By Larry Shoemaker, CEO

By now, you know I am a Medicare insurance broker with a prior background in internal audit. And that I have certain concerns about the direction (s?) of our healthcare industry.

Our current healthcare system is an amazing mix of governmental agencies and private sector organizations. Each with specific responsibilities and sources of funding created by Congress. However, the responsibility of regulation is distorted by the same governmental agencies being deliverers of healthcare in various ways. This muddle reflects an ongoing struggle over whether private sector or government can be the better deliverer of healthcare services.

Now let me focus on one piece of the muddle – Medicare. Medicare is overseen primarily by CMS (Centers for Medicare and Medicaid Services) and Social Security. A famous source of bureaucratic tug-of-war. And, I have stories!

Today, I want to address the upcoming CMS 2025 Medicare Advantage and Part D Final Rule. There is great tension about how much of the proposed version will be implemented. It is possible there could be substantial changes to the structure of the the sales channels. Much of this is justified by “how agents do business”. Which may lead to substantial cuts in actual and perceived compensation of agents. However, I posit that this is a cunning way to cut costs without disturbing the real pig trough.

There are two articles that frame this discussion; https://medicareadvocacy.org/medicare-advantage-proposed-payment-for-2025-and-other-updates/ and https://www.mercurynews.com/2024/03/28/new-report-examines-how-much-hospitals-give-back-compared-to-tax-savings/

In the first article there is a sentence “It is well established that MA plans are significantly overpaid relative to what traditional Medicare spends on a given beneficiary.” It continues with “facts” about the amounts of overpayments – without explaining the how and why. Then continues with discussion about how insurance companies “complaints about higher utilization of services and grumbling about payment rates,” Let’s examine this more closely. Traditional Medicare only covers a core set of medical costs, unlike Medicare Advantage plans which provide supplemental services such as dental, vision, over-the-counter pharmacy products and much more. And all of this is subject to CMS final approval of these plans each year. Also, the question of oversight of expected costs is not discussed.

Now oversight in government is like a magic show – what you see is not what is happening. There are many articles addressing CMS audits, the overpayments they find and the “amazing” decisions to reduce recovery “by CMS”. Remember, government agencies are motivated to generate revenue for the same reason corporations are – the stockholders. And who are CMS’ stockholders? Congress.

However, the second article I cited is a pointer to the real source of the problem of “government waste”. There it discusses how two prominent hospital systems received tax breaks for “financial assistance and community investment,”, yet spent very little of the tax savings on the programs they were expected to implement. It took the non-profit Lown Institute to identify the systemic abuse by non-profit hospitals of the special tax break. Where was Congress and the CBO? Are they passing out tax breaks without monitoring compliance with the purpose of the tax break?

Of course, Congress howls with outrage when an agency reveals “serious overpayments” to insurance companies. The Kaiser Foundation has published several articles recently about CMS uncovering overpayments, then reducing the collections of the overpayments. Mysterious decisions.

These decisions cannot be casual. There are too many people watching agencies such as CMS. Yet, a common story is how Congresspersons pick up the phone and speak with agency personnel. Often for the good, sometimes not.

I mentioned working as an internal auditor – at the County of Santa Clara and Stanford Research Institute. We had interagency training where we met federal and state auditors. I can tell you the feds are tough. Spooky tough. They will stand by the results of their work. And they are smart cookies.

Coming back to the Medicare 2025 Advantage Final Rule – we have a lot to be concerned about. If changes to compensation of agents eliminates much or all the payments to Field Marketing Organizations, much of the support infrastructure for independent agents evaporates like a magic trick.

Already, the 2024 Medicare Final Rule has laid the groundwork for auditing agents on very measurable criteria. And lack of compliance has whatever consequences the regulators choose.

So where are we now? Are we prepared for what may come – or shiveringly waiting to see what may happen? If this gets your attention, read my other articles at https://clinebell.com/posts/