insurance

Beware Medicare fraud risk

Highlights
  • Open enrollment periods increase fraud risk for seniors.
  • Government offers help through SHIPS program.
  • Federal law prohibits door-to-door solicitation.

Stanley Adams wouldn't trade Medicare for any other type of health insurance.

"Nothing beats Medicare," says Adams, 77, sitting in the billiard room of a senior center in Garfield, N.J.

Adams -- or "Ace," as his friends call him -- loves Medicare because he can choose his doctor and knows his coverage is accepted at virtually every health care facility.

Despite Adams' satisfaction with Medicare, he and other beneficiaries have a chance to make any needed adjustments to their coverage during the period from Nov. 15 to Dec. 31. These six weeks sometimes are referred to as the "annual election period."

During this time, beneficiaries can change prescription drug plans, enroll in a private health plan for the first time, switch from one private health plan to another, or move from a private health plan to original Medicare. Any new choices go into effect on Jan. 1.

The task of changing coverage may overwhelm some seniors.

"It's a very confusing time," said Kim Holland, the Oklahoma insurance commissioner and an executive committee member of the National Association of Insurance Commissioners. "You have a lot of different choices."

Unethical agents sometimes take advantage of this confusion. They try to persuade Medicare clients to switch their coverage to plans that may not be appropriate.

As a result, some Medicare beneficiaries may become victims of fraud.

Fraud is a widespread problem

Some say the root of the fraud problem is a financial incentive built into Medicare Advantage, a federal program created through the 2003 Medicare Modernization Act.

Medicare Advantage plans are government-sponsored, but sold through private companies. The government pays a subsidy to insurance companies for every new Medicare Advantage member enrolled.

Joseph Kuchler, spokesman for the Centers for Medicare and Medicaid Services, said the federal payments allow most Medicare Advantage plans to offer services and reduced co-payments and premiums not available under traditional Medicare.

"The idea is to provide beneficiaries with choices," Kuchler said.

Medicare Advantage offers several pluses. Participants generally receive more benefits than seniors who choose the original Medicare plan. For example, Medicare Advantage plans often include Medicare prescription drug coverage, which is only available through private health insurance companies.

One key disadvantage of Medicare Advantage is that your choice of doctors and hospitals may be restricted.

The advent of Medicare Advantage reversed a trend of declining numbers of people getting Medicare benefits through a private vendor. The number of Medicare beneficiaries enrolled in private plans nearly doubled from 5.3 million in 2003 to 10.1 million in July 2008, according to the Henry J. Kaiser Family Foundation in Washington, D.C.

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As part of Medicare Advantage, federal law establishes cost "benchmarks." If a private plan submits a bid to provide Medicare benefits at a cost below the benchmark, the federal government pays 75 percent of the difference to the insurance company offering the plan, Kuchler said.

These federal payments offer a financial incentive for private health insurance companies to enroll more people, according to David Lipschutz, staff attorney for California Health Advocates, a nonprofit public advocacy organization focused on Medicare issues.

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