Part D programs.

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[1] Tracking Survey of Seniors Who Self Enrolled in the Medicare Prescription Drug Benefit Program, Ayres, McHenry & Associates, September 8-12, 2006

[2] National Survey Of Seniors Regarding Medicare Advantage, Ayres, McHenry & Associates, Inc. and The Glover Park Group, February 26 - March 2, 2007

[3] Testimony by Gerard Anderson, Ph.D., Bloomberg School of Public Health, before Senate Special Committee on Aging, May 9, 2007 .

[4] How Many Doctors Does It Take to Treat a Patient?, Peter B. Bach, Wall Street Journal, June 21, 2007, Page A17

[5] The Experience of California Physicians in the Medicare Advantage and Traditional Medicare Programs, Executive Summary, California Association of Physician Groups, June 2007

[6] Keynote Address by CMS Administrator Mark McClellan before the AHIP Medicare Conference (September 11, 2006).

[7] Low-Income and Minority Medicare Beneficiaries in Medicare Advantage Plans, AHIP, February 2007

[8] Centers for Medicare & Medicaid Services, Part D Medicare Prescription Drug Benefit Fact Sheet, January 2007

[9] IMS Health, Medicare Part D: The First Year, 2007

[10] Centers for Medicare & Medicaid Services, Part D Medicare Prescription Drug Benefit Fact Sheet, January 2007

[11] CMS, Medicare Part D Plan Premiums for 2008 Show Continued Impact of Strong Competition, August 13, 2007

[12] Keynote Address by CMS Administrator Mark McClellan before the AHIP Medicare Conference (September 11, 2006).

[13] CBO, The Budget and Economic Outlook: Fiscal Years 2008-2017, January 2007

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