[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
             PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                              JUNE 26, 2007

                               ----------                              

                           Serial No. 110-60


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



            PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 26, 2007

                               __________

                           Serial No. 110-60


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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            PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE
?

                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts          Ranking Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       FRED UPTON, Michigan
BART GORDON, Tennessee               CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois              NATHAN DEAL, Georgia
ANNA G. ESHOO, California            ED WHITFIELD, Kentucky
BART STUPAK, Michigan                BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York             JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                    Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MICHAEL F. DOYLE, Pennsylvania       STEVE BUYER, Indiana
JANE HARMAN, California              GEORGE RADANOVICH, California
TOM ALLEN, Maine                     JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois             MARY BONO, California
HILDA L. SOLIS, California           GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas           LEE TERRY, Nebraska
JAY INSLEE, Washington               MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina     MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

                 Bud Albright, Minority Staff Director

                                  (ii)
              Subcommittee on Oversight and Investigations

                    BART STUPAK, Michigan, Chairman
DIANA DeGETTE, Colorado              ED WHITFIELD, Kentucky
CHARLIE MELANCON, Louisiana              Ranking Member
    Vice Chairman                    GREG WALDEN, Oregon
HENRY A. WAXMAN, California          MIKE FERGUSON, New Jersey
GENE GREEN, Texas                    TIM MURPHY, Pennsylvania
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington               JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex 
    officio)
  


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
 Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     4
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     5
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     7
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, opening statement.................................     8
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     9
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    10

                               Witnesses

David Lipschutz, staff attorney, California Health Advocates.....    12
    Prepared statement...........................................    14
Kathleen Healey, director, State Health Insurance Assistance 
  Program, Alabama Department of Senior Services.................    39
    Prepared statement...........................................    41
Lee Harrell, deputy commissioner, Mississippi Insurance 
  Department.....................................................    46
    Prepared statement...........................................    49
Brenda Clegg-Boodram, Judiciary House............................    63
  Accompanied by Mary Royal, Grady Hammonds, Edith Williams, and 
    Jennifer Mezey, supervising attorney, Legal Aid Society of 
    the District of Columbia
    Prepared statement...........................................    65
Francis Soistman, executive vice president, government and 
  individual plans, executive vice president, health plan 
  operations, Coventry Health Care, Incorporated.................    84
    Prepared statement...........................................    87
Peggy Olson, Healthwise Insurance Planning, LLC..................   104
    Prepared statement...........................................   106
Gary Bailey, vice president, Medicare operational performance, 
  Wellcare Health Plans, Incorporated............................   112
    Prepared statement...........................................   113
Abby Block, director, Center for Beneficiary Choices, Centers for 
  Medicare and Medicaid Services.................................   133
    Prepared statement...........................................   136
    Answers to submitted questions...............................   238
Kim Holland, commissioner, Oklahoma Insurance Department.........   147
    Prepared statement...........................................   149
Jim Poolman, commissioner, North Dakota Insurance Department.....   150
    Prepared statement...........................................   153

                           Submitted Material

``Medicare Private Fee-for-Service Plans: A Market Driven 
  Blueprint for Enhancing Value,'' by John Gorman and Jean 
  LeMasurier.....................................................   191
James S. Theiss, chief privacy officer, Human, Incorporated, 
  letter of June 2, 2006 to Mr. Jim Poolman......................   195
Humana, Incorporated news release of June 5, 2006................   213
``After the Goldrush: the Marketing of Medicare Advantage and 
  Part D Plans,'' California Health Advocates, January 2007......   215
``Methods Used by Insurers Are Questioned,'' by Robert Pear, the 
  New York Times, May 7, 2007....................................   234
Subcommittee exhibit binder......................................   257


            PREDATORY SALES PRACTICES IN MEDICARE ADVANTAGE

                              ----------                              


                         TUESDAY, JUNE 26, 2007

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Bart 
Stupak (chairman) presiding.
    Members present: Representatives Stupak, Green, Schakowsky, 
Inslee, Dingell, Whitfield, Walden, Murphy, Burgess, and 
Barton.
    Staff present: Kristine Blackwood, Joanne Royce, Paul Jung, 
John Sopko, Scott Schloegel, Voncille Hines, Kyle Chapman, 
Peter Spencer, Alan Slobodin, Matt Johnson, and John Stone.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. This hearing will come to order. Today we have 
a hearing entitled ``Predatory Sales Practices in Medicare 
Advantage Programs.'' Each Member will be recognized for 5 
minutes for an opening statement. I will begin.
    Our hearing will examine the program known as Medicare 
Advantage which provides insurance options for Medicare 
beneficiaries. One of its primary objectives was to provide 
Medicare beneficiaries a wide array of managed-care choices. 
However, the proliferation of private Medicare insurance plans 
has come at a price. Investigators for this committee have 
verified countless stories of deceptive sales practices by 
insurance agents who prey upon the elderly and disabled to sell 
them expensive and inappropriate private Medicare plans. These 
shameful marketing practices targeting our most fragile and 
vulnerable citizens are the subject of today's hearing.
    As often happens in the process of our investigation, 
usually just before this subcommittee holds a hearing, those 
being investigated make changes in their practices to appear as 
though they are addressing the problems at hand. On June 15, 
seven major health insurance companies, two of which are 
represented here today, voluntarily agreed to stop marketing 
one type of Medicare Advantage plan, the Private Fee-for-
Service plan, in response to complaints about deceptive sales 
practices including forged signatures and enrollment of dead 
people.
    Today we will explore how CMS and the insurance industry 
reached the point where they had to call a moratorium on 
marketing the Private Fee-for-Service Medicare Advantage plans. 
We will also hear about the real life consequences of 
fraudulent marketing practices. Unfortunately, many seniors are 
coaxed into plans that don't adequately meet their health care 
needs. They don't understand that if they sign up for Medicare 
Advantage they no longer have the benefits of traditional 
Medicare coverage.
    In some instances the Private Fee-for-Service plans being 
sold to these individuals result in reduced coverage and higher 
out-of-pocket expenses that seniors on a fixed income cannot 
afford. And what most people realize about the Medicare 
Prescription Drug Improvement Modernization Act of 2003, MMA as 
it is referred to, is that it created part D of Medicare and 
launched prescription drug plans run by insurance companies.
    But what MMA also did was boost the payments to insurance 
companies operating managed care alternatives to traditional 
Medicare and called the private plans Medicare Advantage. 
Before MMA the Government was paying the private plans 95 
percent of the cost of traditional Medicare. Now the Government 
is paying them 112 to 119 percent of traditional Medicare.
    Medicare Advantage is aptly named. It is richly funded to 
out-compete or privatize traditional Medicare. The launching of 
part D in combination with the boost in payments to Medicare 
Advantage plans has resulted in a dizzing array of choices for 
seniors and disabled persons.
    In Houghton, MI, one of the small towns in my district in 
the Upper Peninsula, Medicare beneficiaries have 54 
prescription drug plans to choose from, plus 14 Medicare 
Advantage plans. And that is nothing compared to other parts of 
the country. For instance, in Miami there are at least 57 
prescription drug plans and 55 Medicare Advantage plans 
available. A May 2006 report by AARP documented the problems 
faced by seniors sorting through this maze showing wide-spread 
confusion and even anxiety over the new Medicare Advantage and 
prescription drug plans.
    At what point does consumer choice become meaningless? When 
seniors and their families sit down at a kitchen table to 
figure out what health care program grandma or grandpa need, 
they should not have to hire an accountant to help make the 
right choice for them. Now we have a glut of private plans that 
end up dispatching fleets of sales agents racing each other to 
get to the local retirement community, assisted living facility 
or senior center first. We have telemarketers and insurance 
agents competing for commissions, prizes and trips to Las Vegas 
based on who sold the most policies in the shortest time.
    These abusive practices under Medicare Advantage are very 
similar to the rampant sales problems witnessed with the launch 
of the Medigap Insurance in the 1980s. The regulatory model 
which eliminated Medigap sales fraud should be applied to 
Medicare Advantage. As with Medigap plans, MA plans should be 
standardized, States should be able to regulate Medicare 
Advantage companies and agents, and insurers should be held 
accountable for their agents' actions.
    Our first panel will explore the extent of the problem and 
the consequences of deceptive sales. We will hear first from 
David Lipschutz, an attorney for the California Health 
Advocates. California has had a lengthy experience with 
Government managed care plans and has often served as the role 
of the canary in the coal mine. We are especially grateful 
today for the testimony of three victims of predatory sales 
practice. Ms. Barbara Clegg-Boodram, a resident of Judiciary 
House in Washington, DC, home to a large number of seniors and 
disabled persons a few blocks from here, will testify on behalf 
of her fellow residents, Edith Williams, Mary Royal and Grady 
Hammonds. Mrs. Williams, Ms. Royal and Mr. Hammonds were 
victimized by an agent who failed to properly explain the 
consequences of their enrollment in Medicare Advantage plans.
    Next, we will hear from Kathleen Healey, the director of 
the Alabama State Health Insurance Assistance Program, SHIP. 
SHIP is a national program in each State that offers one-on-one 
free counseling and assistance to people on Medicare. Also, on 
the first panel is Mr. Lee Harrell, deputy commissioner of the 
Mississippi Insurance Department. Mr. Harrell will share with 
us some of the practical problems State regulators face when 
they investigate deceptive practices under the current 
structure.
    We will hear from the insurance industry in our second 
panel, Fran Soistman from Coventry Health Care and Gary Bailey 
from WellCare Health Plans will testify about the efforts of 
their companies to combat marketing of abuses. They are joined 
by Ms. Peggy Olson, a licensed insurance agent who has 
specialized in Medicare coverage since 1985. We will explore 
with this panel the role of the independent agents, companies' 
relationship with field marketing organizations, general agents 
and sub agents, and some of the inherent challenges these 
relationships pose. We hope each of you will share with us your 
candid assessments and your constructive ideas.
    Finally, we will hear from the Government regulators, Ms. 
Abby Block, the director of the Center for Beneficiary Choices 
at CMS, will testify about CMS oversight of Medicare Advantage. 
She is joined by Jim Poolman, the commissioner of North Dakota 
Insurance Department, and Ms. Kim Holland, the commissioner of 
the Oklahoma Insurance Department. These witnesses will discuss 
steps their departments are taking to investigate questionable 
practices and to warn seniors in their States so they can avoid 
being victimized.
    The financial windfall to the insurance industry 
attributable to the Medicare Advantage program has been likened 
to the gold rush. We are bound to hear today that the industry 
and CMS have zero tolerance for deceptive sales practice. What 
we need, however, is zero abuse. Why do so many elderly and 
disabled continue to be enrolled through confusion, if not 
trickery, in unsuitable and ultimately costly plans? Hopefully, 
our hearing will answer some of the questions.
     Next, for an opening statement I would like to turn to my 
friend and ranking member of the committee, Mr. Whitfield from 
Kentucky.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Well, Chairman Stupak, thank you very much 
for holding this hearing on problematic sales practices of 
Medicare Advantage plans. And I certainly want to thank at the 
outset Ms. Clegg-Boodram, Ms. Royal, Mr. Hammonds and Mrs. 
Williams, who have come this morning to talk about their 
personal experiences with a a deceptive insurance agent just a 
few blocks from the Capitol trying to sell them a Medicare 
Advantage plan.
    Today we are focused on Medicare beneficiaries who have 
been unscrupulously coaxed, misled or fraudulently signed on to 
plans that they do not really want and we appreciate this panel 
helping us understand this problem.
    It is important to expose problems and gaps in the 
oversight of Medicare Advantage sales practices and to insure 
ultimately that the Medicare Advantage program operates to its 
full potential as a new benefit for Medicare beneficiaries. The 
program cannot reach that potential when there is a cloud of 
distrust over the plans created by disreputable sales 
practices.
    The problems we will examine today have occurred amidst a 
large and rapid spread of Medicare Advantage plans across the 
country. More than 8 million people are enrolled in private 
Medicare Advantage plans, up from about 5 million just 3 years 
ago when the Medicare Modernization Act took effect. The 
expansion has been particularly rapid for the Private Fee-for-
Service version of these plans which accounted for some 500,000 
of the 700,000 new enrollees in 2007 so far. These Private Fee-
for-Service plans now serve some 1.5 million beneficiaries, 
strong evidence of their popularity. Because these plans are 
not as constrained as their managed-care counterparts are by 
the need for contracted doctor networks, they have spread 
particularly fast in the rural areas and heretofore have not 
had much access to what Medicare Part C offers in terms of 
extra benefits and services, lower premiums and the like. Yet 
it is with these plans that State and Federal officials, 
consumer advocates and the health plans themselves have seen 
the large number of sales problems.
    Medicare Advantage relies heavily upon insurance agents to 
educate people about these plans to assess the beneficiaries 
needs and to assure they know what they are purchasing. With 
this in mind I would like to hear specifically from 
representatives of the two insurance plans testifying today 
about how they encourage their agents to make sales but at the 
same time ensure that the enrollees are fully informed. How do 
they train and monitor their agents? How have they reacted to 
reported problems?
    We should bear in mind that much of this growth in these 
plans--of sales--has occurred in the shadow of the launching of 
the Medicare drug benefit. With the intense focus on the drug 
benefit there may have been less than necessary Federal 
attention on the growth of the Advantage plans and attendant 
need for informing physicians and the public about the new 
offerings.
    Mr. Chairman, this hearing comes at an opportune time. The 
Centers for Medicare and Medicaid Services has issued a new 
marketing guideline for the upcoming year and I understand that 
State regulators and CMS have been working to improve oversight 
of the marketing practices and most recently seven insurers who 
account for 90 percent of the Medicare Private Fee For Service 
market announced a moratorium on sales until CMS certifies they 
have instituted new marketing provisions.
    This is a good juncture for the subcommittee to examine why 
the sales abuses have occurred and whether the new measures 
will be sufficient to reduce the problems as we move forward to 
the future. And I yield back the balance of my time.
    Mr. Stupak. I thank the gentleman.
    For an opening statement, the chairman of the full 
committee, Mr. Dingell, opening statement, sir.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr Dingell. Mr. Chairman, this is a very important hearing 
and I thank you and commend you for having it.
    I will be blunt. The Medicare Advantage marketing practices 
that have come to the attention of this committee are 
disgraceful in the extreme. Frankly, they have come as no 
surprise to those of us who have long questioned the structure 
of the Medicare Advantage Program and they tend to be a 
replication of some of the charges we have seen of some of 
these same people doing the same thing with regard to Medigap 
which this committee had to act upon years ago to stop the same 
kind of outrageous practices again by some of the same people.
    I would note that we ought to ask why are Medicare payments 
for Medicare Advantage beneficiaries on the average 12 to 50 
percent higher then those that Medicare pays for beneficiaries 
enrolled in traditional Medicare. We were told that this is 
going to be a device which will bring competition and reduce 
costs. Why should the vast majority of traditional Medicare 
beneficiaries pay higher monthly premiums to subsidize Medicare 
Advantage enrollees? And that total subsidy is something on the 
order of $700 million that is flowing to a group of people 
through the hands of a group of insurance companies to others 
who oft times are more affluent.
    Wasn't privatization supposed to help contain costs and 
allow for more efficient delivery of quality health care? In my 
view Medicare Advantage is not containing costs and there is no 
evidence that it is providing value to beneficiaries 
commensurate with its greater cost. On the contrary, as we will 
hear today the very structure of Medicare Advantage creates 
conditions ripe for swindling the elderly and disabled. The 
real beneficiaries of these programs are the insurance 
companies, which are profiting splendidly. Humana is reportedly 
earning 66 percent of its net income from sales of Medicare 
Advantage products this year.
    Should our Medicare Trust Fund be subsidizing the insurance 
industry? And, indeed, there is an interesting thing to note 
here. The Medicare Trust Fund is being depleted 2 years early 
by the events that we are discussing today. Clearly, the 
administration thinks so. The unprecedented overpayments to the 
insurance industry are part of the administration's agenda to 
privatize the Medicare system and they are being subsidized by 
overpayments of somewhere between 12 and 30 percent. Something 
that is totally unjustifiable and unsupervised. So far this 
privatization has neither saved money nor provided verifiable 
efficiencies. It has created some very interesting things. 
First, deep confusion over a ballooning array of plans, and 
second armies of sales agents competing for commissions, cash 
prizes, trips to Las Vegas for those who sign-up the greatest 
number of seniors in the shortest time.
    The industry will tell us that they need time to work out 
the kinks in the provision for bringing about more effective, 
more cost effective, and more coordinated care. But they have 
had decades to do this. It is undone, and I hope that Mr. 
Chairman, your labors thus far and that of the committee will 
help us move this matter forward.
    Private managed care options to traditional Medicare have 
been around since the creation of Medicare. With the 
introduction of the Medicare Plus Choice Act in 1997, Medicare 
Health Maintenance Organizations (HMOs) and Preferred Provider 
Organizations (PPOs) really took off. In order to encourage 
cost containment, private insurers were reimbursed between 95 
percent and 102 percent of the cost of traditional Medicare. A 
number of the better run Medicare managed care plans were able 
to offer additional benefits even at these lower 
reimbursements.
    But after an initial surge in growth many plans started 
withdrawing from the market citing inadequate payments from the 
Government even though they were turning in some fine profits. 
The administration responded in 2003 by throwing still more 
money at the insurers to prime the Medicare privatization pump. 
Insurers responded to the lure of big profits by launching a 
dizzying number and variety of Medicare Advantage plans.
    In addition to draining the Medicare Trust Fund, as I 
mentioned, by 2 years, more quickly, overpayments to the 
insurance industry serve as a pervasive incentive for insurance 
companies and agents to aggressively market their products 
without regard to the seniors' health, financial well-being or 
ability to deal with the kind of practices which we are seeing.
    Let us look at some of the things that the committee has 
heard. We have received evidence of shameful practices. What 
are they? Brokers signing up people with Alzheimer's and 
psychiatric disorders, brokers forging signatures, and signing 
up dead people, brokers telling people that Medicare sent them 
and that Medicare is being eliminated and they must sign-up or 
lose their health coverage.
    I want to thank our witnesses for appearing before us today 
to share with us some of the glaring problems with Medicare 
Advantage and possible solutions. And I look forward to working 
with you, Mr. Chairman, and members of the committee, not only 
to bringing this out but to correcting some of these scandalous 
abuses. Thank you.
    Mr. Stupak. Thank you, Mr. Chairman.
    Next, Mr. Green, for an opening statement, sir.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, for holding this 
hearing on predatory sales practices involved with the 
enrollment of Medicare beneficiaries in Medicare Advantage 
plans. While the notion of private Medicare contractors has 
been around since the 1970s participation in the Medicare 
Advantage Program has increased dramatically since Congress 
passed it. The Medicare Modernization Act, which significantly 
increased payments to Medicare Advantage plans in Harris 
County, TX, which Houston is a part of, along with seniors who 
want to participate in Medicare Advantage have to choose among 
37 different private plans. Unfortunately, the litany of 
choices creates a significant confusion among our seniors, 
confusion that enterprising agents have taken advantage of to 
enroll seniors unwittingly in various Medicare Advantage plans.
    In my State of Texas some of these questionable marketing 
practices include door-to-door marketing of these plans, which 
is illegal. We know in other States that agents have paired 
this door-to-door marketing request with a that a beneficiary 
fill-out a request for more information, a document that the 
beneficiary finds later was truly an enrollment form for a 
Medicare Advantage plan. Some of the tactics offered are so 
egregious that as part of these bait-and-switch routines their 
agents reassure seniors they will still be enrolled in Medicare 
and that their enrollment in a Medicare Advantage plan will not 
affect their Medicare coverage.
    These tactics involve the use of half-truths that seize 
upon the trust that is built for more than 40 years now between 
seniors and the Medicare Program. Medicare is a trusted brand 
name that seniors equate with balance, cost-sharing and open 
access to providers. After being duped in the Medicare 
Advantage plans many seniors now feel misled and frustrated. 
They can't necessarily see their family doctor they have 
trusted for decades and they can't do anything about it until 
the next open enrollment period.
    In Houston we are proud to be the home of M.D. Anderson 
Cancer Center, one of the top cancer centers in the Nation. 
Most cancer centers that are across the country do not accept 
Medicare Advantage plans yet the sales practice of bundling 
part D and part C plans has denied many of the seniors the 
access to these world-renown cancer centers. Unknowing 
beneficiaries find out too late that their part D enrollment 
included enrollment in a corresponding part C plan and their 
dis-enrollment from part B. In fact, Memorial Sloan-Kettering 
had to proactively send letters to its Medicare patients to 
educate them on the distinctions between parts B and C so that 
more beneficiaries wouldn't fall for those bundling tactics and 
lose their access to cancer care.
    The Texas Department of Insurance gets daily complaints 
about the marketing practices of Medicare Advantage plans. 
Unfortunately, the Medicare Modernization Act tied their hands 
and preempted State insurance commissioners from having 
enforcement authority over these practices. Unlike was 
mentioned earlier in Medigap coverage from decades ago, CMS 
doesn't have the time or the resources to adequately enforce 
consumer protections. If the recent agreements between CMS and 
seven Private Fee-for-Service plans are any indication, the 
agencies are relying on the industry to police itself. CMS in 
this particular program is in need of strong congressional 
oversight and I want to thank the chairman for making it a 
priority for our subcommittee.
    As a member of the Health Subcommittee I hope we can learn 
from this investigation and enact some much needed consumer 
protections for our Medicare beneficiaries so they can renew 
their trust in the Medicare Program. I look forward to hearing 
from our witnesses today and I thank you for sharing your 
experience. With that, Mr. Chairman, I will yield back my time.
    Mr. Stupak. Thank you, Mr. Green.
    Ms. Schakowsky, for an opening statement, please.

 OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you. Thank you, Mr. Chairman.
    First, I would like to associate myself with Chairman 
Dingell's remarks regarding overpayments to Medicare Advantage 
plans, even those that are not engaged in predatory marketing 
practices. Since the creation of Medicare Advantage plans in 
2003 and the subsequent ability to market those plans in 2005, 
there has been an explosion in the number of Medicare Advantage 
products on the market. This has brought serious new challenges 
to beneficiaries who must navigate the chaos of varying 
programs with different cost-sharing provisions. It has also 
posed serious questions about the State agencies ability to 
regulate the sales and marketing of these programs.
    Fast forward now to 2007 and you have got seven private 
insurers who cover the largest number of Private Fee-for-
Service beneficiaries voluntarily suspending their marketing 
programs from Medicare Advantage plans in light of serious 
reports of predatory sales practices. Something has gone 
terribly awry.
    Inappropriate sales practices, manipulation and coercion 
have no place in personal decisions about health care. For many 
people insurance agents rank right up there as a source of 
information about their Medicare plan options, that is why I 
have serious concern about States' lack of tools for regulating 
the insurance sales industry, particularly in light of accounts 
of our most vulnerable members of society being targeted.
    Dual-eligibles who are more likely to live alone or likely 
to suffer from mental or psychiatric disorders, and who are 
more likely to have higher levels of chronic diseases or 
serious disabilities are especially susceptible and 
particularly targeted by predatory sales practices. This is 
primarily due to their ability to switch plans on a monthly 
basis. These characteristics also make it all the more 
important that they maintain appropriate coverage throughout 
the year.
    As I suspect we will hear from our witnesses today the 
appalling sales practices employed by some of these bad actors 
can cause immeasurable damage to a person's financial 
stability, prospects for regaining coverage in the future and 
overall personal health and safety. I look forward to working 
with the subcommittee to end these practices once and for all. 
I think we need to look at the commission structure of the 
insurance industry sales industry, the wide variety among plans 
and most importantly the lack of authority and oversight 
granted to CMS to regulate sales agents and plan sponsors. This 
is a very timely hearing as the committee looks for ways to 
truly improve health care, efficiency and quality. And I truly 
want to thank the witnesses for being here today and look 
forward to hearing what you have to say.
    I yield back.
    Mr. Stupak. I thank the gentlelady.
    Mr. Burgess, opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, and thanks for 
calling this hearing. We are going to be gathering some 
information on potential abuses by insurance brokers and agents 
marketing Medicare Private Fee-for-Service and Medicare 
Advantage plans. And I think we are all struck by those who 
would either prey on the elderly or defraud the U.S. taxpayer. 
Those brokers and agents who violated the trust of their 
customers must be dealt with in a way that limits their ability 
to ever do that again.
    Medicare beneficiaries rely on information that these 
individuals provide to be accurate, they rely on it to be 
truthful as they evaluate the different health plans to meet 
their specific needs. When a broker or agent seeks financial 
gain by defrauding these customers, and these customers are our 
parents, they are our brothers or our sisters, they are our 
grandparents, when these agents seek financial gain by 
defrauding those customers they erode the trust that makes up 
the foundation of the Medicare Program.
    The American Association of Insurance Plans has recently 
set forth a new initiative that sets up the responsibilities 
that go beyond existing guidelines and make clear that health 
plans are committed to giving Medicare beneficiaries peace of 
mind. The American Association of Insurance Plans will work 
with the Centers for Medicare and Medicaid Services to 
implement new steps on training, retraining, monitoring to 
ensure compliance, including requiring beneficiary attestation 
on enrollment applications and other steps to confirm that 
beneficiaries understand the plan they have chosen. In 
addition, plans must strengthen the mechanisms to promptly and 
effectively address non-compliance, including working with an 
actual Association of Insurance Commissioners, the Center for 
Medicare/Medicaid Services, different beneficiary groups and 
broke organizations and insure that new uniform processes and 
criteria be adopted to report serious broker misconduct in 
these areas as well as misconduct by the agent or the plan 
employee.
    I am grateful that the industry has taken some proactive 
steps to address this issue. Whatever we do to reinforce this 
initiative the solution should not delegate authority to the 
various States because of the national characteristic of many 
of these plans. An idea that may have merit is to create a 
national database of brokers or agents that engage in predatory 
or fraudulent sales of plans. That way the plans know how to 
steer clear of certain individuals when contracting with 
independent brokers and agents. I also thank the witnesses for 
giving of their time in being with us today and providing 
valuable insight into this problem and, Mr. Chairman, I will 
yield back the balance of my time.
    Mr. Stupak. I thank the gentleman.
    Next I will turn to ranking member of the full committee, 
better known as the winning manager of the baseball team last 
night, Mr. Barton from Texas.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Well, thank you, Mr. Chairman, that was the 
best played game I would say in the last 20 years; no errors or 
very few errors and the Republicans caught the breaks at the 
right time. Praise the Lord, but it was a good game and 
Washington charities are about $90,000 richer as a consequence. 
You, as usual, played a very good game.
    I do appreciate you and Ranking Member Whitfield holding 
this important hearing on the Medicare Advantage Program. 
Medicare Advantage is an important part of Medicare. Congress 
has worked hard to expand the benefits to those who choose this 
particular type of program, and it looks like it is a very 
popular program since there are more than 8 million seniors who 
have enrolled in Medicare Advantage plans so far.
    Having said that no part of government is immune from 
responsible oversight. I believe that responsible oversight is 
important but it does not include second-guessing successful 
and popular programs to death or taking benefits away from 
Medicare beneficiaries who paid for them. I want to assure the 
enrollees in Medicare Advantage that their new benefits are not 
going to be taken away.
    I hope this hearing will be a means to strengthen the 
program and ensure those enrollees that they get the benefits 
that they have chosen as they enrolled in this particular type 
of Medicare Program. We have a real responsibility to prevent 
any program and its agents from preying on the weak and the 
vulnerable. To the extent that there are abusive sales 
practices in Medicare Advantage we should find them and we 
should stop them. Mr. Chairman, you and Ranking Member 
Whitfield are going to have my full support for a 
straightforward inquiry into what may be a very serious 
problem.
    Let me also note that I appreciate your efforts as chairman 
to focus this hearing on the consumer protection elements of 
Medicare Advantage marketing. Reports of any consumer practices 
among some sales agents are troublesome, especially when 
misleading or abusive sales tactics target the seniors, the 
poor and the disabled. If there are gaps in regulatory 
oversight or in our marketing guidelines or in our enforcement 
authorities we should fill them and we should do so in a 
bipartisan basis very quickly.
    Medicare Advantage has sought to harness the free market to 
improve what its beneficiaries can receive in terms of 
increased choice, increased competitive benefits, and different 
payment options. I think this is a good thing. Yet a free 
market approach does not mean a sales free-for-all where agents 
can have their will over the interests of the beneficiary. CMS 
has obligations, the health plans have obligations, and indeed 
even the sales agents have obligations to ensure consumers 
receive necessary information to make informed choices. Let me 
emphasize, we will hold to account those who fail the Medicare 
Advantage patient. And we are going to do that beginning in 
this hearing, Mr. Chairman. You will have the Republicans full 
support on that.
    There are areas that need attention. This is demonstrated 
by the health plans and CMS' own recent actions to put in 
disclaimers and to improve communication about what the plans 
are all about. It is a fair question why it took so long to do 
that. Why weren't problems like have happened anticipated? What 
else needs to be done?
    I am perplexed at some of the problems that I understand 
continue to exist. For example, Private Fee-for-Service plans 
are popular, people like them, they offer benefits that you 
cannot get in traditional Medicare. Private plans also are 
potentially more attractive then traditional Medicare managed 
care to doctors and hospitals because these plans pay at the 
same rates and even more in some cases then Medicare pays. This 
is a selling point to beneficiaries and should be to health 
care providers. So why does CMS continue to code these plans as 
HMOs in the common data file potentially causing physicians to 
turn beneficiaries away? This is not an insurance agent 
problem. This is a CMS problem and it needs to be fixed.
    I would like to echo you, Chairman Stupak, and Mr. 
Whitfield, to say that I am seeking constructive information 
today from all parties to identify problems accurately, be 
confident that appropriate measures are in place to reduce 
abusive sales practices. Again, Mr. Chairman and Mr. Whitfield, 
thank each of you for holding this hearing today and I look 
forward to hearing what the witnesses have to say.
    Mr. Stupak. Thank you, Mr. Barton.
    Well, that concludes the opening statements by Members. We 
have our first panel assembled. Mr. Lipschutz, an attorney with 
the California Health Advocates, Ms. Kathleen Healey, director 
of the Alabama State Health Insurance Assistance Program, Mr. 
Harrell, deputy commissioner of the Mississippi Insurance 
Department, Miss Brenda Clegg-Boodram, a resident of the 
Judiciary House housing complex here in DC, and you are 
representing your fellow residents, but they are all at the 
table. It is Ms. Royal, Ms. Mezey, you are an attorney on 
behalf of the residents of Judiciary House, correct, and Mr. 
Hammonds, correct, and Ms. Williams.
    Since you are all assembled, it is the policy of this 
subcommittee to take all testimony under oath. Please be 
advised that witnesses have their right under the rules of the 
House to be advised by counsel during their testimony and Ms. 
Mezey, I understand you are to provide that counsel to the 
residents there. OK. Does anyone else wish to be represented by 
an attorney or counsel here before they testify today? OK. As I 
said all testimony is taken under oath so I am going to ask you 
to rise and raise your right hand to take the oath. Ms. 
Williams, if you just want to sit there and just raise your 
right hand that will be fine.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect all witnesses answered 
in the affirmative so we will begin with opening statements. 
You have 5 minutes for opening statement. We have your opening 
statements so if you want to paraphrase or summarize that would 
be great. Mr. Lipschutz, we will start with you, please.

STATEMENT OF DAVID LIPSCHUTZ, STAFF ATTORNEY, CALIFORNIA HEALTH 
                           ADVOCATES

    Mr. Lipschutz. Chairman Stupak, Ranking Member Whitfield, 
and distinguished committee members, thanking you for giving me 
the opportunity to testify today. My name is David Lipschutz 
and I am a staff attorney at California Health Advocates, an 
independent, non-profit organization dedicated to education and 
advocacy on behalf of Medicare beneficiaries in California. We 
do this in part by providing technical assistance and training 
to the network of State health insurance programs known in 
California as HICAP. Our experience with Medicare is based in 
large part on our close work with the HICAPs and other consumer 
assistance programs that are on the front line assisting 
Medicare beneficiaries.
    We recognize that Medicare Advantage plans can be a 
suitable option for some people with Medicare, but as the 
Medicare Program has grown and become more complex during the 
last year and a half, consumers and consumer advocates have 
witnessed an alarming epidemic of abuse surrounding the sale of 
Medicare Advantage plans primarily, Private Fee-for-Service 
plans. In the next few minutes I would like to highlight some 
of the abusive practices we have seen and point out how CMS' 
recent cumulative response to misconduct will help but does not 
go far enough in curbing some of the root structural causes of 
misconduct.
    Medicare Advantage marketing misconduct ranges from 
outright fraudulent practices to the misrepresentation of plans 
due to agent ignorance or failure to ensure that consumers 
understand what they are enrolling in. Examples of predatory 
sales practices occurring in California and across the country 
include the following.
    Medicare beneficiaries are being signed-up for plans 
without their consent or knowledge through a variety of means 
including forged applications. Agents are using scare tactics 
to convince people to join plans such as saying you will lose 
your Medicaid unless you join, or are being lied to, such as 
Medicare is going private, you must pick a plan.
    Individuals who sought one type of product such as a PDP or 
a Medigap go to an agent and end up in a Medicare Advantage 
plan that they did not want. Individuals dually eligible for 
Medicare and Medicaid, who in most cases already have 
comprehensive benefits, are being targeted to enroll in plans 
that may not be suitable for them. And in one of the more 
common scenarios agents will make sales at senior or disabled 
housing facilities, either after dropping by unannounced or 
after presentations arranged under false pretenses. For 
example, agents will say they are from Medicare and want to 
talk about changes to the program without disclosing that they 
are in fact insurance agents selling a product.
    Damage that occurs as a result of marketing misconduct can 
range from access and continuity of care issues when new 
enrollees cannot find providers who will take their plan and 
forgo treatment as a result, to financial, including unexpected 
out-of-pocket costs or the loss of previously held insurance, 
such as retiree coverage. Undoing the damage for individuals 
can be challenging as plans can be unresponsive in obtaining 
relief to the Medicare Program can sometimes be delayed.
    CMS has recently responded to the overall problem of 
misconduct by implementing new requirements for Private Fee-
for-Service plans and announcing the voluntary suspension of 
marketing by certain Private Fee-for-Service plan sponsors. For 
our outstanding questions, perceived shortcomings and specific 
recommendations concerning these new requirements I will refer 
to our written testimony.
    In short, these new requirements will be helpful but they 
stop short of stemming the full-range of abuse we are seeing 
and they should be applied to all Medicare Advantage and part D 
prescription drug plan sales, not just Private Fee-for-Service 
plans. CMS action has culminated in the recent voluntary 
suspensions by certain plan sponsors. While this announcement 
has had a loud bark, it will likely have a soft bite as far as 
curbing ongoing marketing abuses. At least some of the plans 
were already under corrective action plans or have announced 
that they are already close to meeting the new requirements, 
meaning the suspension will likely be short-lived. In addition, 
the suspension is in place between the major enrollment periods 
when most people make plan changes. So impact on enrollment 
numbers and company bottom line is expected to be minimal.
    CMS and the insurance industry place the blame for 
marketing misconduct on a few rogue agents. Attention to the 
misconduct of agents committing abuse is certainly warranted 
but plans should not escape scrutiny for their role in this 
problem. One of the primary forces driving inappropriate sales, 
we believe, is profit. The high payments Medicare Advantage 
plans receive and the commissions plans pay to agents that 
drive them to steer people towards Medicare Advantage products 
over PDPs regardless of whether it is the best option for the 
individual. Plans motivate their sales forces to maximize 
enrollment through contests, TVs, trips to Vegas, and cash 
bonuses for benchmark numbers of sales. At the same time plans 
fail to properly oversee and train their contracting agents, 
many of whom appear to lack an understanding of the products 
they are selling.
    As a result of these factors underlying marketing abuse 
coupled with the dramatic growth in the types, numbers and 
variation of Medicare Advantage plans being sold across the 
country, many people with Medicare have been enrolled in part D 
or Medicare Advantage plans they do not understand, did not 
want or are inappropriate for their needs. In order to more 
effectively address widespread marketing abuses recommendations 
in our written testimony include achieving payment parity 
between Medicare Advantage and original Medicare. Applying the 
standards governing the sale of Medigap plans to Medicare 
Advantage and part D sales which better protect prospective 
enrollees and curb abuses driven by agent commissions. And 
standardizing and simplifying the Medicare Advantage and part D 
benefits so that Medicare beneficiaries can make meaningful 
comparisons and plans can be held accountable for providing 
adequate benefits. Thank you for this opportunity to testify.
    [The prepared statement of Mr. Lipschutz follows:]

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    Mr. Stupak. Thank you.
    Ms. Healey for 5 minutes, please.

STATEMENT OF KATHLEEN HEALEY, DIRECTOR, STATE HEALTH INSURANCE 
   ASSISTANCE PROGRAM, ALABAMA DEPARTMENT OF SENIOR SERVICES

    Ms. Healey. Thank you, Chairman Stupak, Ranking Member 
Whitfield and members of the subcommittee for the opportunity 
to speak on the predatory sales practices in Medicare 
Advantage.
    SHIPs are State-administered grant programs funded by CMS. 
SHIPs are housed in State Departments of Aging, Departments of 
Insurance and in one State, the Medicare Quality Improvement 
Organization. Nationally, SHIPs receive significantly less than 
$1 per beneficiary from CMS. SHIP is a volunteer-based program 
and we ask a lot of the volunteers who join us. The SHIP 
network is the only personalized community-based, systematic 
and established source of one-on-one Medicare beneficiary 
counseling in the United States. We must know all of Medicare 
from parts A, B, C and D, to coordination of benefits, Medigap, 
long-term care insurance, preventative benefits and Medicaid. 
Our services are free, unbiased and confidential.
    Today's Medicare environment is very complex. The numerous 
and various options offered by private plans has exponentially 
increased the demand for SHIP services. These new products 
offered by private companies have presented a challenge for 
beneficiaries unused to a myriad of choices. It is not that 
people with Medicare are incapable of making a wise choice; it 
is that the system often prevents an informed choice. 
Unscrupulous agents seeking only a fast commission provide 
misleading information and utilize questionable sales tactics 
to encourage beneficiaries to sign-up for their plan. Let us 
look at some of the examples from Alabama that our clients from 
SHIP have experienced.
    Despite the prohibition on door-to-door marketing, agents 
arrive on residents' doorsteps stating that the President sent 
them or that they represent Medicare. These agents bear 
business cards touting themselves as Medicare specialists, 
senior service specialists, not insurance agents.
    Agents ask beneficiaries to show them their Medicare cards 
and if applicable their Medicaid cards to verify that the 
beneficiary is on Medicare. Later the beneficiaries find out 
they were enrolled in the plan without their knowledge. After a 
sales presentation agents ask beneficiaries to sign forms 
verifying that the agents have met with the beneficiaries or 
they ask beneficiaries to sign forms in order to receive their 
free gifts. What the beneficiaries are actually signing is the 
plan's Medicare Advantage application form. Agents repeatedly 
use red, white and blue business cards that look like miniature 
Medicare cards.
    Telephone marketing has been equally aggressive. Repeated 
phone calls to beneficiaries have become increasingly 
threatening using scare tactics and misrepresentation. One plan 
called the same person five times in 1 day. Telemarketers have 
called beneficiaries stating that Medicare needs to send an 
agent to their homes to correct a mistake in the Medicare and 
You book that all beneficiaries receive. Telemarketers have 
told beneficiaries that Medicare is going out of business or 
that Medicare is being turned over to the plan.
    Agents will arrive early if they know that the 
beneficiaries have requested friends or relatives with them 
during the appointment. By the time of the appointment and the 
arrival of the trusted third party, the agents have already 
enrolled the beneficiaries and gone on their way. When 
beneficiaries learn that they deceptively enrolled in Medicare 
Advantage plans they try to sort out the challenges and 
problems on their own. Too often they discover it is not an 
easy problem to fix and they require assistance. SHIPs provide 
that needed help.
    Deceptive marketing has a profound impact on a person's 
access to health care and well-being. CMS has told SHIPs on 
several occasions that the responsibility to fix the problem 
lies squarely with the Medicare Advantage plans. Consequently, 
SHIP contacts the plans. In some instances we must contact 1-
800-Medicare as we piece together a case history. There are two 
main stumbling blocks which often stymie SHIP case resolutions 
efforts.
    First, SHIP has no official, dedicated lines to plans or 1-
800-Medicare numbers. Second, 1-800-Medicare refers directly to 
SHIPs. Each SHIP has seen an increase in case work volume. 
These cases are also increasingly complex and require an 
extraordinary amount of time to resolve. Mandatory access to 
plans and the necessity that these companies recognize SHIP and 
our efforts on behalf of beneficiaries would be one key to more 
efficiency in handling the complaints and problems we receive. 
However, that still doesn't address the fundamental marketing 
problems and processing delays that get the beneficiary in the 
pickle in the first place.
    The most recent solutions presented by CMS and the State 
Departments of Insurance are a start, however, they are not the 
complete answer. It does no good to establish rules and 
regulations about what agents may or may not do or what type of 
marketing the plans may or may not undertake and not speak 
directly to the very population these plans and agents are 
targeting. There must be a prevention message about health 
insurance fraud aimed at Medicare beneficiaries. Medicare 
beneficiaries must know the red flags to look for and how they 
can protect themselves.
    SHIP is ideally situated to deliver the insurance fraud 
prevention message to Medicare beneficiaries since we already 
have the infrastructure in place. However, SHIPs are severely 
under-funded and consequently under-resourced so it is 
difficult for many SHIPs to provide the proper tools to 
beneficiaries. The Alabama SHIP is in the process of developing 
an insurance fraud prevention campaign which includes tools 
that empower our seniors. However, we do not have adequate 
funding or resources to implement such a program. With less 
than a dollar per beneficiary for our entire program and more 
than 750,000 Medicare beneficiaries in our State alone our task 
is daunting. I urge you to support an increase in SHIP funding 
nationwide. Preventing the deceptive enrollment into Medicare 
Advantage plans including Private Fee-for-Service plans would 
greatly diminish the casework of SHIPs and CMS regional 
offices. Please help SHIP provide the tools to prevent Medicare 
beneficiaries from becoming victims and give State enforcement 
agencies the teeth to bring both insurers and agents to task 
for fraudulent actions.
    I want to thank the committee for holding this hearing. I 
have shared with you only a handful of examples they are not 
the only ones or even the most egregious. Rather, they are 
representative of the problems experienced by thousands of 
beneficiaries nationwide. I hope these experiences I have 
shared with you will help serve as a catalyst for the 
development of real solutions so Medicare beneficiaries may 
rest assured that their health care, whether it is original 
Medicare or Medicare Advantage, is truly their choice. Thank 
you.
    [The prepared statement of Ms. Healey follows:]

                      Testimony of Kathleen Healey

    Thank you, Chairman Stupak, Ranking Member Whitfield and 
members of the Subcommittee for the opportunity to speak on the 
predatory sales practices in Medicare Advantage and the 
challenges facing our Medicare beneficiaries and State Health 
Insurance Assistance Programs (SHIPs) throughout the United 
States.
    State Health Insurance Assistance Programs (SHIPs) have 
been in existence for more than 15 years and are designed to 
help seniors and people with disabilities understand their 
health care coverage options. We are state-administered grant 
programs funded by the Centers for Medicare and Medicaid 
Services (CMS). SHIPs are housed in state Departments of Aging, 
Departments of Insurance and, in one state, the Medicare 
Quality Improvement Organization. Nationally, SHIPs receive 
significantly less than $1.00 per beneficiary. While some 
states receive state funding in addition to their Federal 
grant, many states rely solely on Federal funding.
    SHIP is a volunteer-based program and we ask a lot of the 
volunteers who join us. Many programs operate with one or two 
staff members and rely on volunteers to educate, counsel, and 
assist Medicare beneficiaries in their community. The SHIP 
network is the only personalized, community-based, systematic 
and established source of one-on-one Medicare beneficiary 
counseling in the United States. We must know all of Medicare--
from Parts A, B, C and D to coordination of benefits, Medigap, 
long-term care insurance, preventive benefits and Medicaid. Our 
services are free, unbiased and confidential. Our dedication is 
strong.
    SHIPs respond on a community level to Medicare 
beneficiaries:
     SHIPs educate beneficiaries about Part D, the 
Medicare Prescription Drug benefit, and the extra financial 
help available through the Low Income Subsidy and Medicare 
Savings Programs.
     SHIPs help beneficiaries understand their Medicare 
benefits by explaining which services are covered under which 
part of Medicare.
     SHIPs help beneficiaries determine if a Medigap 
policy is good for them and explain the benefits of each 
policy.
     SHIPs help beneficiaries understand the various 
public and private long-term care financing options that are 
available.
     SHIPs help beneficiaries resolve disputes with 
Medicare or a private Medicare plan.
     SHIPs provide consistent, unbiased counsel for 
beneficiaries and their caregivers, often in times of crisis.
     SHIPs educate seniors, those with disabilities, 
caregivers, and providers of medical services on all aspects of 
Medicare.
    In Alabama, our volunteers and staff have been interviewed 
on television and radio. We have been quoted in newspaper 
articles, newsletters and magazines. We are a trusted resource. 
Nationally, SHIP staff and volunteers have educated and 
counseled millions of people and have distributed hundreds of 
thousands of informational flyers and tip sheets at enrollment 
and educational events.
    Wherever Medicare beneficiaries have gathered, SHIPs have 
been there. We make presentations to retirees and also visit 
senior centers, congregate housing sites, libraries and 
churches. We also make presentations to state and county 
provider groups. Over the past two years, with the 
implementation of Medicare Part D (drug benefit) and the rapid 
expansion of Medicare Advantage plans, SHIPs have educated 
beneficiaries and their caretakers, provided enrollment 
assistance, counseled and resolved problems encountered by 
beneficiaries. We continue to monitor ongoing issues that have 
not been resolved, and provide reassurance to beneficiaries 
that there is an entity they can turn to when they do not know 
where else to go. We have worked with our CMS Regional Offices, 
hosted CMS Mobile Office Tour events, and implemented new CMS 
mandates. We have reached out to create partnerships to better 
serve Medicare beneficiaries and to reach hard-to-reach 
populations.
    Medicare's environment today is very complex. The numerous 
and varied options offered by private plans has exponentially 
increased the demand for SHIP services. Demand has increased 
not just from Medicare beneficiaries and their families and 
caregivers, but also from health care providers and community 
leaders. SHIPs are the essential, local resource for seniors 
and people with disabilities.
    The Advent of Medicare Advantage and Prescription Drug 
CoverageThese new products, from stand-alone prescription drug 
plans to Medicare Advantage plans offered by private companies, 
have presented a challenge for Medicare beneficiaries 
unaccustomed to myriad of choices. Never before have 
beneficiaries had to select from so many different plans 
offering various options and levels of coverage. Never before 
have they had so many independent agents, whether welcome or 
unwelcome, selling health insurance plans. It is a new 
experience for many of our clients and this opportunity for 
choice has also created significant challenges.
    Many times SHIPs have said that having choices, especially 
with prescription drug coverage, can be a good thing. At the 
same time, SHIP staff and volunteers have warned Medicare 
beneficiaries to guard their information; to keep their 
Medicare card as safe as possible as they would their credit 
card or Social Security number. The warnings have been 
inadequate because unscrupulous agents continue to lure 
unsuspecting and ill-informed beneficiaries into plans they do 
not want nor necessarily need--especially if they are on both 
Medicare and Medicaid (also known as dual-eligible).
    Keep in mind, Medicare Advantage products may provide good 
coverage for some beneficiaries. If a beneficiary makes an 
informed choice, has sufficient resources to cover co-payments 
and knows that his health care providers will accept it, 
private fee for service (PFFS) and other Medicare Advantage 
plans can work very well. It is not that people with Medicare 
are incapable of making a wise choice; it is that the system 
often prevents an informed choice. The choices available are 
not meaningful when Medicare beneficiaries do not understand 
how the plans are structured or how to discern true benefits 
from the flood of sales material coming their way. Unscrupulous 
agents, seeking only a fast, and high, commission, provide 
misleading information or utilize questionable sales tactics to 
encourage beneficiaries to sign up for their plan.
    Medicare Advantage Marketing PracticesLet's look at some 
widespread examples from Alabama that our SHIP clients have 
experienced:
     Despite the prohibition of door-to-door marketing, 
agents arrive on residents' doorsteps stating that ``the 
President'' sent them or that they represent Medicare. These 
agents bear business cards touting themselves as ``Medicare 
specialists'' or ``senior services specialists,'' not insurance 
agents.
     Agents ask beneficiaries to show them their 
Medicare cards and, if applicable, their Medicaid cards, to 
verify that the beneficiaries are on Medicare. Later, the 
beneficiaries find out they were enrolled in the plan without 
their knowledge. If they are dual-eligibles, the applications 
often state that the beneficiaries are not Medicaid recipients.
     Agents ask some beneficiaries, after an initial 
visit, to take them around their apartment building or 
neighborhood so the agent could visit and sign up their 
neighbors. These agents ask the beneficiaries to introduce them 
to friends and relatives who are Medicare beneficiaries and who 
may or may not live in the same neighborhood. In one situation, 
an agent told the residents of a senior residential apartment 
complex that Medicare and a specific PFFS company had assigned 
the agent to that apartment building and that no other company 
was supposed to be there.
     After a sales presentation, agents ask 
beneficiaries to sign forms merely verifying that the agents 
have met with beneficiaries or they ask beneficiaries to sign 
forms in order to receive ``free'' gifts. What the 
beneficiaries are actually signing is the plan's Medicare 
Advantage application form.
     Agents encourage beneficiaries to enroll in plans 
stating the beneficiaries would not pay anything for medical 
care and if they did not sign up, the beneficiaries would be 
penalized by Medicare. Not wanting this ``penalty,'' the 
beneficiaries, who are often dual-eligible, enroll in the 
plans.
     Agents tell beneficiaries that the private fee for 
service (PFFS) plan they are offering is supplemental 
insurance.
     One agent continued to visit a building where he 
enrolled many of the residents. When residents complained to 
the agent about receiving bills for co-payments from their 
health care providers, the agent took the bills and said that 
he would straighten them out with the plan and call the 
beneficiaries back. They did not hear from him again and the 
unpaid bills were turned over to collection agencies.
     Agents have repeatedly used red, white and blue 
business cards that look like miniature Medicare cards.
     Telephone marketing has been equally aggressive. 
Repeated phone calls to beneficiaries have become increasingly 
threatening, using scare tactics and misrepresentation. One 
plan called the same person five times in one day. 
Telemarketers have called beneficiaries stating that Medicare 
needs to send an agent to their homes to correct a mistake in 
the Medicare and You handbook that all beneficiaries receive. 
Some telemarketers insist that they are calling from Medicare 
and they tell beneficiaries that they will lose their Medicare 
if they do not sign up for the telemarketer's plan. 
Telemarketers have told beneficiaries they have the plan that 
the government won't tell beneficiaries about and it could save 
beneficiaries money. Telemarketers have told beneficiaries that 
Medicare is going out of business or that Medicare is being 
turned over to the plan.
     Agents will arrive early if they know that the 
beneficiaries have requested friends or relatives to be with 
them during the appointment. By the time of the appointment, 
and the arrival of a trusted third party, the agents have 
already enrolled the beneficiaries and gone on their way.
    In many instances, beneficiaries do not even realize they 
are no longer enrolled in Original Medicare. Beneficiaries 
learn of their enrollment into Medicare Advantage plans when a 
health care provider refuses to see them because the provider 
does not accept the terms and conditions of the new plan--most 
often a private fee for service (PFFS) plan--the provider is 
out of the plan's network, or the beneficiary begins to receive 
bills from providers for unpaid services or co-payments.
    When beneficiaries learn that they have been deceptively 
enrolled in Medicare Advantage plans, they try to sort out the 
challenges and problems on their own. Too often they discover 
that it is not an easy problem to fix and that they require 
assistance. SHIPs provide that needed help. Deceptive marketing 
has a profound impact on a person's access to health care and 
well-being. The best way to have a clear picture of the problem 
is to have the rest of the story--the before and after the 
misrepresentation or deception by the agent:
    Example 1: Ms. J is a 61-year-old disabled woman. She has 
had both Medicare and Medicaid (a dual-eligible) for several 
years. In January 2007, she went to her local pharmacy for 
assistance in finding a Part D plan. Her pharmacist signed her 
up with Company D's prescription drug plan. Several months 
later, an agent with Company D came to her home and asked her 
if she would like to sign up for free supplemental insurance 
since she did not have any. He also told her that by signing up 
she would not lose any of her current benefits and she would 
receive additional coverage that Medicare does not provide.
    In May 2007, she went to her family doctor and discovered 
that she was no longer covered by Original Medicare and that 
her doctor did not take Company D's private fee for service 
(PFFS) plan. She contacted Social Security and was given the 
number for SHIP.
    SHIP discovered that Ms. J was not enrolled in the Part D 
plan that could save her the most money, so we changed her drug 
coverage plan to something that would work better for her. At 
the same time, we also faxed and mailed a request for her to be 
disenrolled from Company D's private fee for service plan.
    Example 2: Ms. F is an 80-year-old widow. She has been on 
Original Medicare with Company X's Medigap policy providing her 
with supplemental insurance. Ms. F takes care of Ms. G who is 
her 55-year-old disabled daughter. Ms. G has been a full dual-
eligible (which means she has both Medicaid and Medicaid) for 
many years. Ms. F chose Company X's prescription drug plan 
(PDP) for herself and her daughter in January 2007. In February 
2007, an agent from Company X came to her home and asked her if 
she would like to make her life easy by having her and her 
daughter's medical coverage simplified by having Company X 
serve as their supplemental insurance. She explained that her 
daughter had Medicare and Medicaid; therefore, she did not need 
supplemental insurance. The agent countered this by saying she 
would get extra benefits for her and her daughter at no 
additional cost and that their current benefits would not be 
affected. Ms. F then enrolled herself and her daughter into 
Company Xs plan--a private fee for service (PFFS) plan.
    Two months later, Ms. F took her daughter to see her 
specialist. When they arrived, Ms. F was asked to make a co-
payment. When she inquired why (because they had never paid one 
before), she was told that her daughter no longer had Medicare 
and Medicaid. Ms. F went home and contacted the agent who sold 
her the plan and was told that she could not get out of the 
plan. Ms. F contacted SHIP. Our office contacted Company X and 
was told she could disenroll. We then faxed and mailed a 
request for Ms. G and Ms. F to be disenrolled from the plan.
    Example 3: Mrs. H and Mr. I are in their seventies. Both 
have been on Original Medicare for years and have a 
supplemental insurance policy (a Medigap) with Company M. In 
March 2007, Mrs. H received a call from Company B's agent 
inquiring about her supplemental coverage. He wanted to know 
how expensive the coverage was. Mrs. H told him that it was 
rather expensive and that she was concerned because it was 
going up every year. He then asked if he could come by and talk 
to her and her husband about a supplemental plan with his 
company that was not expensive. Once the agent arrived, he told 
them they were eligible for a free supplement to Medicare 
through his company. Mrs. H inquired about the cost that they 
would have to pay up front to see their doctor and was told 
that they would only have to pay a $10 co-payment and that they 
could drop their policy with Company M.
    Two days after enrolling in the plan, Mrs. H and Mr. I went 
to their local senior center and heard a presentation given by 
the SHIP coordinator on Medicare Advantage. It was not until 
they heard the presentation that they realized the agent had 
given them misleading information.
    After leaving the senior center, Mrs. H went home and 
contacted the plan and asked if she and her husband could be 
disenrolled. She was told they could not. She contacted SHIP. 
We sent a request to be disenrolled for Mrs. H and Mr. I. They 
were successfully disenrolled on May 1, 2007.
    Example 4: Ms. C is disabled. She has been a dual-eligible, 
having both Medicare and Medicaid, for many years. She has 
suffered from seven strokes and is required to see numerous 
specialists. In January 2006, she was auto-enrolled in Company 
A's prescription drug plan (PDP). In April 2006, she was 
suddenly disenrolled from Company A because she had been auto-
enrolled into five other prescription drug plans, all of which 
began to cancel each other out.
    In May 2006, Ms. C was not enrolled in a PDP and she had to 
pay for her medications without any help. One day in May 2006, 
she was shopping with her parents at a retail store and saw a 
Company A agent. She asked the agent if he could sign her up 
for the stand-alone prescription drug plan (PDP) she first had 
in January 2006; however, the agent, knowing she was receiving 
Medicaid benefits, signed her up for Company A's private fee 
for service (PFFS) plan even though she repeatedly told him she 
only wanted drug coverage.
    After Ms. C enrolled with what she thought was Company A's 
PDP, she received a card from Company B, another company. 
Company B paid for her prescriptions until August 2006. Company 
B was cancelled in August because Company A (the plan into 
which she was enrolled in May) reflected on the Medicare system 
in August. Ms. C decided it was best to contact CMS about her 
problems. CMS filed a complaint on her behalf.
    Meanwhile, she began receiving calls and bills from her 
physicians as a result of unpaid medical bills. Ms. C was 
shocked because she was under the assumption that Medicare and 
Medicaid were still paying her bills. She had no idea that 
Company A was supposed to be paying. When she tried to get her 
physicians to file with Company A, she discovered that they did 
not accept Company A. Ms. C contacted CMS again because she had 
over $900,000 in unpaid medical bills. CMS forced Company A to 
pay the unpaid bills and to process her disenrollment from its 
plan.
    Unfortunately for Ms. C, she began receiving collection 
letters from Company A because of unpaid premiums. The premium 
was over $33 per month. Her income was $643 per month. Ms. C 
contacted Company A and the collection agency because she did 
not think she should have to pay for the plan since she never 
asked for it. Both Company A and the collection agency told her 
that there was nothing she could do but pay the bill. Ms. C 
began to send regular payments of whatever amount she could 
afford. The collection attempts still continued, only stronger.
    Ms. C found out about the SHIP program and contacted our 
office. We have worked with Ms. C to stop the collection 
efforts and to have the premiums written off by Company A. In 
late June 2007, we received a letter stating that the plan 
would not seek payment for the premiums.
    These are just some of the examples of how the marketing 
practices impact Medicare beneficiaries and impede their access 
to health care. We send complaints to the CMS Regional Office 
when we need a retroactive disenrollment and to provide 
examples of what we are seeing at the local level.
    CMS has told SHIPs on several occasions that the 
responsibility to resolve problems lies squarely with Medicare 
Advantage plans. Consequently, SHIPs contact the plans. In some 
instances, we must also contact 1-800-MEDICARE as we piece 
together a case history.
    There are two main stumbling blocks which often stymie SHIP 
case resolution efforts:
    1. SHIP has no official, dedicated lines to plans or 1-800-
MEDICARSHIPs have had to be resourceful to serve the 
beneficiaries. With no ``named'' plan contacts from CMS nor 
required dedicated phone lines for SHIPs to utilize in case 
resolution for plans or 1-800-MEDICARE, state SHIPs have 
developed workable solutions to get the job done. We find our 
own contacts at plans. When we run into issues where the 
``scripts'' used by the customer service representatives with 
the plans and with Medicare are incorrect or miss the point, we 
muscle our way up the chain of command to find someone who can 
solve the problem. We try not to refer cases to the CMS 
Regional Offices if we can solve them ourselves because we know 
of the backlogs and time delays that can result. These time 
delays often cause additional issues as beneficiaries hesitate 
to seek necessary medical care, unsure of their health 
insurance coverage.
    2. 1-800-MEDICAR refers directly to SHIPsThroughout the 
existence of Medicare Advantage and Part D, SHIPs have 
consistently experienced Customer Service Representatives (CSR) 
at 1-800-Medicare referring beneficiaries to SHIPs for 
assistance. The CSRs follow scripts for the calls. It is not 
unusual to have a SHIP counselor or even a SHIP director or 
program staff member contact 1-800-MEDICAR for assistance only 
to be referred back to the state SHIP.
    Each SHIP has seen an increase in casework volume. These 
cases are also increasingly complex and require an 
extraordinary amount of time to resolve. However, we have been 
doing the best we can given our limited Federal funding and 
staff resources. Mandatory access to plans and the necessity 
that these companies recognize SHIP and our efforts on behalf 
of beneficiaries would be one key to more efficiency in 
handling the complaints and problems we receive. After all, 
access is critical to handling cases in a timely fashion. That 
still does not address fundamental marketing problems and 
processing delays that get the beneficiary in the pickle in the 
first place.
    Are the solutions proposed by CMS to address predatory 
marketing practices enough?The most recent solutions presented 
by CMS and the state Departments of Insurance are a start, 
however, they are not the complete answer. Yes, a State 
Department of Insurance can pass regulations that would require 
each insurance agent to leave a business card with the 
beneficiary. And yes, they could also require agents to 
identify themselves as insurance agents and inform the person 
that they are representing a product, not Medicare or Medicare 
supplements. And, if they violate these provisions and other 
marketing guidelines, these agents could be subject to 
discipline. As you know, CMS will be requiring more of the 
plans beginning in 2008.
    Is the problem real? In a recent press release CMS has 
stated that it has received only 2,700 complaints nationwide, a 
relatively minimal number. It is my impression that not all 
cases are being reported. For example, SHIPs do not refer all 
cases to CMS. We handle them ourselves. Additionally, from my 
involvement with elder abuse and legal assistance with our 
agency, I have learned that for all the elder abuse cases that 
are reported, there are just as many or more that go 
unreported. Perhaps a better gauge is the number of Medicare 
Advantage disenrollment requests that have been filed.
    Beneficiaries must receive information on how to prevent 
becoming a victim of unscrupulous marketing practicesCMS has 
taken steps in the right direction by announcing some new 
corrective actions. However, CMS has failed to mention the 
prevention message that must be delivered to Medicare 
beneficiaries. It does no good to establish rules and 
regulations about what agents may or may not do, or what type 
of marketing the plans may or may not undertake, and not speak 
directly to the very population these plans and agents are 
targeting. How would a beneficiary know that they should be 
very suspicious of an insurance agent who comes to his or her 
door unannounced and without an appointment?
    There must be a prevention message--not about health care--
about health insurance fraud aimed at Medicare beneficiaries. 
Medicare beneficiaries must know the red flags to look for and 
how they can protect themselves. A comprehensive media campaign 
with a simple message would be a start.
    SHIP is ideally situated to deliver the insurance fraud 
prevention message to Medicare beneficiaries since we already 
have the infrastructure in place. I have seen it work in 
Alabama. Our SHIP has been able to educate beneficiaries and 
those who have heard the message have been empowered. For 
example, an agent attended a senior center when the director 
was absent hoping to make a sales presentation and enroll 
attendees. Unfortunately for the agent, the seniors had also 
been taught by SHIP what questions to ask agents and how the 
PDPs and Medicare Advantage plans work. The seniors were able 
to determine fact from fiction and literally ran the agent out 
of the building.
    However, SHIPs are severely under-funded and consequently 
under-resourced so it is difficult for many SHIPs to provide 
the proper tools to beneficiaries. An adequately funded, 
comprehensive educational and media campaign with a unified 
message aimed at beneficiaries would achieve dramatic results. 
The campaign could arm Medicare beneficiaries with the 
information they need to protect themselves from unscrupulous 
insurance companies and their agents.
    The Alabama SHIP is in the process of developing an 
insurance fraud prevention campaign which includes tools that 
will empower our seniors. However, we do not have adequate 
funding or resources to implement such a program. With less 
than a dollar per beneficiary for our entire program and more 
than 750,000 Medicare beneficiaries in our state alone, our 
task is daunting. Developing the media campaign and printing 
and disseminating these materials to the target population is 
expensive. I urge you to support an increase in SHIP funding 
nationwide.
    Preventing the deceptive enrollment into Medicare Advantage 
plans, particularly private fee for service (PFFS) plans, would 
greatly diminish the casework of SHIPs and CMS Regional 
Offices. Please help SHIPs provide the tools to prevent 
Medicare beneficiaries from becoming victims and give state 
enforcement agencies the teeth to bring both insurers and 
agents to task for unscrupulous and/or fraudulent actions.
    I want to thank the Committee for holding this hearing. I 
have shared with you only a handful of examples; they are not 
the only ones, or even the most egregious. Rather, they are 
representative of the problems experienced by thousands of 
beneficiaries nationwide. I hope the experiences I have shared 
with you will help serve as a catalyst for the development of 
real solutions so Medicare beneficiaries may rest assured that 
their health care--whether it is Original Medicare or Medicare 
Advantage--is truly their choice.
                              ----------                              

    Mr. Stupak. Thank you.
    Mr. Harrell, deputy commissioner of Mississippi Insurance 
Department, your opening statement, please, sir.

  STATEMENT OF LEE HARRELL, DEPUTY COMMISSIONER, MISSISSIPPI 
                     INSURANCE DEPARTYMENT

    Mr. Harrell. I appreciate the chairman for allowing us to 
come speak. I am Lee Harrell, deputy commissioner of insurance 
for the State of Mississippi and on behalf of commissioner of 
insurance George Dale. We appreciate the opportunity to share 
with you the experiences we have had in Mississippi related to 
Medicare Advantage plans.
    I am not here to demonize CMS or the plan sponsors but we 
want to walk through what we are seeing in Mississippi and it 
is going to be typical of what you are going to hear today from 
your other witnesses, I believe. You will hear about problems 
today, there are a lot of problems in the Advantage program. We 
don't need to get into a blame game but we need to work 
together to find a solution to protect our senior citizens.
    Aside from the specific unfair misleading and the 
fraudulent marketing practices that are in my written testimony 
that you have heard today, we have also seen other general 
problems with agents who sell these plans. Agents being hired 
to sell only during the open enrollment periods, these agents 
get licensed around the first of October, sell through 
December, than let their license lapse until the following 
year, in other words the equivalent of seasonal help. By far 
the biggest problem is lack of sufficient training of agents. 
One of the companies who touts the best training of its agents 
gives 10 hours of instructional training all in one sitting.
    The biggest problem we are seeing in making a case against 
agents alone is the fact that the primary witnesses are often 
elderly persons who because of their age or physical condition 
may become easily confused or simply cannot accurately remember 
the sequence of events. Even if they are able to provide the 
department with clear and accurate information about the 
tactics used by the agent, by the time the matter gets to a 
hearing their memories may not be as clear. Also, many elderly 
victims are not able or are unwilling to attend a hearing and 
sometimes they are simply too embarrassed to even report that 
they have been a victim.
    Some of these specific types of complaints we have received 
in Mississippi are door-to-door solicitation or cold calls by 
agents without having been invited by a Medicare recipient to 
do so. Agents claiming to be from Medicare and sometimes 
presenting a red, white and blue card designed to look like a 
Medicare card. The agent has a recipient complete a request for 
more information form which turns out to be an application for 
a Medicare Advantage plan. The agent asks a recipient to sign a 
form just to show my boss that I have contacted you, which 
again turns out to be an application form. The agent assures 
the recipient that enrollment in this plan would not affect the 
recipient's Medicare coverage without mentioning that the 
recipient may not be able to go to the same health care 
provider or other facility. And that he may be required to pay 
a co-pay. Recipients being enrolled without their knowledge 
without having any contact with the agent, it is believed that 
recipient's personal information was fraudulently obtained and 
that does not mention the problems of having the recipient 
victim dis-enrolled or un-enrolled in the plans they were 
improperly enrolled in.
    Our Department of Insurance has obtained the licenses of 
two agents involved in Medicare scams. The first license was 
revoked on a finding that the agent retained recipient's 
personal information from a home health agency. The recipients 
were enrolled in a plan without their knowledge or consent. 
There was also evidence in that case where the mother of the 
daughter was bedridden and unable to write or communicate but 
according to the agent she signed the form to sign-up in the 
Advantage program. That agent has been indicted in Mississippi 
for these allegations.
    One of the agents was revoked for door-to-door solicitation 
of Medicare Advantage plan in two low-income housing areas. As 
a result of that the Department of Insurance sent a team of 
lawyers and investigators into the complex to interview the 
victims. Some of them were afraid to talk to us because they 
did not know who they could trust. We were able to obtain 21 
affidavits. Some of the people who did not take affidavits 
based on their mental condition. At the 11th hour prior to the 
hearing the attorney for the agent subpoenaed all 21 victims 
and was going to make them travel 150 miles to Jackson, 
Mississippi to testify.
    We were in the process of investigating a third agent for 
similar practices when that agent surrendered his license. From 
2006 to the present, the Mississippi Department of Insurance 
received over a thousand complaints on Medicare Advantage plans 
alone in part because we are the people they know. They are not 
familiar with CMS and they are not generally going to call a 
stranger in Atlanta, Georgia when their insurance commissioner 
is right there at home. These complaints represent at least 
twice as many complaints as we normally receive on all other 
topics combined. We speak to senior groups across the State 
about these practices and how can they avoid the problems. 
Mississippi takes seriously its duty to protect its consumers 
while promoting a healthy insurance market. But the way the 
current Medicare Advantage system is designed we are precluded 
from fully meeting that duty. Clearly, the piecemeal approach 
to enforcement is not working nor is it realistic to expect 
that it will. We suggest as a regulatory model the current 
system for regulating Medigap insurance, which is the States 
enforce Federal minimum standards. If you don't think there is 
a problem I urge you to contact your respective insurance 
department or more important go out to the senior citizen 
groups in your respective States and talk to them, ask them. I 
think someone said somewhat earlier that these are our parents, 
our grandparents and our aunts and uncles. We have to find a 
way to protect the senior citizens. I appreciate you allowing 
me to testify today.
    [The prepared statement of Mr. Harrell follows:]

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    Mr. Stupak. Thank you for your testimony.
    Ms. Clegg-Boodram, on behalf of your residents there at 
Judiciary House, care to state a few words?

STATEMENT OF BRENDA CLEGG-BOODRAM, JUDICIARY HOUSE, ACCOMPANIED 
  BY MARY ROYAL, GRADY HAMMONDS, EDITH WILLIAMS, AND JENNIFER 
MEZEY, SUPERVISING ATTORNEY, LEGAL AID SOCIETY OF THE DISTRICT 
                          OF COLUMBIA

    Ms. Clegg-Boodram. Good morning.
    Mr. Stupak. Good morning.
    Ms. Clegg-Boodram. My name is Brenda Clegg-Boodram. I live 
at Judiciary House which is a DC housing authority property for 
seniors and disabled people of low income. I am accompanied by 
Grady Hammonds, Edith Williams and Mary Royal. We all are 
residents in the Judiciary House which is located in Chinatown 
section of Washington, DC. Our population is deemed independent 
living. I volunteer as the acting president and treasurer for 
the resident counsel which acts as a liaison between DC housing 
and other social service organizations.
    The Judiciary House is as I said a housing authority 
property which provides low-income housing to the most 
vulnerable population in the city. The elderly and disabled 
tenants do not and many times cannot understand paperwork. 
Although the tenants are deemed capable of independent living 
in reality for much of this population this is not true.
    I was approached in late January 2007 by two gentlemen who 
identified themselves as having good news about Medicare Part 
C. At this point I was not aware that they were selling 
insurance. Initially I thought they worked with Medicare. 
Darnell Keys and T.C. were sent to my office by the property 
manager's office. They advised me that they had information 
about Medicare. They proceeded to explain that Medicare had 
recently approved part C which was specifically for eyes, 
dental and hearing. And as I understood them this would be in 
addition to Medicare Part A, B and D.
    They asked me when could they do an educational 
presentation to my tenants and advised that they would provide 
the posters. I advised that I had already had the Legal Aid 
Society lawyers to assist my tenants with their health care and 
their prescription coverage. They advised that they understood 
and they told me that they were not dealing with part D for 
prescription coverage.
    I felt confident that these men understood and I treated 
them like any other health outreach. I provided them with a 
date and about a week later they gave me the posters. At this 
point they did give me some paperwork about Coventry and I 
again reminded them that Legal Aid had already reviewed and 
assisted my participating tenants for appropriate insurance and 
prescription coverage. I posted the posters but I did not read 
the information about Coventry.
    I arranged for them to do their presentation at two of our 
tenant meetings. One meeting took place in the resident council 
office and the other in the community room. I was not ever told 
that they were selling insurance or that they intended to 
change my tenants' health coverage. It was my understanding 
that they were going to add Medicare Part C to their current 
coverage. They did two presentations in the month of February 
2007. About 3 or 4 weeks later Mary Royal came to me and 
advised that her coverage was changed. Then Grady Hammonds, 
Edith Williams and there were other tenants who complained. 
They could not get their medications and that their physicians 
and hospitals did not accept and/or know about this insurance 
company and calling customer service did not help.
    Please note, this incident created a health crisis for our 
witness Ms. Edith Williams, who has MS and had to be treated by 
an emergency room visit and subsequently she had to pay cash 
for her medications because they had changed her Medicare Part 
D drug coverage. She did not have all the money and over a 
period of 2 weeks or more she suffered physically and she had 
to scrape-up money for her meds.
    I contacted Jennifer Mezey, supervising attorney of the 
Legal Aid Society of the District of Columbia. Attorney Mezey 
helped Mary Royal, Grady Hammonds and Edith Williams with their 
dis-enrollment. I know that there are other tenants in my 
building who need the assistance of Ms. Mezey to dis-enroll but 
they are unable to ask for help and they are still suffering.
    I believe that there is a lack of responsible coverage of 
care for seniors, mental, emotional and sometimes the 
physically disabled. And I feel that there should be measures 
taken to prevent these types of incidents from occurring.
    This statement is also a question, where is the 
accountability? Who makes sure that the population who can 
least afford these types of mistakes are protected? I know of 
individuals in other States who are having similar problems so 
this is not a local but rather a national problem. We barely 
survived the Medicare Part D problems and, in fact, there are 
citizens who are unable to advocate for themselves who do not 
understand and are stuck with inadequate health care and 
prescription coverage as a result of part D. We seriously need 
more checks and balances written into the regulations.
    I really think that this is not just a rogue salesman 
problem and I think that you guys who create these programs 
fail in the detail aspect of these programs and you need to 
look at it seriously because you are hurting the people who 
can't help themselves and some of these people worked for you 
guys in the service industry. We all can't be rich or famous or 
whatever. We do these little jobs like cleaning and all of that 
so detail really makes a difference and the salesmen are not 
the only ones who are responsible and I thank you for the 
privilege of making this statement.
    [The prepared statement of Ms. Clegg-Boodram follows:]

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    Mr. Stupak. Thank you.
    Now that concludes the opening statements of the opening 
panel here so we will move to questions, we will go for 5 
minutes. I will begin.
    Ms. Clegg-Boodram, let me ask you this question. You 
indicated in your testimony you said there are still residents 
of Judiciary House then you said unable to ask for help to dis-
enroll in this Medicare Advantage. Explain that.
    Ms. Clegg-Boodram. Because we are a ``multi-function 
community'' the disabled refers to people who are mentally-
challenged and intellectually challenged and they know 
something is wrong because when they go to the doctor or all of 
a sudden their personal care assistant disappears or they go to 
the pharmacy things are not working. But because of the Privacy 
Act and many other issues I can't just arbitrarily snatch them 
and say you need my help and you have got to sit down. Allow me 
to allow Legal Aid to help you through this. And they will come 
and you will talk to them and you have to be very patient. 
There is a whole bunch of stuff that you guys have no clue 
about.
    Mr. Stupak. That is why we are having this hearing.
    Ms. Clegg-Boodram. Right.
    Mr. Stupak. Try to get a clue.
    Ms. Clegg-Boodram. I hope you can because it is very 
serious.
    Mr. Stupak. I agree.
    Ms. Healey, is there a SHIP program in Washington, DC or do 
we rely strictly on Ms. Mezey and Legal Aid?
    Ms. Healey. There is a SHIP program in DC, yes.
    Mr. Stupak. Ms. Mezey, so you work with SHIP then over here 
in DC to get these folks dis-enrolled?
    Ms. Mezey. We work with the SHIP program. We collaborate 
with them but Legal Aid also does this work on our own.
    Mr. Stupak. OK. Very good.
    Mr. Harrell, and in your testimony was this--is this the 
type of problem you have seen in Mississippi? You said you have 
over a thousand complaints, this, what we see at Judiciary 
House, is this common and found in Mississippi, also?
    Mr. Harrell. The problem is--the gentleman from the, Mr., I 
am not going to attempt to pronounce his name, from California, 
[Mr. Lipshutz's] problems sound very similar to Mississippi's 
problems and I don't think you can get any more different than 
California and Mississippi. So that the problems are going to 
be systematic across the country deemed by other insurance 
regulators across there. The problems are the same using the 
business cards, misrepresenting, forging people's names, so it 
is not a Mississippi problem. It is a national problem from one 
State to the next, I think the problems are the same.
    Mr. Stupak. Then I guess the point I was trying to ask you, 
I know you mentioned door-to-door and salesmen, and going to 
senior housing and you encouraged us to check with our senior 
groups to see if they are having the problems. I guess the 
point I am trying to get at is, Ms. Clegg-Boodram said, they do 
not know how to dis-enroll or how to correct the problem, or 
unable to ask for help. Do you see that with the people you, as 
the insurance commissioner you represent?
    Mr. Harrell. Yes, sir. They are not familiar with the 
program. They do not know who to call and for an example I have 
got one here that did contact the actually, the gentleman that 
the lady's brother, and for example on one day he called 
Humana, stayed on the phone for an hour and a half. Calls the 
next day, hour and a half, the next day an hour, on and on and 
on. One day he stayed on the phone from 10:30 to 5:15 on hold. 
Never spoke to a person. It said hold please when he would 
call--just on and on for looks like 10 or 12 days. The most 
time he stayed on hold was 10:30 to 5:15.
    So most of them do not know who to ask, most of them, and a 
lot of them are embarrassed to go ask because they have been 
taken advantage of and they do not, like I said, they do not 
know what CMS is. Mississippi has an elected commissioner and 
that is who they call. And we are not able, due to the 
jurisdictional limitations, we are not able to give them the 
help that they deserve and need.
    Mr. Stupak. You indicated that there is a 2-month window 
period here where these agents come out and they get 10 hours 
of training and basically what, October to December, is the 
enrollment period or December to February is the enrollment 
period, whatever you said. Do those so-called agents who get 
the 10 hours worth of training, do they become insurance 
agents, licensed in Mississippi or are they temporary and do 
not need a license?
    Mr. Harrell. They are a temporary license. They come in and 
sell, well they do not have a temporary license, they have a 
real license but they only sell for those 2 to 3 months, then 
they go back to wherever they came from and they may go to 
another State. They may go to sell maybe some other product. We 
do not know where they go, we just see examples of a lot of 
agents allowing their licenses to lapse and then come back the 
next year.
    Mr. Stupak. OK. Ms. Healey, when Commissioner Harrell 
mentioned about this person being on hold from 10:15 to 5:30, 
you indicated about numbers, direct numbers, the 800 number. Is 
this what you are trying to express to the committee?
    Ms. Healey. Exactly. The SHIPs have to call the same number 
of the plan and 1-800-Medicare so we go through the same 
process. Even though we have all the information that we need 
to and we just need to get the plan to do what we need them to 
do, we are on hold just as long as everybody else.
    Mr. Stupak. OK. Mr. Lipschutz, what recommendations would 
you make to ensure these abuses that we have heard of this 
morning actually stop? I know there are guidelines but the 
guidelines are just simply that, guidelines. There is no 
enforcement. There is no accountability. You do not have to 
follow a guideline, right, if you do not wish to, what would 
you recommend? What would you like this committee to see done?
    Mr. Lipschutz. Our recommendations would range from the 
specific, including mandatory agent training with the standard 
curriculum and testing. It would include standardizing appeals 
processes, including retroactive dis-enrollment and securing 
special enrollment periods through the Medicare Program, as 
well as broader recommendations such as achieving payment 
parity between Medicare Advantage and the original Medicare 
Program, which we believe would minimize some of the incentives 
that are currently driving plans, to neutralize the commission 
structure, and to rely upon many of the protections that are 
contained in the Medigap rules that apply to the sale of 
Medigap products that include insuring that products are 
suitable for beneficiaries before they are sold, insuring that 
beneficiaries--or that commissions for sales--are not higher 
when someone duplicates coverage that they already have or 
switches out coverage with comparable coverage. So our 
recommendations, I will refer you to our written testimony for 
our specific recommendations concerning CMS' new requirements. 
Again, they are helpful but we have a lot of outstanding 
questions about how far they will really go to stop the abuses.
    Mr. Stupak. OK. My time is expired.
    Mr. Whitfield, for questions, we may go around more than 
once here with Members because of a very interesting panel. 
Thank everybody on this panel for being here. Mr. Whitfield.
    Mr. Whitfield. Thank you. Ms. Clegg-Boodram, how many 
people actually live in, is it Judiciary House, and what is the 
total number of people that live there?
    Ms. Clegg-Boodram. Judiciary House is a 10-story building 
with essentially 271 units. Currently, they claim we have about 
192 occupied units.
    Mr. Whitfield. But it is an independent living facility?
    Ms. Clegg-Boodram. That is what they say, yes. And some of 
us are independent.
    Mr. Whitfield. But there are some people who live there 
that are not able----
    Ms. Clegg-Boodram. Fifty-five percent of my population.
    Mr. Whitfield. And what is your responsibility there?
    Ms. Clegg-Boodram. I am on the resident council. It is a 
volunteer position. And so essentially I connect them with 
services when they come and ask.
    Mr. Whitfield. So Ms. Mezey, you are the attorney for these 
groups of residents that were defrauded. Is that right?
    Mr. Mezey. Legal Aid in November and December of last year, 
had come out to Judiciary House to help people with their 
Medicare Part D enrollment. To make sure they were in 
appropriate prescription drug plans. After these people had 
come to Judiciary House and Ms. Clegg-Boodram realized that 
people had signed-up and wanted to get out, she called me and 
then we helped them to dis-enroll from the plans.
    Mr. Whitfield. OK. So they had signed up for Medicare 
Advantage Program but they had no idea of what that really was.
    Ms. Mezey. Right. As Ms. Clegg-Boodram said during, in 
February, there were two sessions.
    Where the residents signed-up for plans and then when they 
realized that they did not want to be in these plans anymore we 
helped them get out of them.
    Mr. Whitfield. But there also is a DC health insurance 
assistance program, correct?
    Ms. Mezey. Correct. There is a SHIP here the same way as 
Ms. Healey's counterpart in DC, and they have also helped a lot 
of people get out of these plans as well.
    Mr. Whitfield. So, Ms. Boodram, when, Ms. Clegg-Boodram, 
when salesmen come to you, you would frequently call Ms. Mezey, 
and then would you call the health insurance assistance program 
as well to ask for their thoughts on it or anything like that?
    Ms. Clegg-Boodram. No, unfortunately, the health insurance 
whatever program is not widely publicized. A lot of this 
information is not available. And my question is to you, sir, 
is why doesn't CMS do an educational component?
    Mr. Whitfield. Yes.
    Ms. Clegg-Boodram. So that we really understand what the 
different parts of Medicare or an agent----
    Mr. Whitfield. So you were not even aware that there was a 
DC health insurance program.
    Ms. Clegg-Boodram. No. I called Legal Aid because I 
realized there was a problem. There was a contact I have at GW, 
George Washington University Medical Center.
    Mike, who helped me out through some of the part D problems 
but in the long run I had to call lawyers because I really 
could not do it.
    Mr. Whitfield. And, Ms. Mezey, were any legal steps taken 
against the salesmen who convinced these people to sign-up 
without their being fully aware of what they were doing?
    Ms. Mezey. We have been focusing at this point, we are 
mainly focused on getting people out of the plans, which we 
were able to do through our CMS regional office. And helping 
Ms. Williams get her prescription drugs, which were cut-off, 
through these efforts. And as far as I know, to my knowledge, 
nothing has happened to the salespeople.
    Mr. Whitfield. Yes. Now, Mr. Harrell, you are with the 
insurance commission in Mississippi, correct?
    Mr. Harrell. Yes, sir.
    Mr. Whitfield. So if a person is licensed to sell insurance 
in Mississippi and they use fraudulent practices, you all have 
the authority to take their license, would that be correct or 
not?
    Mr. Harrell. That is in question now. You have the license 
that the State of Mississippi would issue, but the underlying 
product, Medicare Advantage, is not something the State of 
Mississippi regulates. Attorney general lawyers have raised 
that as an issue for the Department of Insurance, as to how are 
you taking action against an agent for a product that you do 
not have any jurisdiction over, period.
    Mr. Whitfield. So there is a legal question of whether or 
not you have any jurisdiction, is that correct?
    Mr. Harrell. The department maintains the position that we 
do, and we have taken licenses and we have multiple open 
investigations ongoing as we speak.
    Mr. Whitfield. Ms. Healey, what about in Alabama, has this 
issue been discussed in Alabama, the authority that Alabama has 
to take a license?
    Ms. Healey. Well, I am housed in the Department of Senior 
Services. We are working with our Department of Insurance but I 
would defer that question to our Department of Insurance.
    Mr. Whitfield. Now, Mr. Lipschutz, your organization in 
California is that a private entity or is that a governmental 
entity or----
    Mr. Lipschutz. We are independent, private non-profit 
agency. So we are not funded by the SHIP program and we do not 
administer them but we work closely with them.
    Mr. Whitfield. Ms. Healey, I was curious of people who 
sign-up for Medicare each year, they become eligible to sign 
up. Do you have any idea what percent would come to your agency 
for assistance in selecting the right plan?
    Ms. Healey. I would be giving an estimate but in the 
information in the Welcome to Medicare packet that CMS sends to 
the beneficiary, they do have a list of the SHIPs called in the 
materials.
    We do get quite a few beneficiaries aging into Medicare but 
I do not know the percentage.
    Mr. Whitfield. OK. My time has expired.
    Mr. Stupak. And thank you. Mr. Burgess for questions.
    Mr. Burgess. Thank you, Mr. Chairman. This is not going to 
be a question but a statement to you, Mr. Chairman. Are we 
going to hear at some point from the Inspector General of 
Health and Human Services? Are we going to hear from the 
appropriate people at the Department of Justice to find out 
what is happening with the people who are apparently guilty of 
malfeasance in the sale of these products? This sounds to me 
like Medicare fraud, Mr. Chairman. This hearing is all well and 
good but it seems like this should be pursued at a different 
level than simply an oversight hearing.
    Mr. Stupak. Well, unfortunately, in the bad piece of 
legislation that was passed, the standardization of policies, 
the regulations of insurance agents and that which we usually 
find in the Medigap and Medicare Supplementals were stricken 
for at least a couple years under part D here it is more of a 
State issue there so----
    Mr. Burgess. Well, reclaiming my time, I have an article 
here from the New York Times dated May 7, 2007, and it talks 
about individuals who are being signed-up who are deceased. 
Does anyone on the panel have any direct knowledge of a 
deceased person being signed-up for one of these plans?
    Mr. Stupak. Congressman, I have read media reports about 
it.
    Mr. Burgess. Well, again, I would just ask the question, 
signing-up a deceased person for a Medicare plan sounds to me 
like Medicare fraud and I am not a lawyer, I am just a simple 
country doctor but I would think that that would fall into that 
purview and I do not see how you can suspend the investigation 
and the prosecution of somebody who is guilty for Medicare 
fraud simply by passing a statute, even if it was us who passed 
it.
    Mr. Stupak. I will give the gentleman his time back but 
that is really consumer fraud. It is not a Federal fraud case 
to do that.
    Mr. Burgess. I beg to differ. As a practicing physician, if 
I was guilty of Medicare fraud I was going to jail, and it was 
Attorney General Janet Reno who made that very clear back in 
1990.
    Mr. Stupak. Right. But the way this program was written and 
that is why it was such a controversial program when it was put 
forth, the dual-eligibles and the others, the standard frauds 
that we see as you as a doctor with the Federal Government is 
much different underneath this legislation and that is why we 
have the State insurance commissioners and State folks here 
because they really have the consumer protection. 
Unfortunately, it is lacking at the Federal effort and I will 
be glad to join you in trying to tighten that loophole.
    Mr. Burgess. Well, let me just ask Mr. Harrell then because 
it was always my understanding in my home State of Texas that 
when the insurance commissioner had the ultimate trump card. 
They could pull the license of someone to sell insurance in the 
State and then you told Mr. Whitfield that you do not think you 
have that authority in this situation?
    Mr. Harrell. That was an issue that was raised by our 
attorney general lawyers. It is an issue that is out there. The 
Department of Insurance still believes that we have the legal 
jurisdiction over yanking, as you called it, the agent's 
license. And we would make a referral if we determined if or 
thought there were criminal activities.
    Mr. Burgess. Well, and I would encourage you to do so and I 
would hope you would do so if that is indeed the case. Ms. 
Clegg, let me just ask you, I know when Medicare Part D first 
started, my office, you are correct, there were some problems 
and my office was aware of the problems we had in our area. I 
took each of those problems on as individual casework, if the 
person who was calling and complaining was willing to sign the 
appropriate formwork to allow me to intercede on their behalf. 
I know Washington, DC has a delegate, not a representative, but 
did you contact your delegate's office? Did you get the 
delegate's office involved in the individual casework when 
these problems started to come to light? You alluded that you 
had some problems with some of the privacy restrictions that 
prevented you from getting too deeply into a person's medical 
care and I appreciate that. Obviously, privacy laws are 
something that we continue to strengthen up here and that is 
always going to be an issue, but if the person was willing to 
sign a release at the delegate's office and let their delegate 
intercede with CMS directly on their behalf, did that happen at 
Judiciary Center?
    Ms. Clegg-Boodram. No, we did do an approach to the 
delegate's office but we did not get a response. So I just kept 
moving until I could find someone to help us.
    Mr. Burgess. Well, again anyone has the right to petition 
their member for help and we were pretty aggressive about it 
because the pharmacist, some of which I knew from my previous 
professional life, were not at all shy about calling me and 
faxing me and telling me the problems they were having so we 
did take a very aggressive stance and CMS to their credit would 
deal with those. And I would just offer that as--if you 
continue to have problems, please, do not overlook that as an 
avenue because my experience I found that to be a pretty 
powerful way to intercede on someone's behalf and from again, 
maybe our experience was different. I have not had the 
experience that has been discussed here today and to the best 
of my knowledge it has not come up as a constituent issue back 
in the district office, but you can bet I will be checking on 
it later on today. I think the individual Member of Congress' 
office does have some ability to help dis-enroll, with the dis-
enrollment process and working through some of these problems 
and if we are the ones who caused it then, as has been alleged, 
then certainly we are the ones who should be on the front lines 
of solving it. Just as we have dealt with the passport issue 
here recently. Thank you, Mr. Chairman, for your indulgence. I 
will yield back.
    Mr. Stupak. Thank you, Mr. Burgess.
    Ms. Clegg-Boodram. May I speak?
    Mr. Stupak. I have to go to Mr. Murphy. I think we are 
going to go another round. I am certainly going to give you an 
opportunity and your residents if they want to say a few words.
    Mr. Murphy, 5 minutes.
    Mr. Murphy. Thank you, Mr. Chairman. I want to ask a couple 
of folks, maybe Ms. Williams, you can help me with this. I am 
trying to get a sense of how you were presented information on 
these plans. So, for example, when someone was talking to you 
about purchasing a Medicare Advantage plan, I am correct there, 
that is what someone offered you, right? Did they offer a 
comparison for example of Medicare Advantage or something else, 
do you remember?
    Ms. Williams. Well, if I can answer this correctly. First, 
I was having trouble with another insurance company. OK. And 
when I heard about Advantage and what they had to offer and I 
went with them because I thought it was better then I found out 
that it wasn't what I thought it was. When they interviewed me 
I gave them my Medicaid and Medicare card. I asked them would I 
need this and they said no, I didn't need that anymore, that I 
would be covered with them.
    Mr. Murphy. Can you, and this is really helpful and thank 
you so much, if you could try and recall to the best of your 
ability did they mention specifically what the Medicare 
Advantage plan would cover that the Medicare and Medicaid 
wouldn't cover?
    Ms. Williams. They said that it would cover dental, eye, 
eye doctor and something else and I asked them what about my 
medicine? And they said that is why I didn't need the Medicaid 
and Medicare because they would cover it.
    Mr. Murphy. So dental, eye and medicine, and then when you 
started with your Medicare Advantage plan did you find that 
they did or did not cover dental and eye and medicine?
    Ms. Williams. Well, I didn't take it that far to find out.
    Mr. Murphy. OK.
    Ms. Williams. Only as far as my medicine, I got sick.
    Mr. Murphy. I appreciate it. I am trying to find out. I am 
so sorry this happened to you.
    Ms. Mezey. Congressman, can I explain what happened to Ms. 
Williams?
    Mr. Murphy. Yes.
    Ms. Mezey. OK. Ms. Williams was previously in a Medicare 
Advantage plan that also had prescription drug coverage. So 
when Ms. Williams signed-up with the Advantra Freedom plan 
which did not have drug coverage and this was not made clear to 
her, she was in the hospital, she came out of the hospital and 
had to take steroids and antibiotics and those drugs were not 
covered.
    Mr. Murphy. And I am trying to find out all of these 
elements and thank you, it helps me to know this, Ms. Williams, 
and I am sorry this is upsetting for her. I am trying to 
understand what these folks said to you and it really helps us 
a lot to know that. Is there anybody else who can give us 
information in terms of the kind of information that was said 
on these sales pitches in particular? Ms. Royal, could you let 
us know a couple things?
    Ms. Royal. Yes. I was the first person who informed Brenda 
about the problems I was having. I had to go to the hospital 
for a procedure. They had me down there as Medicare HMO. I said 
I have regular Medicare and Medicaid. And so I could not get my 
procedure done and so when I got home that evening I had got 
the card from Advantage before I got any other information and 
it said doctor co-payment $10, emergency room $50, and so I had 
called customer service. I said I can't afford to pay $10 for 
each doctor's appointment that I have I said because I go to 
the doctor sometimes four times in a month. And so she said 
well the reason I enter us in it, she said well you can write 
us a letter and stating that I no longer have to be in the 
program.
    So I said what about my Medicare and Medicaid? She said I 
would no longer have Medicaid and Medicare . That would be 
discontinued and I would their insurance. I said well I don't 
want your insurance I said because I prefer to have my Medicaid 
and Medicare because it said that I may not have the same 
doctor and be able to go to the same hospital. I said well I 
have about five different doctors. I said I cannot afford to 
try and find another doctor to train him and I said and have 
different hospital because I went to Providence [Hospital]. 
Providence told me that they did not carry that type of 
insurance.
    Mr. Murphy. And just to be clear, and this is all what a 
salesperson was telling you with Medicare?
    Ms. Royal. They told me that they didn't even mention that 
I had to change doctors.
    Mr. Murphy. OK.
    Ms. Royal. They didn't say that.
    Mr. Murphy. That was never told to you----
    Ms. Royal. Medicaid would take care of my eyes, my dental 
and ears, nose and throat, which Medicare do not handle. But I 
get all of that from my Medicare and my Medicaid.
    Mr. Murphy. OK. Thank you, Mr. Chairman.
    Mr. Stupak. Thank you. A few more questions here for you.
    Ms. Royal. Oh, excuse me, I did have to show them my 
Medicaid and my Medicare card.
    Mr. Stupak. Ms. Healey, Ms. Royal was just talking about 
Medicare and Medicaid and underneath the MMA Act of 2005 the 
dual-eligibles are no longer, it doesn't exist. Would you 
explain that a little bit the dual-eligibles and how it is 
underneath the new program because there is so much confusion 
out there and if you would explain that.
    Ms. Healey. The dual-eligibles? There are several different 
types of dual-eligibles. If you have Medicare and you may have 
what is called a qualified Medicare beneficiary where your co-
pays and your co-insurance would be taken care of, the next 
level would be what is called a SLMB, Specified Medicare Low, I 
believe the acronym is wrong, and then QIs, and each one is a 
different level but the QMBs are the full duals and that is 
where Medicare and Medicaid covers most of their cost, all of 
their costs actually.
    Mr. Stupak. I guess the point I was trying to make and it 
is easy for us to ramble off those acronyms but for people like 
Ms. Royal and others it is very, very difficult and they don't 
understand the changes that took place in 2005, therefore, 
their coverage is much different then what it was before.
    Mr. Harrell, Mr. Burgess and I were talking a little bit 
about it, about the law and the agents. You indicated you have 
jurisdiction over the agents but do you have jurisdiction over 
the policies that are being presented in your State of 
Mississippi or is that a subject still open to interpretation?
    Mr. Harrell. The position is that we don't have 
jurisdiction over the product itself which would be the 
policies' marketing.
    Mr. Stupak. Just the agents then?
    Mr. Harrell. Yes, sir.
    Mr. Stupak. Mr. Lipschutz, you indicated that one of the 
things we have to do is to commission structure, take a closer 
look at the commission structure. I get the impression that 
Medicare Advantage are profit-driven policies?
    Mr. Lipschutz. Well, they are profit-driven policies for 
the companies but they also try to maximize enrollment into 
their plans by using commission structures that tend to pay 
more in commissions for enrollment into Medicare Advantage 
plans than other plans and it is not uncommon for plans to pay 
three, four, five, six times as much in commissions, each 
commission in a Medicare Advantage plan than they pay for a 
standard----
    Mr. Stupak. Give me an example of a commission for a 
Medicare Advantage plan versus a different plan.
    Mr. Lipschutz. Well, one example would be say a company 
that offers both a stand alone part D prescription drug product 
and a Medicare Advantage plan will typically offer say $50 for 
each enrollment into a stand-alone part D product and it will 
offer $250 or more for each enrollment into a Medicare 
Advantage product. That creates an incentive on the part of the 
agent to steer people towards those Medicare Advantage products 
regardless of whether or not that is actually the best option 
for an individual.
    Mr. Stupak. What responsibility, we talked a little bit 
about agents here and their fees and commissions, but what 
responsibility does the insurance carrier itself, the parent 
company, have? Here are two people like Ms. Royal and Ms. 
Williams and Mr. Hammonds, and others.
    Mr. Lipschutz. It is my understanding that the companies 
are free to set their own commission structures. A CMS 
marketing guideline says that companies can set commission 
structures commensurate with the level of involvement that is 
entailed when trying to describe a product to an individual. So 
in theory the Medicare Advantage product is more complex than 
the stand-alone part D product the company can pay more or a 
greater commission. But there are no standards that require an 
agent to actually explain the additional complexity of a 
particular plan. It is my understanding that it's a CMS 
position that they do not have the ability to regulate 
commissions that are paid to insurance agents.
    Mr. Stupak. And have you or Mr. Harrell or Ms. Healey, have 
you--gone back to the insurance carriers, the parent company 
and say look what your agents are doing? You have a 
responsibility here if not legal at least moral and ethical to 
make sure that your policies are being presented accurately to 
individuals. Have you contacted anyone like that?
    Mr. Lipschutz. We have contacted some companies and some 
companies have contacted us in response to complaints that we 
have made about agent activity.
    Mr. Stupak. Mr. Harrell.
    Mr. Harrell. We have done the same thing in Mississippi 
working with the respective carriers, working with CMS, working 
with Social Security Administration and we have two on-going 
marked conduct examinations of two of the carriers.
    Mr. Stupak. Ms. Healey.
    Ms. Healey. We have done the same thing, in fact, we worked 
with some agents to talk about the difference between a full 
dual and someone who just receives only Medicare.
    Mr. Stupak. What I have seen thus far from CMS is maybe 
some voluntary guidelines. Do you think voluntary guidelines 
work or do we need more? Anyone, Mr. Harrell, Mr. Lipschutz, 
Ms. Healey, Mr. Harrell?
    Mr. Harrell. I don't think it has worked up to now. Same as 
some of the same problems that we are seeing today are the same 
problems that the Department of Insurance saw in the late 1980s 
and early 1990s with Medigap products and it hasn't worked to 
date and I don't think it is going to work.
    Mr. Stupak. Ms. Healey.
    Ms. Healey. We are moving forward with our toolkit because 
we are going to focus on prevention. Two of the things we have 
already developed is a form that we want the beneficiary to 
fill out, did you check to make sure that your doctor is going 
to accept this? Did you contact SHIP to work with us? We also 
have a form that we can, that SHIP can hand the agent and they 
will need to initial that this plan is going to take them out 
of original Medicare so they are aware of what they are going 
to be facing and try to make an informed decision because we 
feel that the seniors are failing to ask enough questions and 
they are not verifying the information and they are not 
checking with a trusted resource such as SHIP before they make 
that decision because the agents who are doing this are 
basically predators.
    Mr. Stupak. Sure. Mr. Lipschutz, did you want to add 
anything?
    Mr. Lipschutz. I would like to highlight a statistic I came 
across the other day. It is my understanding that nationwide 
there are roughly 12 to 14,000 SHIP counselors, including 
volunteers. That is compared to what some industry estimates 
put at 200,000 agents selling Medicare products across the 
country. Whereas insurance agents are specifically trying to 
steer people towards particular plans the SHIP programs are not 
permitted to do so and instead it is their mission to provide 
unbiased counseling about individual's options so that people 
can make informed decisions about their choice.
    Mr. Stupak. Thanks. My time has expired. Ms. Clegg-Boodram, 
looked like you were wanting to say something there. Was there 
something you want to say?
    Ms. Clegg-Boodram. These individuals never made it clear 
that they were an insurance company, No. 1. Number 2, when they 
talked to our people they knew that most of our people did not 
understand what they were talking about. Ms. Williams and Mr. 
Grady Hammonds and Ms. Royal are probably three of the most 
proactive individuals in our community. So that is the level 
and it is not fair. And I have one last little, little 
question, OK?
    Mr. Stupak. Sure.
    Ms. Clegg-Boodran. When you guys designed this program I 
think you all realized that it had some problems because it 
feels like it was designed to fail. OK. That is No. 1. I mean 
my body is falling apart but parts of my mind still work. Then, 
how could this program, and any rule written into it, supersede 
the laws of this country so that someone couldn't be prosecuted 
for Medicare fraud? I have a problem with that. So when you 
guys are doing your legislative duties or whatever, you guys 
got really good lawyers because they are making the dollars and 
I think this whole problem is a dollar thing. And it has 
nothing to do with the people of this country. And it is 
getting old. Thank you very much.
    Mr. Stupak. Thank you for your testimony and this program 
was controversial when it was brought forth and it passed by a 
very close vote, and but it did pass. In this country when it 
passes, it becomes law. We have to administer it whether you 
support the program or not the best as possibly can and we have 
a couple more panels here and that is why your testimony is 
important to us here today to understand the problems being 
faced by folks out there.
    Mr. Whitfield, questions please?
    Mr. Whitfield. I don't have anymore questions. I do have 
one comment before Mr. Walden I understand has questions. Ms. 
Clegg-Boodram, I want you to know that CMS will be testifying 
on a later panel and they have a responsibility for managing 
the entire Medicare Program, and Medicaid as well at the 
Federal level. But I can assure you that anyone that defrauds a 
person relating to Medicare can be prosecuted. So this 
Medicare, and we will have them talk about that but we do 
appreciate your time very much today.
    Mr. Stupak. Mr. Walden.
    Mr. Walden. Thank you, Mr. Chairman. Thank you, Mr. 
Whitfield. I apologize for having to come and go here but some 
other meetings I had to attend to but I am very concerned about 
what I heard in your testimony and obviously it is our 
obligation to not only learn about what went wrong but how to 
make sure it doesn't go wrong again. And how to make sure that 
people who have been harmed are unharmed, which is not a word 
but I think it gets the meaning of the problem here.
    Mr. Harrell, how effective do you think the new practices 
such as post enrollment call-back can be. I mean I have heard 
from some that say, OK, the agent comes in and makes the sale 
but then the company calls back and says here is what you were 
sold. Are you sure this is what works for you.
    Mr. Harrell. The problem is when they call back, the 
insured is still not going to understand it. That's the problem 
that I think Ms. Boodram referenced a while ago with the three 
witnesses she brought here today. They were, without putting 
words in their mouth, they were at the top of the list in terms 
of the most active. Who's out there protecting the ones who 
don't know who to call? They don't know what the agents are 
selling them. They don't know who CMS is or the carrier when 
they call-back, so I don't see the call-back in some of the 
more despicable cases. I don't see the call-back working.
    Mr. Walden. OK. So how would you fix this then? Would you 
just ban the sale of these products altogether?
    Mr. Harrell. For the informed person I don't think the 
product is a bad situation, for some people it is a good 
product. If you can somehow just like the Congress did with the 
Medigap product, if you give the State regulators the 
jurisdiction over the product and the agent I think with that 
joint effort that Congress did in the 1990s along with NAIC, 
was able to solve the problem. You don't see those problems in 
Medigap now that you see in Medicare Advantage due to the 
policing of it from the State regulators who are in every State 
who have been able to solve that. When you go out and penalize 
the agent and the company that is when you are going to start 
seeing some reaction from the carriers.
    Mr. Walden. Are you seeing any of these problems with the 
Medicare Part D?
    Mr. Harrell. No, sir.
    Mr. Walden. And are those products sold by agents as well?
    Mr. Harrell. I mean you usually see problems with any 
insurance product, in Mississippi we are very familiar with the 
insurance issues the last couple years but we are not seeing 
the same volume you are going to get a problem on any insurance 
product, but the volume of what we are seeing, the largest 
volume of complaints we are seeing, and we are a very rural 
State, is involving Medicare Advantage once you get past 
Hurricane Katrina issues.
    Those are the two biggest problems we are seeing.
    Mr. Walden. Why is it you are not seeing a problem with 
Medicare D? That is a very complicated process I can assure you 
having my wife's parents sign-up and go through that I 
retreated immediately out of the room and told my staff, we 
have got to hold some hearings, some meetings out, in the 
district to educate people.
    Mr. Harrell. I don't know exactly, I am very familiar with 
that. My own parents call me about Medicare Advantage, what is 
this? And I quickly got them in touch with our consumer 
services director.
    Mr. Walden. Right.
    Mr. Harrell. And had her explain all of the nuances and 
differences similar to what Ms. Healey does. I wasn't capable 
of doing that and any time you are representing your parents, I 
am also a lawyer by trade, it gets to be dangerous. But what I 
have seen I don't know why when we are still complaints but we 
are not seeing anywhere near the volume of the complaints we 
are seeing on Advantage.
    Mr. Walden. And when you talk about the volume in the 
Medigap plans, can you give me some perspective here of how 
many complaints you get overall versus complaints out of 
Medigap? What is that volume figure you are referencing?
    Mr. Harrell. I didn't bring those stats with me. Our office 
keeps the stats of what kind of complaints we get but I will be 
glad to provide them.
    Mr. Walden. Is it twice as many as you get on other plans?
    Mr. Harrell. The Medicare Advantage is the leader as it 
relates to all complaints that we are getting now.
    Mr. Walden. Among health and among these----
    Mr. Harrell. Among all types of insurance.
    Mr. Walden. All types. So does that include property, 
casualty, auto?
    Mr. Harrell. It even includes Katrina claims.
    Mr. Walden. OK. And so it is No. 1.
    Mr. Harrell. Yes, sir.
    Mr. Walden. In Mississippi. Is that the same in California 
from your perspective, Mr. Lipschutz?
    Mr. Lipschutz. I think in California the State Department 
of Insurance hasn't registered as many complaints as other 
State insurance departments, in part because of the way 
different SHIP programs are organized in different States. In 
some States SHIP programs are administered through the 
Department of Aging, whereas in some States it is administered 
through the Department of Insurance. And I think in States 
where the SHIP program is administered through the Department 
of Insurance it is much more likely that complaints will get 
registered and it is a much more streamlined process. So while 
the complaint volume to the Department of Insurance might not 
be as high in California as some of these other States, that 
does not mean that the volume of problems are not in fact 
happening.
    Mr. Walden. OK. I understand what you are saying. My time 
is about to expire. I want to thank all of you for your 
testimony today and we obviously are going to pursue this with 
vigor and certainly look to CMS to see how they plan to address 
this issue as well. Thank you, Mr. Chairman.
    Mr. Stupak. Mr. Burgess, any questions?
    Mr. Burgess. Let me just ask Mr. Harrell a follow-up to 
what your discussion with Mr. Walden. You said penalizing the 
agent and the company was the best way to get this problem 
solved. Did I understand that correctly?
    Mr. Harrell. In our opinion, yes, sir.
    Mr. Burgess. And right now there is a discrepancy with how 
you are able to respond to someone who has a problem with 
Medigap as opposed to someone who is in a Medicare Advantage 
Program, is that correct?
    Mr. Harrell. Yes, sir.
    Mr. Burgess. And what is the nature of that discrepancy?
    Mr. Harrell. Looking at it with the Department of Insurance 
does not have jurisdiction over the product that is being sold 
in Medicare Advantage due to the standardization that Congress 
passed that relates to Medigap. If we could tie the two 
together, link the company and the agent because the agent is 
representing the company, he is not representing me.
    Mr. Burgess. OK. Is the plan licensed by the State?
    Mr. Harrell. The insurance company is, yes, sir.
    Mr. Burgess. And you still have jurisdiction over that, is 
that not correct?
    Mr. Harrell. On the company itself we do but not the 
underlying product that is being marketed.
    Mr. Burgess. But if it is amalgamated to whomever and they 
are selling a Medicare Advantage plan in your State you could 
simply pull all of their license for all of their products, 
could you not?
    Mr. Harrell. That is in question. Our lawyers are advising 
us that they don't think we have jurisdiction over the product 
itself. Now whether we can or cannot take the license is 
something that we have not, we have looked at it but also that 
would also harm all the other individuals who sold good 
products.
    Mr. Burgess. Sure, sure it would be a drastic step, but it 
would certainly be a way of getting the company's attention.
    Mr. Harrell. Amongst the other thousands of policyholders 
who were not victimized, yes, sir.
    Mr. Burgess. Well, let me ask you this. If you had another 
company with another policy that wasn't Medicare Advantage and 
you discovered a problem with it what would be the trajectory 
that you would follow there?
    Mr. Harrell. It depends on what the situation would be. 
Examine the company to find out what the problem was, what the 
violations and how to fix them. And then take disciplinary 
action against the company.
    Mr. Burgess. And in your opinion what is it that prevents 
you from doing that for the Medicare Advantage purchasers in 
your State who feel that they have been harmed?
    Mr. Harrell. Our lawyers have looked at it and had 
discussions with CMS. It is their opinion that we do not have 
the underlying jurisdiction to take action against the carrier 
as relates to the product being marketed.
    Mr. Burgess. Well, I think we are going to hear from CMS 
later on this morning. I will be interested in their response 
to that as well but clearly if that is an area where you don't 
feel you have the power to advocate on behalf of the people in 
your State, that is something that I think needs to be 
corrected. And, Mr. Chairman, I will just for the good of the 
order, I did follow-up with my constituent service department 
back home. We currently have no Medicare Advantage cases that 
are pending. We have two Medicare Part D that were just 
resolved that were apparently long-term cases where people were 
trying to dis-enroll and weren't allowed to do that. But again 
the individual Member's office has considerable ability to deal 
with CMS and for those of you who are having difficulty I would 
not overlook that as an avenue to get some immediate help for 
the recipients who are in the greatest amount of need. And with 
that, Mr. Chairman, I will yield back.
    Mr. Stupak. I thank you, Mr. Burgess. Every week my staff 
gives a report and Medicare Advantage is one of those that 
shows up every week in my district and I have half of the 
geographic size in the State of Michigan and the problem we see 
is once you recognize a problem with Medicare Advantage and you 
want to dis-enroll, the length of time it takes and the hoops 
you have to go through for our constituents is very, very 
difficult, to dis-enroll once you realize there is a problem 
there.
    Mr. Burgess. But if the gentleman will yield, that and that 
is exactly the place where the congressional office can make a 
difference. Two cases that I referred to were long-standing 
cases and we had them resolved within one, 4 weeks, and one, 5 
weeks. I grant you that is a long period of time but when 
someone has been fighting it for a year they are grateful to 
have that sort of attention.
    Mr. Stupak. Sure. And on behalf of Ms. Norton, the delegate 
from Washington, DC, she advises that if you would vote to make 
DC full voting rights in the Congress, she could move more 
expeditiously to help her constituents. She is a very effective 
voice here, right. Mr. Murphy, did you have any further 
questions?
    Mr. Murphy. Yes, Mr. Chairman, just real quickly.
    Mr. Stupak. Sure.
    Mr. Murphy. Mr. Harrell, are these the issues that the 
insurance commissioners through other States have prepared any 
sort of report on, these problems with Medicare Advantage, to 
your knowledge?
    Mr. Harrell. I believe the National Association of 
Insurance Commissioners is working on that. You have two 
commissioners on another panel later today and I think they can 
update you as well. I know that the southeastern zone of the 
insurance commissioners have been working on this together 
trying to solve the problem. We have written our entire 
congressional delegation on this issue.
    Mr. Murphy. OK. I certainly hope that they will make that 
available to the chairman. Also, how have insurance companies 
responded to your requests about complaints from people selling 
these plans in this way?
    Mr. Harrell. On a one-on-one basis they have been very 
cooperative working with us trying to solve the problems. They 
have also been trying to work with the Social Security 
Administration trying to get the bank drafts stopped, trying to 
dry-up the checks, working with CMS. It is a very difficult 
problem because you have got two very large governmental 
agencies working together, hopefully, and a large insurance 
company trying to work together but on a one-on-one basis they 
have been, but that is just one-on-one of the ones who are 
contacting the Department of Insurance. I know to contact CMS, 
many don't know who they are and may not know to contact their 
Senator or their Representative because they don't know that it 
is not an insurance product. In fact, when we have written our 
congressional delegation, we have even spoken to some of our 
congressional staffers and some of them were not sure why the 
people were calling them either initially. Now they do now 
because of all the publicity that has been out there in the 
last year.
    Mr. Murphy. When they have identified that that there is 
some problems in terms of agents, perhaps, less than scrupulous 
behavior in terms of selling or promising plans there are a 
couple of things I want to know. One is while people were 
looking to switch plans back were there gaps in their coverage 
and did anybody offer anything during that time to help with 
payments or medications or hospital or anything, or were these 
people left completely out in the dark.
    Mr. Harrell. It is my understanding--I defer to some other 
panel--some of them were left in some gap periods because they 
had cancelled one and trying to get dis-enrolled in the other.
    Mr. Murphy. How do we keep track of agents that are 
involved in fraudulent behavior then? How do you keep track of 
them? Is there a national database? How do we know in the 
future if these people are trying to sell other----
    Mr. Harrell. The National Association of Insurance 
Commissioners has formulated a national database for an agent. 
So if an agent in Pennsylvania has his license revoked and he 
moves to Mississippi, when we run his name through the system 
it will reveal that Pennsylvania Department of Insurance took 
action regarding Mr. Smith.
    Mr. Murphy. And then here is another issue here. When we 
read now and then about people being involved in unscrupulous 
activity with regard to sales tactics with insurance plans what 
is unique to this issue, the Medicare Advantage or the Medicare 
issues that is not just a matter of people doing bad things. 
But what is there unique to this that is allowing this to occur 
that we need to change?
    Mr. Harrell. Well, my personal opinion is you look at the 
victims here, the insureds, they are all elderly. Some of them 
are in good mental shape, some of them in good physical shape, 
a lot of them are not. If you go into a nursing home and start 
enrolling individuals, you are going to have some who do not 
need to be in a position of making that decision. And we have 
seen a lot of them where they would have a power of attorney, 
be it either brother or sister or another loved one, that is a 
power of attorney. That person is supposed to be there but for 
some reason they are not. I don't know why the agent would have 
gone when the power of attorney person is not there. We are 
seeing instances of those and some of the issues we have talked 
about today are, if you give the States authority to enforce 
it, right now that is in question, do the State regulators have 
that authority? That is what we are trained for, that is what 
we have been doing for over a hundred years, not me personally, 
but that is what the insurance forum is across the country are 
doing. All of them have specially-trained staff. In Mississippi 
our SHIP program is not even part of the Mississippi Department 
of Insurance and my figures don't even include what the SHIP 
program has gathered complaints on.
    Mr. Murphy. Ms. Healey or Mr. Lipschutz, either of you have 
any comments on this in terms of the questions I just raised 
about other things specific to this Medicare plan that allows 
these fraudulent salespeople to operate here?
    Mr. Lipschutz. I would say part of the reason is due to the 
complexity of the Medicare Advantage Program, the sheer number 
of plans that are now available, the differentiation between 
the plan types, the great flexibility the plans have to design 
their benefits and cost-sharing structures that can sometimes 
leave people paying more for certain benefits if they are in 
such a plan than they would in original Medicare.
    Mr. Murphy. Did any of you know is there any side-by-side 
comparison of here is what is in Medicare, here is Medicaid, 
here is what is Medicaid Advantage, here is the preferred 
plans, any side-by-side clear comparisons so that people can 
either look at to see what is in this and what is not and how 
much is it going to cost me? I haven't been able to find any 
and so I find, no wonder people can be victimized.
    Mr. Lipschutz. I think some SHIP programs do piece together 
their own side-by-side comparisons of various plans. I would 
also ask the Congressman to direct the question toward CMS 
because there may be some prohibitions against plans actually 
comparing benefits against one another. The one of our 
outstanding issues when it comes to particularly Private Fee-
for-Service plans is that we believe that those that are 
targeting marketing towards dual-eligibiles should be able to 
clearly show how the benefits they provide are, in fact, better 
than State Medicaid benefits, if at all.
    Mr. Murphy. Thank you. Thank you, Mr. Chairman.
    Mr. Stupak. Thank you. That concludes questions of this 
panel and I want to thank this panel once again for putting and 
bringing forth and educating Members as to the problems faced 
with a Medicare Advantage. Thank you all for coming and you are 
dismissed. And we will have our second panel come forward.
    Our second panel of witnessess will be Mr. Francis 
Soistman, executive vice president of health plan operations at 
Coventry Health Care, Incorporated, Mr. Gary Bailey, vice 
president of Medicare Operational Performance at WellCare 
Health Plans, Incorporated, and Ms. Peggy Olson with Healthwise 
Insurance Planning, LLC. Welcome, and as you know it is a 
policy of this subcommittee to take all testimony under oath. 
Please be advised that witnesses have a right under the rules 
of the House to be advised by counsel during testimony. Do any 
of our three witnesses wish to be represented by counsel here 
today? They all indicate no. Then if so, I am going to ask you 
to stand and raise your right hand and take the oath.
    [Witnesses sworn]
    Mr. Stupak. Let the record reflect all witnesses replied in 
the affirmative. You are now under oath. We will start with our 
opening statements.
    Mr. Soistman, do you want to start, please.

   STATEMENT OF FRANCIS SOISTMAN, EXECUTIVE VICE PRESIDENT, 
  GOVERNMENT AND INDIVIDUAL PLANS, EXECUTIVE VICE PRESIDENT, 
   HEALTH PLAN OPERATIONS, COVENTRY HEALTH CARE, INCORPORATED

    Mr. Soistman. Chairman Stupak, Ranking Member Whitfield and 
member of the subcommittee, thank you for inviting me here 
today. I am Fran Soistman, executive vice president of Coventry 
Health Care, a national health insurance company headquartered 
in Bethesda, Maryland. Our Medicare programs provide part D 
prescription drug coverage to 700,000 beneficiaries and serves 
more than 200,000 beneficiaries through a variety of Medicare 
Advantage plans. We understand the committee's concerns about 
marketing activities of independent agents and we appreciate 
the opportunity to discuss these matters with you.
    I want to make three points today. Number 1, putting 
beneficiaries first is a core value for Coventry and we have a 
very good track record in doing just that. Number 2, while we 
have faced some unanticipated problems with the conduct of some 
independent agents we have taken steps to put this right. And 
No. 3, we remain committed to working with CMS, State 
regulators and our industry to insure fair and appropriate 
marketing practices.
    As a leader in serving Medicare beneficiaries for more than 
a dozen years we have a solid track record. In marketing our 
HMO and PPO plans through our internal sales force and then our 
part D plans through national distribution partners we had 
great success and encountered few complaints about agent 
marketing practices.
    When we began offering Private Fee-for-Service plans for 
2007 enrollment we ran into some unexpected challenges with the 
marketing activities of certain independent brokers and agents. 
The situation at Judiciary House where an agent misrepresented 
himself and misrepresented our product is an unfortunate 
example of these activities. This was a deplorable situation 
and I want to extend my personal and Coventry's deepest 
apologies to Mr. Hammonds, Ms. Royal and Ms. Williams. This 
kind of conduct is unacceptable.
    Coventry has terminated both agents and the agency. We have 
taken a number of steps over the past 8 months to deter sales 
to dual-eligibles, protect beneficiaries, and enhance agent 
training and accountability. First, in January we sent two 
field communications to independent agents emphasizing that our 
Private Fee-for-Service plans are likely not suitable for dual-
eligibles and reiterating special marketing guidelines for, 
excuse me, for institutionalized settings.
    Second, to further deter agents from selling Private Fee-
for-Service plans to dual-eligibles, we proposed eliminating 
commissions on such sales. CMS advised that our proposal would 
not satisfy their non-discrimination rules so instead we 
stopped paying upfront commissions on these sales. We have 
already seen significant reductions as a result.
    Third, we began a successful program to make verification 
calls to all enrollees in Mississippi to confirm that they 
understand and intend to sign-up for our Private Fee-for-
Service plans. We are moving to extend this program across the 
country.
    Fourth, we are implementing stricter guidelines for 
marketing our products in subsidized housing facilities. Fifth, 
we raised the bar for agents requiring they pass a test to 
ensure their grasp of our products and the do's and don'ts of 
marketing. Sixth, agents are now required to re-train and re-
test prior to selling products for the 2008 enrollment year. 
Seventh, we have enhanced our broker quality-management program 
to include new performance metrics and an expanded special 
investigations unit that allow us to evaluate agent practices 
and take action when necessary.
    Coventry remains committed to working with CMS, State 
regulators and our industry to protect Medicare beneficiaries. 
As the committee knows on June 15, CMS, Coventry and six other 
leading companies announced a temporary suspension of Private 
Fee-for-Service marketing activities. This was done to 
strengthen consumer protections for early implementation of 
CMS' new marketing guidelines for 2008.
    We continue to work constructively with regulators in a 
number of States including Mississippi, Georgia and Oklahoma. 
Finally, we are working with AHIP to identify helpful industry 
level measures such as a national registry of sanctioned 
brokers.
    In conclusion, Mr. Chairman, we have no tolerance for 
improper agent conduct and we are committed to doing whatever 
it takes to ensure appropriate marketing practices by everyone 
who sells a Coventry product. This is good for our customers. 
It is good for us. We have an excellent reputation in this 
industry. We value that reputation and we intend to keep it.
    Thank you.
    [The prepared statement of Mr. Soistman follows:]

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    Mr. Stupak. Thank you.
    Ms. Olson, your opening statement, please, for 5 minutes.

  STATEMENT OF PEGGY OLSON, HEALTHWISE INSURANCE PLANNING, LLC

    Ms. Olson. My name is Peggy Olson. I am honored to have 
been asked to testify before the subcommittee. I am a licensed 
health insurance agent from Portland, OR, and I specialize in 
the sale of Medicare-related health insurance products 
including Medicare Advantage plans. I have been in the 
insurance business for 25 years and I have counseled seniors 
since 1989.
    I am very aware of the publicity surrounding agents selling 
Medicare Advantage plans. I make absolutely no excuses for 
those individuals or their egregious violations of the Medicare 
marketing rules. However, I do not think the outrageous 
behavior of a dishonest few is in any way reflective of my 
entire industry.
    The sale of senior products is a labor of love. This is not 
a quick way to get rich. I have never been offered a trip to 
Las Vegas.
    The Medicare eligible population has unique needs. Clients 
are frequently suffering from debilitating or chronic medical 
conditions. Many have trouble with functional literacy or 
comprehension. Selling any Medicare-related product if it is 
done properly is a very labor-intensive process that requires 
patience, compassion and specialized knowledge.
    I have an example in here of a client I worked with 
recently who it took a long, long time to get her problems 
straightened-out. For this nice lady, I will receive $4 per 
month in commission for the entire time she stays on the 
contract.
    The standard I use for advising my clients is to treat them 
as I would my own parents and this is the standard that most of 
my professional colleagues use too. Most licensed producers who 
sell Medicare Advantage plans spend a lot of time advising 
their clients, answering questions and helping to select the 
best possible plan for them.
    I would hate to see the subcommittee take any actions that 
would limit the ability of people to access the services of a 
licensed, ethical health insurance producer. One of the main 
ways we can make sure that all producers selling Medicare-
related products do so in the most ethical manner is through 
education. My passion for education is a large part of what led 
me to become involved with the National Association of Health 
Underwriters, which is my industry's professional trade 
association. Since joining I have worked with HCFA, on Medigap 
standardization and to create agent training programs for the 
sale of Medicare managed care.
    NAHU has been committed to senior product education but I 
wanted to make sure that all of you were aware of the project 
we have undertaken in cooperation with America's health 
insurance plans to make sure the producers have access to high-
quality, consistent training.
    Our program has been reviewed by CMS and approved for 
Continuing Education Credit in almost every State, except 
Oregon. And we are actively promoting the course to both NAHU 
members and non-members. The program is currently being updated 
and expanded to include more training on Private Fee-for-
Service plans and will be available in a more universal format. 
It is our understanding this will be the standard for education 
for producers whether they are independent agents or employees 
of insurance carriers.
    The recent voluntary suspension of Medicare Advantage Fee-
for-Service product sales accentuates the need for this type of 
comprehensive training. It is our understanding that all 
carriers will utilize this uniform training and its required 
exam to be certain that all agents are trained with the same 
information.
    I truly appreciate this opportunity to appear before the 
subcommittee today and hope that I can help.
    [The prepared statement of Ms. Olson follows:]

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    Mr. Stupak. Thank you and thank you for your testimony.
    Mr. Bailey.

STATEMENT OF GARY BAILEY, VICE PRESIDENT, MEDICARE OPERATIONAL 
        PERFORMANCE, WELLCARE HEALTH PLANS, INCORPORATED

    Mr. Bailey. Mr. Chairman, Ranking Member Whitfield and 
other members of the committee, I appreciate the opportunity to 
testify about the sales practices of Medicare Advantage 
Programs. I am Gary Bailey, vice president, Medicare 
Operational Performance for WellCare Health Plans. At WellCare 
I am responsible for monitoring and improving our Medicare 
Advantage and prescription drug programs. Previously, I spent 
over 30 year at CMS working to improve the operations of the 
Medicare Program and services delivered to beneficiaries. Today 
I am proud to be working at WellCare, a company committed to 
providing high quality products and services to Medicare 
beneficiaries.
    WellCare is striving to have a best-in-class compliance 
program. We have a zero tolerance policy for inappropriate 
marketing. WellCare is a leading provider of managed-care 
services with a long-standing commitment to Medicare/Medicaid. 
Founded in 1985, our team of over 3,000 associates currently 
serves over 2.2 million Medicare/Medicaid members nationwide. 
We offer Medicare Advantage plans in 40 States and DC.
    Today I will speak about WellCare's efforts to protect 
beneficiaries in the marketing of Medicare Advantage plans. I 
will provide this committee with specific recommendations on 
how to improve this program. WellCare's corporate ethics and 
compliance program is called the Trust Program. We have 
enhanced the Trust Program with additional measures in the 
oversight of independent sales agents who market our Medicare 
Advantage products.
    These measures include we conduct a thorough pre-screening 
of all agents. We verify the agent as licensed. We conduct 
extensive criminal background checks. We have extensive agent 
training, re-training and testing. If an agent does not pass 
with 100 percent or if they are not trained or re-trained, they 
are suspended from selling WellCare's products.
    We maintain a field management program. We conduct ride-
alongs with our agents. We also look at dis-enrollment rates to 
see if there are any inappropriate trends. We call each and 
every member after they enroll in our plan to measure their 
satisfaction, to ensure that they fully understand their new 
plan and that they are fully informed.
    We have developed a strict code of conduct. Every agent 
agrees to the code of conduct before they can market our 
products.
    We have recently started a secret shopper program. We have 
an outside, independent organization that monitors our 
marketing efforts to give us feedback from the member and to 
ensure broker compliance. When any compliance issue is 
identified agents are immediately investigated and if 
appropriate are terminated. Over the last 7 months we have 
terminated 18 sales agents for marketing conduct violations.
    But there is more to do. We recently announced additional 
efforts to strengthen our compliance program. These include 
implementation of an in-bound telephone enrollment verification 
process. This system will ensure that prospective enrollees 
understand the plan while they are meeting with a licensed 
agent. We will find this out in real time.
    The program will be in addition to our 100 percent out-
bound call-back program already in place for new members. Also, 
since we are recording the call we can monitor the agent's 
behavior at the point of sale.
    On June 15, we announced our decision to join six other 
Medicare Advantage organizations in pledging to strengthen 
consumer protections for Medicare beneficiaries. The pledge 
implements CMS' 2008 marketing rules in 2007. This pledge 
includes a temporary suspension of the marketing of our Private 
Fee-for-Service plans until we implement these new rules.
    Our Trust Program's compliance process works. For example, 
in monitoring Medicare Advantage enrollment applications we 
proactively discovered an agent in Georgia that had submitted 
fraudulent applications. Working with the Georgia Department of 
Insurance and others, aggressive action was taken against this 
agent. This agent and his accomplice were subsequently 
arrested.
    In California we learned of improper marketing by an agent 
that translated approved marketing materials into Chinese and 
then distributed them to Medicare beneficiaries who do not 
speak English. We terminated this agent. Following this we 
immediately undertook a national agent re-training program and 
initiated a program of making calls to 100 percent of our 
members to verify their understanding of our plans.
    But we support even more improvements. First, we believe 
there should be a uniform national training program for all 
agents who sell Medicare Advantage products. Second, we believe 
a national database should be developed now to share 
information about those agents and brokers who have been 
sanctioned by a State or terminated by a health plan. We do not 
want to be associated with an agent or broker who has been 
terminated by another plan because of their non-compliance with 
State or Federal rules.
    Third, we believe all plans should conduct the in-bound 
telephone enrollment and verification process I described. If 
the national database had been established we would not have 
hired an independent agent selling for another plan whose 
license had already been suspended in Mississippi. This agent 
then moved and was selling Medicare Advantage plans in Alabama. 
We were one of the plans who unknowingly had this agent selling 
for us. We then learned he had lost his license. We 
investigated and terminated him within 72 hours. If we had had 
a national database he would never have been allowed to sell 
our products or any other plan's products.
    We appreciate the committee's attention to this important 
program and thank you for the opportunity to testify and I look 
forward to answering your questions.
    [The prepared statement of Mr. Bailey follows:]

                        Statement of Gary Bailey

     Good afternoon, Chairman Stupak, Ranking Member Whitfield 
and members of the Committee. I am Gary Bailey, Vice President, 
Medicare Operational Performance for WellCare Health Plans. In 
that role, I am responsible for monitoring and improving 
WellCare's operations and performance in our Medicare health 
plans, including both the Medicare Advantage (MA) plans and 
Medicare Prescription Drug Benefit plans (PDP). Previously, I 
was Deputy Director for Plan Policy and Operations in the 
Center for Beneficiary Choices at the Centers for Medicare & 
Medicaid Services (CMS). During my tenure at CMS, I was 
responsible for the administration of Medicare Advantage plans 
and the Medicare Prescription Drug Benefit. I appreciate this 
opportunity to testify about sales practices in the Medicare 
Advantage program, what we at WellCare have done to contribute 
to industry improvement, and what more can be done to ensure 
the program works well for Medicare beneficiaries.
     In my 32 years of Federal Government service at CMS, I 
consistently focused on improving the Medicare program. During 
my tenure at WellCare, I have been extremely impressed with 
WellCare's commitment to serving the needs of Medicare 
beneficiaries, the organization's responsiveness to rapidly 
changing Medicare program dynamics, and our commitment to 
strong corporate compliance. WellCare is a company that prides 
itself on continuous improvement, and I have seen this 
improvement first hand in our approach to Medicare Advantage 
sales and oversight.
     WellCare understands the challenges and the rules 
governing marketing practices in the Medicare Advantage 
program, particularly for new Private Fee for Service (PFFS) 
products that have expanded so rapidly. Health plans and their 
independent sales agents must abide by appropriate marketing 
and sales practices for these products so that beneficiaries 
understand the important differences between PFFS and 
traditional Medicare or other options, so they can select a 
plan that best fits their health care needs. At WellCare, we 
have a zero tolerance policy for non-compliance with our 
marketing guidelines. We will--and we have--promptly terminated 
contracts of non-compliant sales agents. It is our company's 
ethic to do more than merely ``follow-the-rules''--we have NO 
tolerance for any unethical behavior.
     In my testimony today, I will provide information about: 
WellCare's government-sponsored health care plans, specifically 
our Medicare Advantage PFFS plans; CMS's recent audit of 
WellCare's PFFS plans; our recently announced decision to join 
six other leading health plans in pledging to strengthen 
consumer protections for Medicare beneficiaries; and WellCare's 
zero-tolerance of inappropriate marketing. Finally, I will 
provide our recommendations about how further improvements can 
be made to marketing and oversight of Medicare Advantage plans.

                     I. About WellCare Health Plans

     WellCare is a leading provider of managed care services 
dedicated exclusively to government sponsored healthcare 
programs, such as Medicare and Medicaid. WellCare operates a 
variety of Medicaid and Medicare plans, including health plans 
for families, children, and the aged, blind, and disabled as 
well as prescription drug plans. Founded in 1985, our team of 
over 3,000 associates serves more than 2.2 million members 
nationwide. We currently operate networked managed care 
programs in eight states, and we are the fifth largest vendor 
to CMS for the nationwide PDP program.
     In order to better serve the Medicare population, WellCare 
continues to expand its range of Medicare products. In 2006, 
WellCare laid the foundation for the January 2007 nationwide 
launch of our Medicare Advantage PFFS plans that feature an 
open network and additional benefits for members. We operate 
our open-network MA plans through three life and health 
insurance subsidiaries under the WellCare name. We contract 
with licensed, independent sales agents across 39 states and 
offer these MA plans in 793 counties in 39 states and 
Washington, D.C. As of March 31, 2007, WellCare has enrolled 
over 32,000 members in our Medicare Advantage PFFS plans.

                       II. CMS Audit of WellCare

     As you may know, there was a report in the New York Times 
about a CMS audit conducted on WellCare's private fee-for-
service operations. The routine audit consisted of 
documentation review, interviews with WellCare staff and 
sampling of various records. Preliminary findings were issued 
during the exit conference in mid-March and formal findings 
were subsequently delivered to WellCare.
     As a result of the CMS audit, WellCare has improved 
several marketing processes, two of these, the ``secret 
shopper'' program and the telephonic enrollment system, will go 
a long way towards addressing the concerns put forth by CMS. In 
addition to those improvements, WellCare has implemented 
mandatory broker re-training and re-testing, the translation of 
additional materials into multiple languages, and additional 
outreach and coordination with advocacy groups and state 
agencies.
     WellCare appreciated the opportunity to have CMS come on-
site within the first 10 weeks of our launch of the Medicare 
Advantage private-fee-for-service program to provide early 
identification of concerns and improvement opportunities. We 
welcome input and communication from others on issues and 
concerns. We will investigate and take swift action when we 
suspect any abusive practices.

 III. Our Decision to Join Six Other Leading Medicare Advantage Health 
   Plans in Pledging to Strengthen Consumer Protections for Medicare 
                             Beneficiaries

     Based upon our concerns about misleading marketing 
practices by independent agents, WellCare has helped lead the 
drive toward industry improvements. We are working with CMS, 
America's Health Insurance Plans (AHIP), the National 
Association of Insurance Commissioners (NAIC) and other health 
plans to develop consistent compliance and oversight standards 
for independent sales agents.
     On June 15, WellCare announced its decision to join six 
other leading Medicare Advantage health plans in pledging to 
strengthen consumer protections for Medicare beneficiaries. 
This pledge includes the accelerated implementation of the 2008 
CMS Call Letter, the CMS marketing guidance provided to MA PFFS 
plans on May 25th as well as the development of best practices 
for compliance oversight of independent sales agents. To allow 
time for these activities, the pledge includes a temporary 
suspension of the marketing of our PFFS plans.
     Under the voluntary pledge of compliance with CMS, a plan 
may not market PFFS plans until CMS certifies that the plan has 
the additional systems and management controls in place to meet 
all the additional requirements specified in the May 25, 2007 
guidance and 2008 Call Letter issued by CMS. While the full 
range of updated requirements will be in effect for all 
sponsors of PFFS plans beginning October 1, 2007, WellCare and 
the six other MA health plans have agreed to accelerate the 
adoption of these new requirements. CMS will require the 
following protections before PFFS marketing can resume:

        All materials, including advertisements, 
enrollment materials, and materials used at sales presentations 
must include model disclaimer language provided by CMS in its 
guidance;
        All representatives selling the product must 
pass a written test that demonstrates their thorough 
familiarity with both the Medicare program and the product they 
are selling;
        A provider outreach and education program must 
be in place to ensure that providers have reasonable access to 
the plan terms and conditions of payment, and that provider 
relations staff are readily accessible to assist providers with 
questions concerning the plan;
        Outbound education and verification calls will 
be made to all beneficiaries requesting enrollment to ensure 
that they understand the plan rules;
        A list of planned marketing and sales events 
must be provided to CMS that includes events sponsored by 
delegated brokers and agents as well as those sponsored by the 
plan; and
        At CMS's request, plan sponsors must provide a 
complete list of all representatives marketing a PFFS product 
and authorize CMS to make that list available to State 
Insurance Departments upon request.

     Even before these new CMS requirements, WellCare had 
previously announced enhancements to our compliance program for 
our PFFS products, including an inbound telephone enrollment 
and verification process and a ``secret shopper'' program using 
an independent organization to anonymously monitor field 
marketing activity. These enhancements are in addition to 
extensive compliance efforts that were already in place for our 
independent sales agents.

III. WellCare's Current Approach to the Marketing of Medicare Advantage 
                                 Plans

     WellCare vigorously enforces a zero-tolerance policy for 
the violation of all laws, rules, and policies. I will address 
both the Federal and WellCare controls in turn.
     A. Federal Controls on the Marketing of Medicare Advantage 
Plans
     As a rule, each WellCare employee is personally 
responsible for compliance with all Federal, state, and local 
laws and regulations. All employees and representatives of 
WellCare must become and remain knowledgeable on the legal and 
regulatory requirements applicable to their respective 
positions, duties, and contractual requirements. Additionally, 
WellCare has created an environment enabling all people who 
work and are under contract with WellCare to exercise this 
individual responsibility.
     The marketing of Medicare Advantage plans is controlled by 
Federal regulations and CMS guidance. Federal regulations 
prohibit the distribution of any marketing materials or 
election forms to prospective beneficiaries unless approved by 
CMS. In conducting marketing activities, MA organizations may 
not: (i) provide cash or other monetary rebates as an 
inducement for enrollment; (ii) engage in any discriminatory 
activity, including targeted marketing to Medicare 
beneficiaries from higher income areas without making 
comparable efforts to enroll Medicare beneficiaries from lower 
income areas; (iii) solicit Medicare beneficiaries door-to-
door; or, (iv) engage in activities that could mislead or 
confuse Medicare beneficiaries or misrepresent the MA 
organization. Importantly, Federal rules also require an MA 
organization to establish and maintain a system for confirming 
that enrolled beneficiaries have in fact enrolled in the MA 
plan and that beneficiaries understand the rules applicable 
under the plan.
     In addition to regulations, CMS has released numerous 
guidance documents that reflect CMS's current interpretation of 
the requirements and related provisions of the Medicare 
Advantage and Medicare Prescription Drug Plan rules. As I 
mentioned, on May 25, 2007, CMS issued additional guidance 
specifically to MA PFFS plans outlining CMS's new requirements 
for PFFS marketing. Finally, the CMS 2008 Call Letter outlines 
in detail the information that health plans need to ensure 
compliance with CMS policies and program requirements.
    B. WellCare Health Plans Compliance Programs for Medicare 
Advantage Plans
     In addition to the Federal regulations and marketing 
guidance, WellCare Health Plans has implemented even stronger 
oversight policies. These are based upon our corporate ethics 
and compliance program, known as the Trust Program, that was 
adopted in 2002. All people associated with WellCare must 
accept the individual responsibility and duty to conduct 
WellCare's business in an ethical and compliant manner, 
consistently adhering to the standards of conduct embodied in 
the Trust Program.
     1. The Trust Program
     The Trust Program is the foundation for WellCare's 
operations, unifying our long-standing corporate ethics and 
compliance policies under a comprehensive program with the goal 
of establishing a culture of integrity and trust within 
WellCare. The Trust Program promotes prevention, detection, and 
the resolution of conduct that does not conform to applicable 
Federal or state laws or our high standards of business ethics. 
The Trust Program applies to WellCare, our Board of Directors, 
employees, and our business partners. The Trust Program 
provides guidance and oversight to ensure that all work at 
WellCare is performed in an ethical and legal manner.
     The Trust Program, however, cannot substitute for an 
individual's personal sense of honesty, integrity and fairness. 
We strongly encourage all people within the WellCare community 
to rely on their common sense in recognizing right from wrong 
using the Trust Program to ensure that we observe high ethical 
standards.
    2. Additional Compliance Measures
     To augment the Trust Program, we recently announced 
enhanced compliance measures designed to protect the rights of 
Medicare beneficiaries. These enhancements will increase the 
oversight of independent sales agents who market the company's 
MA products. Our recent improvements include two new components 
for oversight of MA independent sales agents. Because 
independent sales agents market more than health plans, 
WellCare firmly believes these improvements are necessary to 
ensure that the quality and professionalism of WellCare's sales 
practices remains best-in-class.
     The first improvement is an inbound telephone enrollment 
and verification process. This system will allow prospective 
enrollees an additional opportunity to verify their 
understanding of plan benefits, acknowledge that they received 
all the information needed to make an informed decision before 
joining a Medicare Advantage program, and confirm their 
voluntary election to select the plan terms. The phone call 
verification will be digitally voice recorded at the point of 
enrollment for all Medicare Advantage beneficiaries. With this 
new enrollment process, WellCare will implement a real-time 
verification and quality assurance process. The inbound 
verification program will be in addition to the 100 percent 
outbound callback program already in place for new members.
     The second new component is the launch of a ``secret 
shopper'' program where WellCare will use an independent 
organization to anonymously monitor the compliance of Medicare 
Advantage independent sales agents. This national program began 
its rollout just before the announced voluntary suspension of 
marketing. Once WellCare meets the benchmarks outlined in the 
agreement with CMS, and resumes marketing, the program will 
continue its phased nationwide rollout. All results of 
WellCare's secret shopper program will be reported directly by 
the independent organization to WellCare's Corporate Compliance 
department, generally on a same-day or next-day basis. Like our 
other compliance and consumer protection measures, the secret 
shopper program aims at ensuing seniors are fully informed 
about their PFFS benefits and treated appropriately by 
independent agents. It also will help us to identify 
inappropriate agent activity and aid in our ongoing efforts in 
improving agent education.
     In addition, WellCare is working with America's Health 
Insurance Plans (AHIP) on new principles, standards and 
practices to further protect Medicare beneficiaries. In short, 
these new measures will tolerate nothing less than strict 
adherence to a code of conduct that appropriately educates and 
protects our members. We are confident that with these new 
enhancements, our overall compliance strategy will continue to 
be best-in-class.
     Other enhancements to WellCare's compliance program will 
build upon the extensive activities already in place to oversee 
independent sales agents for Medicare Advantage private fee-
for-service products, including:

        Confirmation of agent's state licensure;
        Extensive criminal background screening;
        Mandatory training and testing on product 
benefits and marketing guidelines;
        Mandatory contract terms, incorporating a sales 
agent code of conduct;
        On-site monitoring of agents by field sales 
management;
        Post-enrollment outreach calls to 100 percent 
of new members;
        Mandatory re-training and re-testing to refresh 
knowledge of plan terms and marketing guidelines;
        Secret Shopper program;
        Developing an inbound enrollment verification 
process;
        Rapid resolution of any identified compliance 
issues; and,
        Zero tolerance for verified infractions.

    3. Sales Agent Code of Conduct
     As a leading provider of Medicare products, WellCare has 
established a reputation for providing quality health plans at 
affordable rates for beneficiaries. In an effort to ensure all 
independent sales agents contracted with WellCare are 
representing our plans with the highest degree of integrity, we 
also require every sales agent to abide by the ``WellCare Sales 
Agent Code of Conduct.'' This code of conduct requires the 
following:
     Respect the beneficiary: Agents must provide guidance with 
the beneficiary's best interest in mind, be respectful of the 
beneficiaries' wishes and understand their unique health care 
needs. Sales agents should be available for any questions or 
concerns before and after the sale.
     Provide full disclosure: Agents must present all plan 
options completely with full disclosure of any plan limitations 
and compare WellCare plans to the beneficiary's current 
coverage to ensure they understand differences in features, 
benefits, costs, and access to providers.
     Follow proper marketing guidelines: Agents must follow 
approved marketing methods for setting appointments and 
conducting sales sessions as outlined by CMS regulations. 
Agents cannot solicit individuals via door-to-door sales, phone 
calls or unsolicited email and cannot solicit or enroll members 
where health care services are dispensed.
     Use approved materials: Agents must use only WellCare and 
CMS approved materials and agents must not alter the materials 
in any way. WellCare has developed all the sales and marketing 
material needed to present plan information to the beneficiary 
and makes these materials available in multiple languages.
     Proper use of sales tactics: Agents must never use high 
pressure sales tactics to influence a beneficiary's decision to 
enroll. Agents must allow the beneficiary time to review and 
understand the information and offer them independent sources 
of information such as the CMS web site: www.cms.hhs.gov.
     Representation: Agents must always represent themselves 
and WellCare appropriately to ensure that beneficiaries 
understand that they represent WellCare but are not an employee 
of WellCare, Medicare, Social Security, or any other government 
entity.
     Use enrollment forms correctly: Agents must not back-date, 
falsify, or alter any enrollment document or form, and 
applications must be submitted so that information on the 
original copy matches exactly with the copy that was left with 
the prospective member. Completed enrollment forms must be 
mailed or faxed to WellCare within 24 hours of the date the 
beneficiary signed the form.
     Do not discriminate: To ensure fairness, agents must not 
discriminate against potential enrollees on the basis of health 
status, ethnicity, or any other improper criteria. If an agent 
believes a beneficiary lacks understanding of the program or is 
of questionable competence, he or she must observe proper 
procedure by having the member's authorized representative 
present at the time of enrollment and approve the member's 
decision.
     Comply with oversight standards: WellCare has rigorous 
compliance standards for all independent sales agents. Agents 
must know and understand these standards.
     4. WellCare Oversight
     To ensure compliance with all marketing guidelines and the 
Code of Conduct, all Sales Agents are informed and understand 
that WellCare undertakes the following initiatives:
        Deployment of a secret shopper service to pose 
as potential beneficiaries to experience the sales process/
presentation;
        Revocation of selling privileges for sales 
agents who do not complete the mandatory training and score 100 
percent on the required testing;
        Follow-up calls to all beneficiaries enrolled 
by any terminated sales agent to confirm the beneficiary's 
enrollment decision or to facilitate disenrollment;
        Monitoring of sales data for potential issues 
and to educate or even terminate agents based on the findings, 
with emphasis on proactive resolution of issues;
        Monitor a confidential compliance Hot Line 
where members, associates and government regulators can report 
concerns about potential marketing misconduct; and
        As our inbound enrollment verification process 
is implemented nationwide for PFFS, all agents will need to 
complete any sales activities through this process.
     The focus of our oversight is to ensure that each Medicare 
beneficiary receives high quality, professional interaction in 
their sales experience. Medicare beneficiaries must fully 
understand their health plan benefits, coverage limitations, 
and policies to make an informed choice about the health care 
coverage that best suits their needs. Ensuring a positive sales 
experience is in everyone's best interest. If a product or 
service is not good for a beneficiary, then it is not good for 
WellCare, either.
     C. Recent Examples of WellCare's Zero Tolerance Policy
     Through WellCare's compliance programs, 18 independent 
sales agents have been terminated for marketing conduct 
violations across the country because WellCare has a zero-
tolerance for agent misconduct. However, we are never satisfied 
with our past performance, and we continue to improve our 
internal compliance measures.
     The New York Times report I mentioned was critical of 
WellCare's private fee-for-service operations, and I'd like to 
set the record straight. In January 2007, WellCare learned of 
improper marketing efforts by a California licensed, 
independent sales agent who was not an employee. This agent 
translated approved marketing materials into Chinese and 
aggressively distributed them to a group of Medicare 
beneficiaries who did not speak English. WellCare immediately 
analyzed the selling history of this agent to reveal that the 
agent used inappropriate sales tactics and that the materials 
he was using were not approved. As a result, WellCare 
immediately terminated its contract with the sales agent.
     Because WellCare takes its responsibilities under the 
Medicare program seriously, we moved quickly and aggressively. 
First, WellCare staff commenced mandatory retraining for the 
insurance agency that contracted with the terminated agent to 
reinforce the agency's understanding of the Medicare marketing 
guidelines and WellCare's expectations. Second, WellCare 
initiated mandatory retraining and testing on a national basis 
for all licensed independent sales agents under contract with 
WellCare for its Medicare Advantage products. If sales agents 
do not complete this follow-on training and score 100 percent 
on the required retesting, their selling privileges with 
WellCare will be revoked. Third, WellCare initiated mandatory 
new member call-backs to 100 percent of new Medicare Advantage 
enrollees to confirm that their sales experience was positive 
and that they understand their benefits. WellCare also placed 
follow-up calls to the beneficiaries enrolled by the terminated 
agent to confirm their enrollment decision or facilitate 
disenrollment.
     Another recent action occurred with a sales agent in 
Georgia. In early December 2006, through our monitoring of 
enrollment applications, we learned that an agent submitted 
several Medicare Advantage applications for deceased persons. 
That day, an investigation was initiated and within two days, 
the agent in question was terminated. We conducted an analysis 
of and contacted all of the fired agent's enrollees. Through 
the investigation, we learned that the terminated agent 
participated in several prohibited marketing activities in 
violation of Federal regulations, CMS guidelines, and WellCare 
policies. Accordingly, WellCare informed the Georgia Department 
of Insurance and Federal authorities of the agent's actions, 
and we cooperated with them on their investigation. In the 
spring, the fired agent was escorted from his home in handcuffs 
by Georgia law enforcement authorities. He and his accomplice 
are now behind bars.

  V. WellCare's Recommendations to Further Improve Marketing Practices

     WellCare is extremely proud of our Medicare Advantage 
offerings. The plans offer beneficiaries new choices to broaden 
the ways in which beneficiaries can receive high quality health 
care. We are confident that Federal regulations combined with 
our vigilant internal compliance efforts and commitment by the 
industry will help ensure the highest standards of integrity. 
Nonetheless, through the operation of our zero-tolerance policy 
as well as our recent dialogue with CMS, as evidenced by our 
new compliance pledge to further strengthen consumer 
protections, we recognize there is room for improvement. We 
offer the following recommendations for your consideration:
     Development of a mandatory national standardized Medicare 
training program for all agents selling Medicare products. 
While plans conduct such training and specific training will 
always be needed for company-specific benefits and products, 
consumer protection can be enhanced by ensuring all agents 
marketing PFFS products are trained with a uniform set of 
education materials and directed to cover with Medicare 
beneficiaries a set of mandatory topics and disclaimers. This 
will provide a platform for excellence in education of 
consumers and streamline investigation of any compliance issues 
with agents. This issue is currently under discussion with AHIP 
and CMS;
     Use of an inbound telephone enrollment and verification 
process that would provide the opportunity to ensure that 
enrollees fully understand the benefits and features of the 
plan. Again, this proposal would serve to enhance consumer 
education and help plans to quickly identify any compliance or 
training issues with independent agents. It would ensure that 
no person who did not have an adequate understanding of the 
PFFS product would be enrolled in the program;
     Creation of a national database to provide and share 
information about agents and brokers that have been sanctioned 
by a state or terminated by a health plan. While most agents 
are ethical and professional in their marketing of our 
products, a national database would allow plans to track and 
quickly report any issues with a small subset of roque agents--
who sometimes seek to sell in other states when their bad 
behavior is discovered in one state. Again, this issue is 
currently under discussion with AHIP, NAIC and CMS;
     Early implementation of the CMS 2008 Call Letter. This 
effort is now underway for those plans, like WellCare, taking 
the voluntary compliance pledge;
     Additional provider outreach and education, including 
fixing the ``Common Working File;'' and
     Industry-wide adoption of secret shopper programs.
     While all of the issues mentioned above should be adopted, 
I want to stress the importance of two of them--inbound 
verification and a national database. As the Committee is 
aware, there was an independent agent whose license was 
suspended in Mississippi, but he continued selling MA plans in 
another state. WellCare was one of the plans who unwittingly 
had this agent selling our products in Alabama because Alabama 
was not aware the agent had been suspended in Mississippi, and 
he passed all other background checks. We became aware of the 
Mississippi suspension only through word of mouth during our 
general outreach effort to the Mississippi Medicaid Agency and 
the Department of Insurance. When they identified this agent as 
a problem in Mississippi, we immediately sought to determine if 
he was selling our products in any other states. He was, we 
undertook an investigation, and within 72 hours had terminated 
our relationship with him. We began contacting the members in 
Alabama he had signed up and worked to disenroll those who were 
not satisfied with our product.
     Luckily, we found this agent, but it was very much due to 
our aggressive oversight. It is our belief, though, that with 
inbound verification and a national database, this agent and 
others like him could be stopped much sooner. Inbound 
verification would have stopped this agent from enrolling 
individuals in the first place if they expressed concerns about 
the agent. We also could more quickly and proactively 
investigate such agents. And we could quickly report to the 
central database any termination of an agent to protect other 
Medicare beneficiaries who may be approached by the same agent 
marketing for a different company.
     In conclusion, we believe the most effective action to 
undertake on behalf of Medicare beneficiaries is to improve 
communication channels and provide effective confirmation of 
allegations of abusive marketing practices. By fostering 
cooperation at the Federal, state, health plan, and agent or 
agency levels in communicating and resolving complaints, we can 
take swift action against those who defraud Medicare 
beneficiaries.
     WellCare is proud to be an industry leader in good 
compliance. We started with a best-in-class compliance program 
five years ago and have added enhancements along the way as we 
continuously seek to improve the quality of our products, our 
operations, and the practices of the independent sales agents 
that market our products.
     Thank you again for this opportunity to testify about our 
perspectives on these important issues. Please be assured that 
WellCare remains deeply committed to the long-term success of 
the Medicare Advantage program. We appreciate the critical 
oversight that the Committee provides over this valuable 
program and look forward to continuing to work with you to meet 
future challenges in the Medicare and Medicaid health programs.
                              ----------                              

    Mr. Stupak. Thank you. We will start with the questions.
    Mr. Soistman, Mr. Bailey talked about a national registry 
for agents, would you be in favor of that?
    Mr. Soistman. Mr. Chairman, we would be very much in favor 
of that.
    Mr. Stupak. OK. Would you be in favor of putting that 
registry on the Internet so senior citizens would have access 
to it so they could see if these agents were in fact registered 
and licensed in good standing?
    Mr. Soistman. We think the, Mr. Chairman, we think that 
information should be available to the public at large and 
obviously to State regulators provided it is kept timely and it 
is reliable. I think it could be a very useful tool in the 
process.
    Mr. Stupak. You have all mentioned the abuses we have heard 
about on Medicare Advantage. Strike that, I don't want to go 
there.
     Mr. Bailey, let me ask you this question. Your company is 
on a corrective action plan by CMS right now, is that correct?
    Mr. Bailey. Yes, sir, that is correct.
    Mr. Stupak. What led to that? Why did you have to go on 
this corrective action plan?
    Mr. Bailey. OK. We were notified by CMS that they were 
going to do an audit, a full review of our Private-Fee-For-
Service plan in March. They visited us on March 12. It was a 
good opportunity for us. The program was only 10 weeks old and 
we would rather find out if there were any issues that needed 
to be corrected sooner than later. So they spent the week with 
us. We had an informal debriefing at the end of that week on 
March 16. They actually issued a requirement report to us on 
April 19.
    Mr. Stupak. Your private plan had only been out there for 
what, 10 days you said?
    Mr. Bailey. Actually, for 10 weeks. And it is not unusual--
--
    Mr. Stupak. Was there a lot of complaints then?
    Mr. Bailey. I think there were probably two reasons they 
decided to visit us. One, it is not uncommon for the agency to 
visit new plans when they are in start-up mode just to provide 
technical assistance, but also I think they had received a 
number of complaints about brokers in general and wanted to 
visit us and make sure we were doing all that we could do to 
prevent that from happening. So I think that is the two 
contributing factors.
    Mr. Stupak. Were the complaints on what you call on the in-
bound verification call? Is that what the complaints were based 
on?
    Mr. Bailey. Actually, what they really asked us to do after 
spending a week with us in terms of corrective action, they 
wanted to make sure we were managing the broker community as 
effectively as we could.
    Mr. Stupak. Now a broker community now, that would be 
agents?
    Mr. Bailey. That would be the agents. Primarily the agent 
or brokers on this one. They wanted to make sure that, in fact, 
they wanted to see the results of the calls that we were 
making, as I had mentioned earlier, we began to make in 
February before the CMS audit occurred, calls to our Private 
Fee-for-Service applicants before they were enrolled to gauge 
the satisfaction of their sales experience.
    Mr. Stupak. Now that is that in-bound verification call, 
right?
    Mr. Bailey. Actually that is another thing.
    Mr. Stupak. OK.
    Mr. Bailey. There are three different levels of calls. What 
we do for Medicare Private Fee-for-Service as a result of some 
of the abuses that we had heard of earlier where that the agent 
in San Francisco had illegally translated the marketing 
materials, we realized at that point we need to reach out to 
the beneficiaries before they were enrolled, before they were 
into the system, so we implemented a 100 percent call-back on 
Private Fee-for-Service enrollees. So that is call No. 1.
    We would call them and we ask them about their satisfaction 
of the sales experience. We wouldn't want to do that at the 
time the broker was there so we waited about a week after is we 
call them up, go down some of the benefits of the program, some 
of their understanding, but more importantly how did the sales 
satisfaction go. So that is the first call.
    The second call that we have been doing on all members for 
our programs are the out-bound calls within 2 weeks of 
effective enrollment we call them and we discuss with them 
their understanding of the benefits. We want to make sure that 
we have the correct address, they understand their benefits and 
how to access them.
    The in-bound telephone and verification call is something 
relatively new now. Some other major plans are using it. But 
what we want to do there at the time of a sales transaction, 
this may have occurred to several folks in this room or up 
there, with other products. At the time of the sales 
transaction, before the sale is actually consummated, the agent 
will make a call, in this case to an enrollment verification 
specialist working at WellCare, and they will talk to the 
representative for several minutes to provide some of the 
beneficiary's information. But more importantly, we ask the 
beneficiary to take the phone, if they wouldn't mind, and the 
enrollment verification specialist goes through a pretty 
detailed questionnaire. We do not ask about broker performance 
but you understand the deeming concept and how that works, the 
provider must accept this. Do you understand that if it is a 
Medicare Advantage plan and we go down a list.
    Mr. Stupak. Does CMS approve these scripts that you are 
like any other outward communications?
    Mr. Bailey. Absolutely. That script like any other outward 
communication that CMS has been approved.
    Mr. Stupak. Go to exhibit No. 8. So CMS approved these 
communications, halftime, extra points, we are urging your 
agents to sign-up people. You get $100 bonus for every 
application and you can possibly win a Panasonic 42-inch, 
plasma HDTV.
    Mr. Bailey. I don't think since this wasn't a communication 
to the members that CMS would have had to approve it, but I 
recall this.
    Mr. Stupak. But wouldn't this go to your members, your 
agents, your brokers, your independent brokers.
    Mr. Bailey. The agents.
    Mr. Stupak. OK. The independent brokers and----
    Mr. Bailey. The CMS approveal, I believe, is required on 
communications going to the members.
    Mr. Stupak. To members you mean the people you sign-up, in 
other words.
    Mr. Bailey. We don't do this. We have actually stopped any 
type of effective incentives January 1, when we began to offer 
our product. I remember this specifically. We were very 
concerned about the agents making sure they got their 
applications of the members to us quickly. Because if not you 
can run into some date lag so we don't want that, so we 
actually put incentive out if, in fact, this was to promote 
them getting their applications into us quickly and not 
gathering them and sending them all at once.
    Mr. Stupak. But they wouldn't get paid a commission unless 
they got their application in, right?
    Mr. Bailey. This is true but from the beneficiaries, we 
wanted to minimize the amount of time from when the beneficiary 
said I would like to join to when we were able to fulfill the 
member, the member kit and providing the ID card.
    Mr. Stupak. So you are telling us you had to do this to get 
them to turn in their applications quicker?
    Mr. Bailey. No, I think at the time we just wanted to just 
have a double-check to make sure they got them as quickly as 
possible. Again, we don't do this anymore but at the time the 
program was relatively new for us, we just didn't have any 
track records as to how long it would take to get those in. And 
now we seem to have a pretty good flow of applications and we 
are not really concerned about this.
    Mr. Stupak. I find that hard to believe that you have to do 
these kind of incentives to get them to get your application in 
early. I would think they would get their application in 
because their commission runs on it, right?
    Mr. Bailey. In terms of what some of the folks have said 
about things that you have done and what you have learned from 
them, I think that situations like this that you have raised 
have driven us to supporting the implementation of the in-bound 
enrollment verification system. Because, in effect, what you 
have done there if it is successful encounter between the 
representative from the plan and the agent and the beneficiary 
it all transpires over the telephone. It is done 
telephonically.
    Mr. Stupak. These sort of invites agents to play rather 
quick and loose with the facts in order to get your points to 
get your chance to win that plasma TV that retails at, 
according to your flyer here, $1,439.99. I mean this would be 
more encouraging to sign people up not to get your applications 
in quickly. Well, I got to get it in by the deadline if you 
want to qualify for the contest but and you don't do this 
anymore?
    Mr. Bailey. No, we don't do that anymore and that, as I 
said there was some things in the administration of the program 
that you learn from and you move forward so no we don't.
    Mr. Stupak. OK.
    Mr. Whitfield, for questions, please.
    Mr. Whitfield. Ms. Olson, I represent a rural district and 
a lot of people like these Medicare Advantage Programs and from 
your experience as a person selling them, what are the 
positives about these Medicare Advantage Programs? Why do 
people like them?
    Ms. Olson. There are a number of reasons. First of all, let 
me state I do not sell Private Fee-for-Service plans because 
they don't work very well where I am.
    Mr. Whitfield. OK.
    Ms. Olson. Medicare Advantage plans are relatively easy to 
understand. There are co-payments, some of them offer both in-
plan and out-of-plan benefits, usually they offer vision 
benefits, some alternative care benefits, depending on where 
you are, and the price is reasonable. And you know, pretty 
much, from month to month as opposed to a Medicare Supplement 
or a Medigap plan exactly what your out-of-pocket is going to 
be.
    Mr. Whitfield. OK. Now, let me ask you, do you represent a 
lot of different insurance companies?
    Ms. Olson. I use to. I got it down to about seven companies 
now for my Medicare people.
    Mr. Whitfield. All right. So you have seven companies that 
you represent.
    Ms. Olson. Yes, sir.
    Mr. Whitfield. Are you an agent or a broker or a 
consultant?
    Ms. Olson. I am an agent and a consultant.
    Mr. Whitfield. And, Mr. Soistman, your company has a 
Medicare Advantage Program that it put together and you were 
selling it, is that correct?
    Mr. Soistman. Yes, Congressman, we have multiple Medicare 
Advantage Programs.
    Mr. Whitfield. OK. And what percent of your sales force 
would be actual employees of your company as opposed to 
independent brokers or independent agents?
    Mr. Soistman. Well, our Medicare Advantage plans that are 
health plan based, we call them coordinated care plans, they 
are in five markets, and they are limited by the number of 
counties. So they are not even statewide in those five markets 
and there are approximately 35 employees who are responsible 
for selling.
    Mr. Whitfield. So those are in-house employees and then you 
have contracts with other agents that can sell them as well.
    Mr. Soistman. That is correct.
    Mr. Whitfield. OK. And, Mr. Bailey, what about how many 
agents do you have in-house selling these programs?
    Mr. Bailey. I don't have those numbers at my fingertip and 
I can absolutely get those but I am thinking probably in-house 
could be 15 to 20 percent, 25 percent of the total agent 
population.
    Mr. Whitfield. OK. Now, Mr. Soistman, unfortunately your 
company was the one involved with Judiciary House and the 
salesman that sold those Medicare Advantage Programs at 
Judiciary House from your analysis and review of that case what 
did they do wrong?
    Mr. Soistman. Well, Congressman, they did a number of 
things wrong. First, just so the committee understands these 
are independent agents. They weren't employees of the company. 
What we have been able to piece together through out internal 
investigation is that as the previous panel indicated, the 
agents did call on Judiciary House on two occasions in 
February. They, apparently, made statements representing that 
they were from Medicare and that they were there to talk about 
the new part C programs. So clearly they were misrepresenting 
themselves. They were misrepresenting the purpose of their 
visit and, clearly, misrepresented the products that they were 
marketing. As far as we can tell, they were indeed promoting 
our Advance for Freedom Private Fee-for-Service plan. We know 
these agents represent other companies so don't know exactly--
--
    Mr. Whitfield. But they both had licenses to sell in the 
District?
    Mr. Soistman. The agent in particular that was identified 
as having signed the applications was licensed, he indeed was 
licensed.
    Mr. Whitfield. And has he lost his license in the District?
    Mr. Soistman. He has lost his license and the agency that 
he is affiliated with was terminated as well.
    Mr. Whitfield. But it would be possible----
    Mr. Soistman. I am sorry, let me correct that.
    Mr. Whitfield. OK.
    Mr. Soistman. He has been terminated, losing his license is 
not something that we really can affect other than report any 
agent who has violated the contract and has done something of a 
significant nature including fraud, we would report them to the 
State Department of Insurance.
    Mr. Whitfield. But if he went to Mississippi, say, and 
wanted to sell insurance in Mississippi on his application 
would he have to state or would they ask the question have you 
been terminated in another jurisdiction or do you know?
    Mr. Soistman. I would imagine that in most States that is a 
requirement if you have ever lost your license you have to 
report that. The States, I think, are somewhat limited in terms 
of the availability of that information though.
    Mr. Whitfield. Now, Ms. Clegg-Boodram, mentioned in her 
testimony that when the Federal law passed that allowed 
Medicare Advantage Programs to be sold that in essence CMS was 
prohibited from bringing any Medicare fraud charges against 
anyone. Now, you understand as an insurance company selling 
Medicare products you can be prosecuted for fraud by CMS, is 
that correct?
    Mr. Soistman. Well, we can certainly, CMS has the authority 
to take multiple actions, corrective actions, sanctions, et 
cetera, if we are violating our agreement or not living up to 
the agreement.
    Mr. Whitfield. So that is quite clear that that is still in 
place which we think is certainly helpful and I see my time has 
expired.
    Mr. Stupak. Thank you, Mr. Whitfield.
    Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman. I want to 
welcome our panelists. I appreciate your testimony as well.
    Mr. Bailey, I want to go to you on this extra points sales 
promotional flyer that went out to the agents. At the very 
bottom it says WellCare reserves the right at its sole 
discretion to determine eligibility for this program on a case-
by-case basis and may disqualify agents if they violated any of 
these provisions, the producer agreement, CMS Marketing 
Guidelines, or the law. So this flyer would aggressively, well, 
it is designed to get agents to go out and sell your product 
first of all, which isn't an offense I don't think.
    I have been in the broadcast business for 20 years and we 
are always trying to find ways to incent agents but we don't 
incent them to violate the law or other practices of ethical 
business behavior, so my question is given that last line 
there, were there agents that you encountered that went too far 
in WellCare, and if so were there case-by-case situations where 
policies were not appropriate had been issued and were 
subsequently reviewed and terminated?
    Mr. Bailey. Let me try to answer that question the best 
that I can. We have terminated 18 agents in the last 7 months.
    Mr. Walden. Eighteen agents.
    Mr. Bailey. Eighteen agents. When an agent is terminated in 
terms of the downstream effect what we do is we then reach out 
to talk to all of the enrollees of that particular agent just 
to make sure that they were fully informed as to what the plan 
was at the time of enrollment.
    Mr. Walden. And let me stop you on that point because in 
the prior panel I asked about the call-back notion which is a 
little different then this but it is basically the same, you 
are checking back and the answer I got was generally that that 
is not an effective technique because some of these people 
don't know whether they are in the right plan or not.
    Mr. Bailey. All right. Well, several comments. With regard 
to the calls that we made we actually have a compliance staff 
with WellCare that will make these particular calls and we will 
basically advise them, of what happened with the agent we found 
that he had provided misleading information, and we just want 
to make sure were you satisfied with the presentation, do you 
feel fully informed. And several of those individuals for 
whatever reason whether because of the fact we have told them 
about the agent or have had second thoughts, have wanted to 
dis-enroll and we have worked with CMS and the regional office 
the SHIP, whomever to dis-enroll those people.
    In terms of the previous person's comment, I can understand 
that. I think that having an out-bound telephone verification 
system, an out-bound call process, 2 to 3 weeks after they 
enroll which what we do is great but it doesn't go the whole 
way. We think it needs to be done in conjunction with the in-
bound telephone verification enrollment system. And that is 
when the beneficiary actually is at the conclusion of the 
appointment with the licensed agent the broker asks if he may 
use the beneficiary's phone and they call an enrollment 
specialist in the plan. The enrollment specialist goes down a 
very detailed questionnaire to try to tease out the fact that 
the beneficiary isn't fully informed and if any of these 
answers appear not to be the fact that--not to be the matter, 
actually, we actually will end it at that point. But what we 
will do is say please, give the call back to the broker, the 
telephone back to the broker and we will explain at this 
particular point we don't think the person is fully informed. 
It is not good to have someone that is not fully informed in 
our plan.
    Mr. Walden. So are you doing that now with each enrollment?
    Mr. Bailey. Well, actually we were ready to roll this out.
    Mr. Walden. OK.
    Mr. Bailey. And then we participated and we let the 
enrollment freeze.
    Mr. Walden. Right.
    Mr. Bailey. This was absolutely directed towards brokers so 
while this halt is here, and we are determining other ways to 
strengthen our broker management processes, we are actually 
looking at this again to strengthen. But, yes, we are ready to 
roll this out and we are excited about this.
    Mr. Walden. OK. Mr. Soistman, is your company looking at a 
similar sort of proposal?
    Mr. Soistman. On the post verification process?
    Mr. Walden. Or the in-bound, as the agent is sitting there 
counseling somebody if they say it is, I have been on those 
solicitation calls, not insurance but like to my alma mater and 
if you agree to give they say, OK, now I have got to put my 
supervisor on the line and they confirm that I have agreed to 
give. It sounds like that sort of process is what Mr. Bailey's 
company is looking at. Is that something that would work for 
yours?
    Mr. Soistman. Congressman, we have some concerns about that 
process. More specifically, we are concerned that there may be 
a feeling of intimidation to have the agent and the Medicare 
beneficiary going through that process together and we really 
feel that it would be best when the agent leaves to then 
confirm and we can ask a series of questions and do it in a way 
that is far less intimidating.
    Mr. Walden. Well, let me because my time is about expired. 
I was troubled by some of the comments from the last panel of 
the delays in being able to get a live body on the line to get 
an answer. And my frustration level is pretty short when it 
comes to trying to get consumer help. And I am curious, maybe 
Ms. Olson, can you tackle that one for me? What needs to happen 
there that seems like a real abuse.
    Ms. Olson. If I was queen of CMS or whatever----
    Mr. Walden. Well, if you have got the answer we may convene 
that.
    Ms. Olson. We need a lot more very well-trained customer 
service people, poly-lingual, if possible. I tell my people if 
they are calling Medicare, 1-800-MEDICAR, have a cup of coffee 
there. Be ready, it is going to take some time.
    Mr. Walden. Right.
    Ms. Olson. And be prepared. The Medicare Advantage plans 
and the prescription drug plans have caused huge numbers of 
questions. In Multnomah County, OR, we have 47 different 
Medicare Advantage plans available. That is absurd. If I was 
running things I would standardize the Medicare Advantage plans 
and that was spoken of earlier. I think that makes sense the 
same way we did with the Medicare Supplements a number of years 
ago and I was involved in that. This population in particular, 
spends a lot of time on the phone and they are very 
deliberative and they have a lot of questions. And if an agent 
can't answer them properly, first of all that agent shouldn't 
be selling the product. Second of all those people need to have 
instant access to somebody who can answer their questions.
    Mr. Walden. And is that the responsibility of Medicare or 
Medicare and the plans?
    Ms. Olson. It could be the State SHEBA programs. It could 
be the insurance plans.
    Mr. Walden. Does anybody track how long you wait on the 
call, and does that matter to anybody?
    Ms. Olson. Yes, I do.
    Mr. Walden. Who, but I mean as a consumer, do I know I have 
been on, I think, phone companies that sort of thing, they tell 
you how long you have waited but there internally they are 
regulated on that, too, by their regulators. Does anybody 
regulate you all on that from the plans, do you regulate it?
    Mr. Soistman. I am happy to field that question.
    Mr. Bailey. Yes, we have. We do have performance measures 
and metrics on the quality and of the phone calls that we make 
with members. I don't have them all at my fingertips. One is 
the average speed of answer.
    Mr. Walden. Got it.
    Mr. Bailey. Another one is the waiting time. I am not sure 
exactly----
    Mr. Walden. Are those data published anywhere for consumers 
to know about?
    Mr. Bailey. I believe, we share those with CMS. I can 
verify that.
    Mr. Walden. OK. They are going to be on our next panel, I 
guess, so thank you. Thank you. I have way over-extended my 
time. Thank you very much.
    Mr. Stupak. Let me follow that up, will you provide those 
numbers to us, the waiting time and quality there? If you 
provide them to CMS could you provide them this committee?
    Mr. Bailey. Absolutely. And what is very interesting is the 
person that runs our call center is extremely proud of those 
because we always exceed the CMS metrics, so when I tell him 
that the committee has asked for this, you will get it post 
haste, sir.
    Mr. Stupak. OK. This is not your agents waiting but your 
clients waiting.
    Mr. Bailey. No, at WellCare employee we have a call center 
that this year we will probably handle 10 million calls and we 
are proud of what they do and he will be very proud to submit 
the data and probably come on a plane and walk you through it. 
I know him very well.
    Mr. Stupak. OK. And the last panel told us we would almost 
need a direct line to Starbucks just to stay awake on the 
phone.
    Mr. Soistman, can you also provide those waiting time for 
us?
    Mr. Soistman. Mr. Chairman, it would be my please to do 
that.
    Mr. Stupak. OK. Thanks. Thanks, Mr. Walden.
    Mr. Burgess, for questions.
    Mr. Burgess. Thank you, Mr. Chairman. I can assure you that 
I was monitoring the time that Mr. Walden went over.
    Let me ask our witness from Coventry, Mr. Soistman, you 
heard the testimony from the previous panel on the problems 
that the young lady with multiple sclerosis had when she went 
to the emergency room with the Coventry plan. Now, if you 
proactively do these phone calls back to the people who signed-
up for the program, a lot of times they aren't going to know 
that they have a problem with the product that they have 
purchased until they go to use it. So what, do you have any 
quality assurance mechanism in place at your company that makes 
certain that at the point of utilization that the beneficiary 
who enrolled in the plan understands what they got what they 
understood they were getting? Because it seemed to be a real 
disconnect there regardless of how she was signed-up and 
whether or not it was, in fact, proper to sign her up, the 
disconnect between what the beneficiary thought they had and 
what they actually had?
    Mr. Soistman. Congressman, let me begin by answering it 
this way that the product that Ms. Williams and Ms. Royal both 
were enrolled in was not really the right product given their 
Medicaid status, the Medicare/Medicaid status. And that is 
getting to the root cause which we took steps in early January.
    Mr. Burgess. Well, let me just ask you this. Do you think 
proactively you have gone back and now identified all of those 
potential problems and corrected the defects in plan coverage 
that might have been given to a dual-eligible?
    Mr. Soistman. I don't think we have corrected all of the 
defects meaning that there are still individuals enrolled who 
are dual-eligibles into these plans. We have reached out to all 
of the dual-eligibles who were associated with agents who 
misrepresented the product to make sure that they knew they had 
an opportunity to switch plans if they so choose.
    Mr. Burgess. Was that only with a telephone call because 
again we heard testimony from the last panel that maybe a 
telephone call may not be a sufficient way to conduct that 
interview?
    Mr. Soistman. Presently, our process is by telephone. If we 
are not able to reach the beneficiary by telephone we then 
provide a letter.
    Mr. Burgess. I don't want to ask this question but I have 
to. You don't outsource that calling, do you?
    Mr. Soistman. No, Congressman.
    Mr. Burgess. This is someone who speaks English at least, 
we heard about the problem of needing multiple, somebody who is 
poly-lingual but at least the person who is calling them back 
is calling from an American call center?
    Mr. Soistman. It is and I am pleased to say, Congressman, 
that we built that call center in your home State of Texas.
    Mr. Burgess. Then I know they are getting good service. I 
appreciate that. Well, how--for any of the three up there--do 
you account for the predatory practices actually beginning in 
the first place? What was the driver there? I mean you are 
talking about, Ms. Olson, you are talking about $4 a 
beneficiary, is that enough to drive the kind of practices that 
we are seeing that caused people to go door-to-door to sell 
these policies?
    Ms. Olson. Well, $4 per month per client. And, of course, 
that is one plan I am selling. I have one plan that I sell 
where I don't get paid anything per month. But I think the 
initial rules were not as clear as they could have been and I 
think in the big rush to get particularly the Medicare 
Advantage with prescription drug plans up and a number of us 
talked about this before it happened, that we would see a rush 
towards people signing-up as many clients as they possibly 
could, either on the agent level or on the company side.
    Mr. Burgess. Let me ask you this. We heard testimony from 
the panelists who were the State insurance commissioners or 
deputy commissioners and I have in the evidence binder under 
tab 10 I have a letter from the Department of Insurance from 
the State of North Dakota, Mr. Poolman, and the opening 
paragraph, or the second paragraph, as part of MMA 2003, the 
regulation of Medicare Advantage plans and the companies 
marketing them was given to CMS. And the letter goes on to 
state that maybe that is not the best way to deal with that. 
Does anyone on the panel here agree or disagree with that 
statement that, perhaps, this authority should be given back to 
the State commissioners or do you feel that the State 
commissioners lack the authority that they need to be able to 
adequately provide the oversight?
    Ms. Olson. Well, since my license or one of my licenses is 
and my real license is through the State of Oregon, I mean I 
have real license elsewhere but the State of Oregon can take 
away my license. And at that point I would lose my errors and 
omissions insurance and in theory could not get my license back 
again.
    Mr. Burgess. So the amount of regulatory authority that the 
State commissioner at least in Oregon possesses should be 
adequate for oversight to prevent this problem from happening?
    Ms. Olson. On the agents' side, I would think.
    Mr. Burgess. Mr. Bailey, you alluded to the fact that there 
was an agent arrested in Georgia, is that correct?
    Mr. Bailey. Yes, we had a situation where we have a process 
in place to check the validity of the applications when they 
come in and the system showed us that some of the applicants, 
in fact, were deceased. We conducted a quick investigation. We 
terminated the broker. We contacted the Georgia Department of 
Insurance and they conducted their own study. We helped them on 
the study and they actually, that agent and his accomplice were 
arrested, not sure of the disposition now, but they were 
arrested.
    Mr. Burgess. Did that State insurance commissioner, let 
me--did they have the authority to do what they needed to do 
under the laws as it is written?
    Mr. Bailey. I have not personally spoken to the 
commissioner. I can assume that they probably have revoked this 
gentleman's license and the fact, and actually he was 
incarcerated for some period of time. What we have found in 
terms of, it wasn't so much a case of do we need additional 
regulation, it was more from what we have seen over the last 25 
or 26 weeks since we have been in the program, it is more an 
instance of communication and coordination. We have reached out 
to a lot of DOIs to share information with them. A lot of the 
DOIs have reached out to us to share information with us just 
like the case for Mississippi where they advised us of the 
gentleman that was working without--well, they had suspended 
his license. What we have found we need to bridge the 
coordination, the communication gap, we need some tools. We 
need some help. And we think the national database where anyone 
can go in and put information in, and anyone even an insurance 
commissioner can check not only what is happening outside of 
his or her State boundaries, but also within the State. We 
think that coupled with something else that I want to mention 
also, which was a national, mandatory standardized training 
program for any agent that is going to sell Medicare products. 
We have a lot of companies selling Medicare products. We 
probably all have what we consider to be good training 
materials. We would like to see something up to the next level, 
work under the auspices of CMS and have this out and have----
    Mr. Burgess. Does that function not already get taken care 
of by the individual States in their Department of Insurance?
    Mr. Bailey. I am sure that training of the agents is 
absolutely essential to the States' requirements but we are 
talking about a consistent and mandatory training to at least 
guarantee that every agent has a certain level of Medicare 
across the country and that is what----
    Mr. Burgess. Well, shouldn't you as a company demand that 
of any agent that sells policies on your behalf?
    Mr. Bailey. We provide our own training not only on 
Medicare but also on our particular products. But we would like 
to make sure that we are just taking advantage of any best 
practices and taking advantage of the expertise of CMS in 
helping to develop this training program and then making it 
mandatory.
    Mr. Burgess. OK. Thank you. And, Mr. Chairman, I see that I 
have used all of the additional time that Mr. Walden used.
    Mr. Stupak. And let us go another round I think if you have 
some more questions we can go a little bit more with this 
panel.
    Ms. Olson, you are an independent or representing the 
independent insurance agents, correct?
    Ms. Olson. And I am an independent insurance agent.
    Mr. Stupak. So you sell more than just Medicare Advantage 
policies all kinds, home, casualty, life, the whole thing.
    Ms. Olson. Oh no, health insurance, life insurance.
    Mr. Stupak. OK.
    Ms. Olson. Long-term care.
    Mr. Stupak. So what is the benefit of having an insurance 
agent acting as the middle person, if you will, between an 
insurance company and a consumer?
    Ms. Olson. There are a number of reasons. First of all, we 
know those products very well. In some cases I designed the 
products that I am now selling, when I was working for the 
insurance companies. So I know the products and that is why I 
finally cut it down to about seven products.
    Mr. Stupak. Seven products or seven companies?
    Ms. Olson. Seven companies.
    Mr. Stupak. OK.
    Ms. Olson. I take the time, I can also translate what the 
paper says into a real life situation for them. I also make 
sure that all of my clients know that no matter what the 
problem is if they have a problem with their health insurance, 
they call me. I have trained most of the agents in our State 
about Medicare so I get a lot of referrals from other agents. 
And I know most of the people who work for the insurance 
companies I use.
    Mr. Stupak. Where is the breakdown here, Medicare Advantage 
and last year we have had all these reports and that is the 
reason we are having these hearing.
    Ms. Olson. Right.
    Mr. Stupak. I hear the company saying it is those darn 
agents. On you, on behalf of the agents saying no, the 
companies aren't doing it right. Where is the breakdown here? 
When you, when the last panel, Mr. Harrell, says they have had 
more complaints on Medicare Advantage then they do on Hurricane 
Katrina claims in Mississippi so where is the breakdown?
    Ms. Olson. That is outrageous. We need to have the 
standardized training. Standardized training for all agents who 
are selling Medicare-related products. And that is what the 
National Association Health Underwriters and the American 
Health Insurance plans has put together. CMS has already 
approved it to be used.
    Mr. Stupak. Well, it is a guideline. What CMS is suggesting 
so far has been guidelines. Where is the enforcement of a 
guideline? What happens if you violate the guidelines?
    Ms. Olson. Refuse to appoint agents who have not taken that 
training.
    Mr. Stupak. All right. And then the company should pay for 
the training then I take it?
    Ms. Olson. Not necessarily.
    Mr. Stupak. You want CMS to pay for the training?
    Ms. Olson. No, I would pay for it.
    Mr. Stupak. OK.
    Ms. Olson. I have paid for it.
    Mr. Stupak. Well, all right. Let me ask you this, one 
policy you said you received no money, then one policy you said 
you received $4 a month and you spent a lot of time. You said 
you have never been to Vegas.
    Ms. Olson. Well, I have been to Vegas, but I haven't been 
paid to go to Vegas.
    Mr. Stupak. Then maybe that is where you make a living 
because I see one policy with no money and another one $4 a 
month. To even qualify for that plasma TV at $1,400 you would 
have to, at $4 a month, you would have to go 360 months and 
that is 30 years. If you sell it to a person who is 62 you have 
to make sure they live to 92. Is that right?
    Ms. Olson. Exactly. Right.
    Mr. Stupak. So doesn't these incentives like tab No. 8 
about the plasma TV, isn't it really incentives for agents to 
cut corners to get that commission to move things along faster?
    Ms. Olson. I certainly hope not.
    Mr. Stupak. But isn't that the purpose of it really?
    Ms. Olson. I am sure it can be interpreted that way.
    Mr. Stupak. Well, do you really think that it is the gift 
of deadlines. No, I didn't think so either. The seven companies 
you sell for do you get prizes? Do you qualify for prizes and 
trips?
    Ms. Olson. Sometimes they are available I just never get 
there.
    Mr. Stupak. OK.
    Ms. Olson. I don't do enough business with one company to 
qualify for something like that.
    Mr. Stupak. Well, what other suggestions are there other 
then--let me ask you this. CMS rules currently allow cross-
selling. Would you support a rule banning cross-selling?
    Ms. Olson. Cross-selling?
    Mr. Stupak. Of policies met, I go from Mr. Bailey's to Mr. 
Soistman's, I am cross-selling two different insurance 
products.
    Ms. Olson. Well, only during enrollment or if you moved out 
of the service area could you do that.
    Mr. Stupak. Well, I don't know. That is why we are trying 
to see if this cross-selling is a good idea or not. It is two 
different products.
    Ms. Olson. You mean to voluntarily move a client's 
insurance so that you get like the big first year commission or 
bonus?
    Mr. Stupak. Commission, yes.
    Ms. Olson. Well, that is extremely unethical.
    Mr. Stupak. Well, so you wouldn't----
    Ms. Olson. Not if it wasn't right for the client.
    Mr. Stupak. If we banned it that would be OK?
    Ms. Olson. For me it would be fine.
    Mr. Stupak. OK. Because it is that first year where you 
make your money, right?
    Ms. Olson. Not necessarily. If you are just going to make 
$4 a month for the life of the contract you just want them to 
live a long time.
    Mr. Stupak. Sure, but aren't some of them set-up that if 
you switch over in the first year there is a pretty good bonus? 
You are not aware of that?
    Ms. Olson. It has to be the right thing for the client.
    Mr. Stupak. Right, I realize all that. I am saying what is 
the reward for doing it in cross-selling? Isn't that the 
benefit, you get a----
    Ms. Olson. It can be very definitely.
    Mr. Stupak. OK. Thank you.
    Mr. Whitfield, questions?
    Mr. Whitfield. Just one other question.
     Ms. Olson, obviously there are some unscrupulous sellers 
out there and that has been demonstrated quite clearly. But you 
are a professional in Oregon and you have a reputation of 
selling health insurance plans for people and I am sure you 
have experienced some situations where you sold a plan that 
turned out not to be the right plan and a person came back and 
you have to deal with that to dis-enroll and so forth. So as a 
person who is in the community and a part of that community, I 
mean you have every incentive to be sure that they get the 
right plan, don't you?
    Ms. Olson. Absolutely.
    Mr. Whitfield. I would think it would be a major headache 
to sell somebody the wrong plan and they don't have the 
coverage, I mean they would be pretty upset.
    Ms. Olson. Very definitely. It saves me a lot of time to do 
it right the first time.
    Mr. Whitfield. Right. And what we have to be sure of from 
our next panel is that CMS is providing the tools to make sure 
that everyone has the incentive to do it right the first time, 
so, thank you.
    Mr. Stupak. Nothing? All right. Then we will move on to our 
third panel. Thank this panel for their time and efforts and 
testimony today and answers. Thank you.
    Our third panel is Ms. Abby Block, director of the Center 
for Beneficiary Choices at the CMS Centers for Medicare and 
Medicaid Services, the Honorable Kim Holland, commissioner at 
Oklahoma Insurance Department, and Mr. Jim Poolman, 
commissioner at the North Dakota Insurance Department. We will 
have those witnesses come forward in a minute here.
     It is the policy of this subcommittee to take all 
testimony under oath. Please be advised, witnesses have the 
right under the rules of the House to be advised by counsel 
during testimony. Do any of our witnesses wish to have counsel 
present during their testimony? Ms. Block? No. Ms. Holland? Mr. 
Poolman? OK.
    All right. Then I will have you rise and raise your right 
hand and take the oath, please.
    [Witnesses sworn]
    Mr. Stupak. Let the record reflect the witnesses have 
indicated in the affirmative. They are now under oath. We will 
start with opening statements. We will start with Ms. Block, if 
you would please for your opening statement.

   STATEMENT OF ABBY BLOCK, DIRECTOR, CENTER FOR BENEFICIARY 
      CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Ms. Block. Mr. Chairman and members of the subcommittee, I 
am pleased to be here today to discuss oversight issues related 
to Medicare Advantage organizations, particularly with regard 
to marketing.
    As you know, Medicare Advantage offers an affordable, high-
value choice in comprehensive health care coverage for all 
Medicare beneficiaries. I am also pleased to report that this 
year beneficiaries selecting an MA plan are receiving on 
average $1,032 per year in benefits over and above what 
original Medicare provides.
    Enrollment in growth in one type of MA plan, the Private 
Fee-for-Service plan, has increased precipitously since the 
Medicare Prescription Drug Improvement and Modernization Act of 
2003. In fact, more than 500,000 beneficiaries have enrolled in 
Private Fee-for-Service plans from August 2006 to February 
2007.
    However, specific features of the Private Fee-for-Service 
product are unfamiliar to many beneficiaries and providers and, 
therefore, a certain level of confusion with this product is 
coming to light as more people enroll. Responding to emergent 
concerns, CMS is building on lessons learned and information 
gathered during 2006, to strengthen its oversight of Private 
Fee-for-Service plans, and all Medicare organizations in 2007 
and forward into 2008, ensuring beneficiaries' protections 
begins early. Before a plan sponsor is allowed to participate 
in the MA program it must submit an application and secure CMS 
approval. CMS conducts a comprehensive review of all 
applications to verify compliance with a broad range of 
important protections. Any deficiencies in these areas must be 
cured before a plan is able to go to the next step of benefit 
and bid review.
    Second, upon successful completion of the application or 
renewal process, plans submit benefit packages and bids for CMS 
review and negotiation. Through the bid review process CMS 
assesses MA benefit packages to ensure that they are not 
discriminatory against certain classes of beneficiaries. In the 
CMS actuarially equivalence test on the benefit packages and 
cautionary arrangements reviews, benefit packages must be 
valued as equal to or better than Medicare Fee-for-Service.
    Once plans have secured application and bid approval, CMS 
continually collects and analyzes performance data submitted by 
plans' internal systems and beneficiaries. The recently 
released 2008 call letter to plans serve as a central guidance 
document to help plans implement new CMS policies and 
procedures. Baseline measures for performance measures outlined 
in the call letter will be used for the MA plan report card 
available this fall, in time for the next open enrollment 
period. And, by the way, we monitor, and those report cards 
will include information on wait times at call centers, at plan 
call centers. All of that is very carefully monitored and there 
are requirements in place. CMS' monitoring of the performance 
metrics is supplemented by routine and targeted audits of MA 
plans which is outlined in more detail in my written testimony.
    In addition to regularly scheduled audits, a new contract, 
a risk assessment tool, will be available in the fall of 2008, 
and will be used to identify organizations and program areas 
representing the greatest compliance risks to Medicare 
beneficiaries and the Government in order to focus audits in 
the highest risk areas.
    On May 21, 2007, to further support compliance efforts, CMS 
issued a proposed rule strengthening its current oversight 
requirements and penalties for Medicare Advantage plans and 
part D prescription drug plans. Among other things, CMS 
proposed new steps to help expose potential fraud or misconduct 
through mandatory self-reporting of compliance violations as 
well as modifications to the current rules to expedite our 
ability to take compliance actions, including non-renewal of 
contracts.
    On May 25, 2007, CMS released guidelines that include 
specific policies for Private Fee-for-Service MA plans designed 
to protect beneficiaries from inappropriate sales tactics. 
Those guidelines say that Medicare Advantage organizations must 
monitor the activities of employees and contractors engaged in 
the marketing of plans to potential enrollees to ensure that 
their activities comply with applicable Medicare and other 
Federal health care laws.
    We are working with State insurance department officials 
and the National Association of Insurance Commissioners to 
address problems with marketing. Part of this effort includes a 
Memorandum of Understanding that allows States and CMS to share 
information more easily.
    As an update to the number in my written testimony, I am 
happy to say that to date 27 States, Puerto Rico, and the 
District of Columbia, have signed the MOU. These agreements are 
critically important because State insurance departments, 
indeed, retain jurisdiction over licensed brokers and agents in 
their States. And CMS requires that plans use only licensed 
agents.
    Therefore, States can act on information they receive from 
CMS or any source to control any inappropriate or illegal 
marketing practices of their licensees.
    We are particularly concerned about reports of marketing 
schemes designed to confuse, mislead or defraud beneficiaries 
and have taken very vigorous action to address these issues. 
Ninety-eight Medicare Advantage plans are on a corrective 
action plan to fix identified problems and allow enhanced 
monitoring of their conduct.
    In a further step to target marketing violations, CMS 
recently announced that seven health care organizations have 
agreed to voluntarily suspend the marketing of Private Fee-for-
Service plans. CMS will certify that a given plan is ready to 
resume marketing when the plan has demonstrated to us that it 
has the systems and management controls in place to meet all of 
the conditions specified in the CMS marketing guidance I 
mentioned earlier.
    Again, this guidance includes strong measures such as 
verification of the beneficiaries intent to enroll, documented 
training of marketing agents and brokers, and inclusion of a 
clear disclaimer statement in all Private Fee-for-Service 
marketing materials that tells beneficiaries what a Private 
Fee-for-Service plan is and what it is not.
    We are putting in place a rigorous process to review 
organizations' actions to determine when CMS can certify that 
the plan is ready to resume marketing. Violations after plans 
resume marketing will be subject to the full range of available 
penalties which include suspension of enrollment, suspension of 
payment for new enrollees, civil monetary penalties, and 
termination of the plan's participation in the Medicare 
Program.
    This voluntary suspension action is meaningful and 
precedent-setting and indicates how important good practices 
are to both CMS and the industry. The organizations included in 
the voluntary suspension represent 90 percent of Private Fee-
for-Service enrollment. Their willingness to forego significant 
enrollment opportunities indicates their determination to work 
with CMS to root out problems and do the right thing for 
beneficiaries.
    CMS has also developed Standard Operating Procedures to 
implement our long-standing policy that any beneficiary who 
believes he or she was enrolled in a plan without consent, or 
through misinformation may contact 1-800-MEDICAR to request 
prospective dis-enrollment assistance, or work through a CMS 
regional office to request assistance with retroactively dis-
enrolling from the plan, and returning to original Medicare, if 
desired. CMS is committed to taking whatever steps are 
necessary to ensure that people with Medicare are not misled or 
harmed by MA plans or their agents. As evidenced by our recent 
actions, we are putting beneficiaries first and we will 
continue to do so.
    Thank you and I look forward to taking any questions.
    [The prepared statement of Ms. Block follows:]

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    Mr. Stupak. Ms. Holland, opening statement, please.

  STATEMENT OF KIM HOLLAND, COMMISSIONER, OKLAHOMA INSURANCE 
                           DEPARTMENT

    Ms. Holland. Thank you, Mr. Chairman, distinguished 
members. My name is Kim Holland and I am the Oklahoma State 
insurance commissioner. I appreciate the opportunity to speak 
to you today about an issue for which I care deeply, the safety 
and security of our citizens promised by the availability of 
quality insurance products and services. I want people to want 
to be insured.
    Since the roll-out of Medicare Part D the Oklahoma 
Insurance Department has responded to an unacceptable number of 
complaints caused by the inappropriate and sometimes fraudulent 
marketing of Medicare Part C and part D products by certain 
insurance companies and their agents. We have received hundreds 
of complaints from confused, unhappy and frightened citizens 
who have been misled or deceived during a sale.
    The creation of new and affordable programs under Medicare 
Part C and D means that many of our Nation's seniors no longer 
have to choose between a meal or their medication. But it is 
this reality of pressing demand for coverage and a growing 
supply of available plans, 54 in Oklahoma alone, that 
necessitates adequate regulatory oversight. Yet, the MMA's 
preemption of State's authority to oversee the licensure, 
market conduct and financial solvency of Medicare Part D, 
agents and carriers, and the marketing practices of Medicare 
Advantage insurers has allowed insurers to exploit this 
exemption from regulatory oversight.
    Our seniors are plagued by aggressive and frequently 
misleading advertising, agent high-pressure sales tactics, and 
a lack of responsiveness if not outright neglect from their 
insurance companies. A letter I received just this month from a 
senior caregiver offers a poignant illustration of the 
problems. I quote directly from her correspondence. ``WellCare 
employees are stationed on every other corner in the 
neighborhood. They are approaching people in the street 
including our residents to sign them up for WellCare services. 
They do this in a very aggressive manner. They do this without 
establishing the care needs of the current providers of the 
patients.'' She writes that 90 percent of their residents 
suffer from chronic illnesses and that their ability to form 
competent judgments is impaired. She also writes that she sent 
a letter expressing her concerns to WellCare in October 2006, 
and has received no response. She told me personally that 
WellCare is not facilitating dis-enrollment in a timely manner, 
that patient care is being denied, and that her CMS regional 
offices manager did not know how to address the problem.
    We recently completed a targeted market conduct examination 
of Humana, one of America's largest providers of Medicare 
Advantage plans in response to an escalation in number and 
nature of unresolved complaints involving the sales tactics of 
agents selling their products. When finally completed the 
examination exposed chronic and blatant disregard for State 
regulation and for senior policyholders and the inadequacy of 
Federal oversight. That examination focused on the current 
limits of our authority regarding Medicare Advantage and part D 
products, insurers' obligation to properly license their sales 
agents.
    However, the full scope of market conduct oversight 
customarily performed for the benefit of insurance consumers 
goes well-beyond licensing. Insurance departments monitor 
compliance of an insurer's handling of complaints, claims 
practices, marketing and sales materials and advertising, 
producer licensing as well as appointed agent training and 
conduct, underwriting and rating practices, policyholder 
service, and company operations and management. Our rigorous 
examination standards ensure that consumer protections are kept 
at the forefront of an insurer's enterprise, equally balanced 
with their profit motives.
    Our inability to assert this balance has resulted in a 
travesty of security for Medicare beneficiaries. Since my 
recent testimony to the Senate, I have met with Humana 
executives who outlined new processes and heightened compliance 
oversight of their Medicare business stream. Well, we are still 
in disciplinary discussions with the company and will continue 
to monitor their activities closely. I am somewhat encouraged 
by their actions to devote increased resources to assist and 
protect their Medicare plan policyholders.
    However, the problems identified with Humana are certainly 
not unique to them but rather a glaring example of what is 
occurring on a regular basis as companies pursue market share 
in an unregulated environment. Insurance departments across the 
Nation are receiving complaints of a similar nature from 
seniors, their families and caregivers against many insurers, 
including other dominant players such as WellCare, Coventry, 
Secure Horizons and Pyramid Life.
    While I applaud CMS for their recent efforts to compel 
insurer's to refrain from marketing activities while they 
attempt to address the issues I raised in my Senate testimony, 
their efforts are simply no substitute for the 136 years of 
State-based insurance regulation that has resulted in our 
sophisticated and expansive and incomparable understanding of 
insurance company financials, operations and marketing.
    Congressmen, we put this expertise to use everyday acting 
promptly and judiciously on behalf of the industry and the 
consuming public. Given our seniors chronic and continuing 
complaints against insurers why are State insurance departments 
vast resources being denied those in need to their continued 
peril?
    I opened my remarks by telling you that I want people to 
want to be insured. It is a challenging proposition but an 
important goal in insuring the financial security of Oklahomans 
and the future prosperity of my State. But I can tell you that 
my progress is severely impeded when my public is fearful that 
their insurer or their insurance product is bad. When they 
begin to question whether going without coverage is safer and 
less costly then simply going without.
    Today I ask again that Congress un-encumber me from the 
unproductive, unnecessary and dangerous preemptions that expose 
my citizens to the neglect and abuse I have described, and let 
me do my job. I am not interested in territorial squabbling or 
finger-pointing. I am interested in working together for the 
benefit of my folks back home. If government cannot protect our 
most vulnerable, our children, our frail, our disadvantaged and 
our elderly, of what use are we? Let us do our job.
    Thank you very much.
    [The prepared statement of Ms. Holland follows:]

                        Statement of Kim Holland

     Good morning Mister Chairman and members of the Committee. 
My name is Kim Holland and I am the Oklahoma State Insurance 
Commissioner, an elective office I have held since January 
2005. I appreciate the opportunity to speak to you today about 
an issue for which I care deeply: the safety and security of 
our citizens promised by the availability of quality insurance 
products and services. I want people to want to be insured.
     The primary obligation of my agency is to protect our 
insurance consuming public. I, and my staff of over 150 
dedicated individuals, take this obligation very seriously. Our 
office fields over 60,000 calls to our consumer assistance 
division each and every year, plus an additional 12,000 calls 
to our federally funded SHIP program. We license and regulate 
the activities of over 80,000 agents, monitor the financial 
solvency and market conduct of over 1,600 insurance companies 
and my twelve member law enforcement team responds to more than 
700 insurance fraud and abuse allegations each year. We act 
swiftly and aggressively on behalf of all policyholders against 
any carrier, agent or broker that has acted unlawfully or 
otherwise not delivered on their promise to policyholders.
     Since the roll-out of Medicare Part D in November of 2005, 
the Oklahoma Insurance Department has responded to an 
unacceptable number of complaints caused by the inappropriate 
and sometimes fraudulent marketing of Medicare Part C and Part 
D products by certain insurance companies and their sales 
producers. We have received hundreds of complaints from 
confused, unhappy and frightened citizens who have been mislead 
or deceived during a sale.
     The passage of the Medicare Modernization Act has made 
access to affordable medications possible for 20 percent of 
Oklahoma's population, a large measure of whom depend solely on 
social security for their livelihood. The creation of new and 
affordable programs under Medicare Parts C and D means that 
many of our Nation's seniors no longer have to choose between a 
meal or their medication. But it is this reality--a pressing 
demand for coverage and a growing supply of available plans (54 
in Oklahoma alone!)--that necessitates adequate regulatory 
oversight.
     Yet the MMA's preemption of states' authority to oversee 
the licensure, market conduct and financial solvency of 
Medicare Part D agents and carriers and the marketing practices 
of Medicare Advantage insurers has allowed them to exploit this 
exemption from regulatory oversight. Our seniors are plagued by 
aggressive and frequently misleading advertising, agent high 
pressure sales tactics, and a lack of responsiveness if not 
outright neglect from their insurance company. A letter I 
received just this month from a senior care-giver offers a 
poignant illustration of the problems. I quote directly from 
her correspondence: ``WellCare employees are stationed on every 
other corner in the neighborhood. They are approaching people 
in the street, including our residents, to sign them up for 
WellCare Services. They do this is a very aggressive manner. 
They do this without establishing the care needs or the current 
providers of the patients''. She writes that 90 percent of 
their residents suffer from chronic illness and that their 
ability to form competent judgments is impaired. She also 
writes that she sent a letter expressing her concerns to Well 
Care in October of 2006 and has received no response. She told 
me personally that her CMS regional office's regional manager 
did not know how to adequately address the problem. While the 
sales activities have relented somewhat, she says that WellCare 
is not facilitating disenrollment in a timely manner and 
patient care is being denied.
     As you are aware, we recently completed a targeted market 
conduct examination of Humana, one of America's largest 
providers of Medicare Advantage plans, in response to an 
escalation in number and nature of unresolved complaints 
involving the sales tactics of agents selling their products. 
When finally completed, the examination exposed chronic and 
blatant disregard for state regulation and for senior 
policyholders, and the inadequacy of Federal oversight.
     That examination focused on the current limits of our 
authority regarding Medicare Advantage and Part D products--
insurers' obligation to properly license their sales agents. 
However, the full scope of market conduct oversight customarily 
performed for the benefit of insurance consumers goes well 
beyond licensing. Insurance Departments monitor compliance of 
an insurer's handling of complaints; claims practices; 
marketing and sales materials and advertising; producer 
licensing as well as appointed agent training and conduct; 
underwriting and rating practices; policyholder service; and 
company operations and management. Our rigorous examination 
standards ensure that consumer protections are kept at the 
forefront of an insurers' enterprise--equally balanced with 
their profit motives. Our inability to assert this balance has 
resulted in a travesty of security for Medicare beneficiaries.
     Since the presentation of my testimony in May, I have met 
with Humana executives who outlined new processes and 
heightened compliance oversight of their Medicare business 
stream. While we are still in disciplinary discussions with the 
company and will continue to monitor their activities closely, 
I am somewhat encouraged by their actions to devote increased 
resources to assist and protect their Medicare plan 
policyholders.
     However, the problems identified with Humana are certainly 
not unique to them, but rather a glaring example of what is 
occurring on a regular basis as companies pursue market share 
in an unregulated environment. Insurance Departments across the 
Nation are receiving complaints of a similar nature from 
seniors, their families and caregivers against many insurers, 
including other dominant players WellCare, Coventry, Pacificare 
and Pyramid Life.
     While I applaud CMS for their recent efforts to compel 
insurers to refrain from marketing activities while they 
attempt to address the issues I raised during my testimony to 
the Senate Special Committee on Aging, their efforts are simply 
no substitute for the 136 years of state based insurance 
regulation that has resulted in our sophisticated and expansive 
and incomparable understanding of insurance company financials, 
operations and marketing. Congressmen, we put this expertise to 
use every day, acting quickly and appropriately on behalf of 
the industry and the consuming public. Given our seniors' 
chronic and continuing complaints against insurers, why are 
State Insurance Department's experience, assistance and 
protections being denied those in need at their continued 
peril.
     I opened my remarks telling you I want people to want to 
be insured. It's a challenging proposition, but an important 
goal in ensuring the financial security of Oklahomans and the 
future prosperity of Oklahoma. But I can tell you that my 
progress is severely impeded when my public is fearful that 
their insurer or their insurance product is bad; when they 
begin to question whether going without coverage is safer and 
lest costly than simply going without.
     So today I ask again, that Congress unencumber me from the 
unproductive, unnecessary, and dangerous preemptions that 
expose my citizens to the neglect and abuse I have described 
and let me do my job. Allow me to fully deploy the substantial 
and immediate resources of my office to protect the interests 
of all policy-holders, regardless of their age and regardless 
of the private health plan they purchase. I am not interested 
in territorial squabbling or finger-pointing. I am interested 
in working together for the benefit of my folks back home. If 
government cannot protect our most vulnerable--our children, 
our frail, our disadvantaged, our elderly--of what use are we? 
Let's do our job. Thank you.
                              ----------                              

    Mr. Stupak. Thank you for your testimony.
    Mr. Poolman, the North Dakota insurance commissioner, your 
opening statement please, sir.

STATEMENT OF JIM POOLMAN, COMMISSIONER, NORTH DAKOTA INSURANCE 
                           DEPARTMENT

    Mr. Poolman. Thank you, Mr. Chairman, and good afternoon 
and good afternoon, Mr. Whitfield, and members of the 
committee. I am pleased to appear before you today and truly 
appreciate the opportunity to articulate my concerns about MMA 
and specifically abuse in the Medicare Advantage plan 
marketing. And thanks also for, hopefully, taking action. My 
name is Jim Poolman. I am the elected commissioner in the State 
of North Dakota. I took office in January 2001, and given that 
length of tenure in office of seeing firsthand the 
implementation of the Medicare Modernization Act, I sit before 
you today to urge you to restore the regulatory authority over 
these programs and consider using the current Medigap insurance 
regulatory model as the model going forward.
    And I do want to say that I believe in Medicare 
Modernization Act and I believe in what you folks have done to 
get prescription drugs under part D to the citizens across the 
country. I have about 105,000 out of 640,000 that are eligible 
for Medicare. Not, what I am trying to tell you is the North 
Dakota experience that we have gone through in the 
implementation of Medicare Modernization.
    From the earliest days of the roll-out we saw widespread 
confusion and frustration on the part of seniors in North 
Dakota. As the roll-out progressed it became increasingly clear 
that the Centers for Medicaid and Medicare Services was ill-
equipped to adequately address the conflicts that arose for 
this vulnerable population. For example, our contact with 
customer service staff at Medicare is typically unproductive. 
Not only do they lack the answers or information we need but 
they are also inadequately trained and on occasion CMS staff 
members have simply hung-up the phone on beneficiaries or those 
folks in our SHIP program who are trying to help beneficiaries.
    Companies and agents have capitalized on the confusion 
associated with the new products by using aggressive sales 
practices that in my estimation are misleading at best, and 
fraudulent at worst. I have examples of tactics ranging from 
agents refusing the leave people's homes or giving them 
misleading information to actually sending money to an 
insurance company on behalf of that potential policyholder that 
was not their money. We even have seniors who were switched 
from traditional Medicare to an MA plan simply because they 
signed their name on the entrance of a mass enrollment event.
    In addition, we have an example of a woman who was switched 
from one plan to another plan without consent only to find that 
she does lack coverage but the company she was switched to had 
no record of her enrollment. The back story is incredible. CMS 
confused her with another person of the same name who may have 
switched plans. This woman has made multiple complaints to CMS 
and to the company and still her situation is not resolved. She 
is paying for her drugs out-of-pocket on a very limited Social 
Security check. That is not the goal of Congress when setting-
up MMA.
    Even though CMS has long been aware of the conflicts and 
bugs in the system they have not been resolved and they are 
worse. Instead of becoming more responsive, CMS has adopted a 
``do not call us'' attitude. That requires us to spend 
countless hours on the telephone with them only to be referred 
to the company, specifically, for help.
    The ramifications of this situation are varied. From a 
State senior health insurance counseling program standpoint my 
staff has fielded over 3,800 client contacts. And of those 
contacts, 75 percent of them are dealt with enrollments or dis-
enrollments of Medicare Advantage plans. The data tells us 
this, nine out of 10 clients that contact our SHIP program were 
the result of some type of problem with the Medicare 
Modernization Act, either part D or Medicare Advantage. Only 
one out of ten client contacts are basic Medicare/Medigap, 
prescription assistance, long-term care, Medicaid questions 
that are SHIP staff or SHIP counselors were answering prior to 
MMA. Three out of four problem-type calls involved Medicare 
Advantage plans that are related to enrollments or dis-
enrollments, strongly suggested inappropriate sales and/or 
inefficient administration of the policies. By comparison, one 
out of three problem calls involving part D plans are related 
to enrollments or dis-enrollments.
    From our perspective the situation in untenable, it becomes 
difficult to do the good work that we desire to help our senior 
population. As insurance commissioner my main duty is to 
protect insurance consumers. However, under the current 
circumstances seniors in North Dakota are being shortchanged by 
CMS and the current MMA. Clearly, these companies need more 
rigorous oversight and CMS is not prepared or seemingly unable 
to do the job. With all due respect, I find it highly unlikely 
based on our experience during this situation that CMS will be 
able to do better as Ms. Norwalk suggests in a recent press 
release.
    Today I again urge you to restore and expand State 
insurance regulatory oversight over these programs and consider 
the regulation of Medicare Supplement insurance as a potential 
model. By adopting the Medigap model consumers will still have 
a variety of plans to choose from that will be standardized. 
Competition will remain strong as in the current Medigap market 
of which I believe in. State regulators would be able to 
adequately safeguard consumers.
    The bottom line is if State insurance regulatory is 
restored all of the stories you have heard about abuse of 
marketing tactics would be prohibited by State law, monitoring 
questions by State insurance regulators, and controlled by 
State-based insurance regulation. By restoring State authority 
you, in fact, untie my hands and allow me to take whatever 
steps appropriate to safeguard the seniors in my State.
    Mr. Chairman and members of the subcommittee thank you 
again for holding this hearing and this issue is one that 
affects not only seniors in my State but obviously all of your 
States. And I hope that the information that I have shared with 
you and that the information that we will share in a give and 
take on questions will be helpful. Together, Mr. Chairman, we 
can work together to fill in the gaps that will protect seniors 
across the country.
    [The prepared statement of Mr. Poolman follows:]

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    Mr. Stupak. Thank you and thank you for your testimony.
    Now, we will go to questions now. Ms. Block, if I may start 
with you. I would assume that CMS does not approve what 
happened at Judiciary House as best practices, correct?
    Ms. Block. We totally, totally disapprove.
    Mr. Stupak. OK. Then I know you have worked with industry 
but has CMS taken any steps to alert Medicare beneficiaries of 
potential deceptive sales practices. Alabama is talking about 
putting together a fraud alert. Ms. Healey testified about 
that. But has CMS thought about doing that?
    Ms. Block. Actually, we have put together fraud alerts and 
we----
    Mr. Stupak. But sent them to the beneficiaries?
    Ms. Block. Those alerts, yes, those alerts are sent out. 
They are sent out through the SHIPs and through other outreach 
programs. So, yes, we have alerted beneficiaries.
    But in addition to that I would say that it is really 
incumbent upon us working in collaboration with the States and 
I would really like to stress that CMS appreciates the 
opportunity to work collaboratively with the States. We value 
what the States have to----
    Mr. Stupak. Well, these two commissioners would like 
Congress give them the authority through CMS to regulate the 
policies within their own States. Do you have any objection to 
that?
    Ms. Block. Yes, I do.
    Mr. Stupak. You object to that?
    Ms. Block. Yes, I absolutely do.
    Mr. Stupak. Why would you object to that?
    Ms. Block. I object to that because this is a Federal 
program funded by Federal money.
    Mr. Stupak. Right, Medicare, Medigap----
    Ms. Block. Unlike Medigap which is privately paid for, each 
beneficiary pays their premium, Medicare Advantage is highly 
subsidized, it is a Federal program and it needs uniform 
consistent standard Federal oversight.
    Mr. Stupak. Then why don't we have standards in the 
policies that can be offered and for practice for the agents 
who sell these? Why don't we have that Federalized and standard 
so the policy whether it is in Oklahoma or North Dakota are the 
same and beneficiaries would know exactly what they are 
receiving then?
    Ms. Block. That is a question that has been debated from a 
policy perspective for many years. I used to run the Federal 
Employees Health Benefit.
    Mr. Stupak. Right. I am well aware of that.
    Ms. Block. I did that for many years. We in that 
organization looked carefully and at one time considered 
proposing standardized benefits. We decided after careful 
analysis that that was not the best way to run a consumer 
choice program. And I don't believe that it is the best way to 
do it in the Medicare Program either.
    Mr. Stupak. How many insurance companies are selling these 
Medicare Advantage policies? Do you know?
    Ms. Block. In terms of the total number of insurance 
companies, I always have trouble with this number because there 
are plans and then there are sponsoring organizations.
    Mr. Stupak. OK. Is there about 150, is that about right?
    Ms. Block. Yes, I would say that, that is probably about 
it.
    Mr. Stupak. OK. One 150 and you said you have 98 corrective 
actions going right now with these 150 companies? That is like 
two-thirds.
    Ms. Block. There are significant numbers of corrective 
actions but not all of them, by the way, are marketing-related 
by any means. Corrective actions can be put in place for many 
different reasons.
    Mr. Stupak. But there is a concern that CMS is looking at 
two-thirds of these 150 companies that are selling policies 
about the delivery of the product, right?
    Ms. Block. Well, again, many of those corrective action 
plans come about through routine audits, through focused 
audits, and they cover the whole range of compliance with all 
of CMS' requirements. And, in fact, the fact that we have that 
many corrective action plans in place, means that we are 
carefully monitoring these plans----
    Mr. Stupak. Or it means it is not----
    Ms. Block. That there is oversight----
    Mr. Stupak. Or it means they aren't working real well.
    Mr. Stupak. Right or it also could mean that it doesn't, it 
is not working as well as intended to be.
    Let me ask you this, has CMS ever imposed a monetary 
penalty on a plan for any marketing abuses?
    Ms. Block. Not for marketing abuses specifically----
    Mr. Stupak. So the civil penalties that suggest----
    Ms. Block. Sanctions against plans for marketing abuses.
    Mr. Stupak. Well what are the sanctions? What would be a 
sanction?
    Ms. Block. A sanction would be freezing marketing, freezing 
enrollment. We did impose those penalties against a plan in 
Florida.
    Mr. Stupak. OK. So if you freeze it they still are allowed 
to get the benefits of that monthly payment and things like 
this, correct?
    Ms. Block. For existing members, yes.
    Mr. Stupak. Well, where is the penalty then?
    Ms. Block. Well, the penalty is that they can't increase 
their membership.
    Mr. Stupak. You imposed a penalty because they did 
something wrong and if I have a captive audience here and I am 
frozen, I am still being rewarded for my deceptive practices 
because I have this group here that has the problems, right? So 
where is the penalty here?
    Ms. Block. Let me say this. The ability to impose penalties 
and the penalties that can be imposed range depending upon the 
offense, and so----
    Mr. Stupak. Sure. My problem is I never see CMS issue a 
penalty.
    Ms. Block. When you impose civil monetary penalties you 
need to demonstrate very specifically, and by the way those 
penalties have to be approved by the Justice Department.
    Mr. Stupak. Sure.
    Ms. Block. You have to be able to demonstrate real harm to 
beneficiaries so you don't impose those kinds of penalties, you 
can't impose them for what would be considered to be 
administrative-type violations. And that is where corrective 
action plans are used. In order to impose a civil monetary 
penalty and we did that by the way for the late delivery of 
ANOX. We imposed civil monetary penalties on a number of plans 
and we did that because we believed that there was, in fact, 
and could justify to the Justice Department that there was 
direct harm to beneficiaries because by not receiving the 
information they needed timely they could not make an 
appropriate decision in terms of their choice of plan for the 
next year.
    Mr. Stupak. Civil monetary penalties are not approved by 
the Department of Justice. Department of Justice just really 
checks to see if they might interfere with their open 
investigation, right? You don't have to get Justice Department 
approval?
    Ms. Block. My understanding is I have to go through the 
Department of Justice every time I want to impose that kind of 
penalty.
    Mr. Stupak. To make sure you are not interfering with a----
    Ms. Block. That is a time-consuming process.
    Mr. Stupak. Oh, I agree.
    Ms. Block. What I want to do, believe me, is fix these 
problems just as quickly as I possibly can. I want to address 
every problem and I want to fix it and I want to fix it right 
now.
    Mr. Stupak. Well, but let us be clear here. Justice 
Department doesn't approve or have to approve the civil 
penalties. All Justice Department wants to know is whether or 
not you are interfering with an ongoing investigation.
    Ms. Block. I am sorry but if I want to be exact they have 
to review them.
    Mr. Stupak. OK. Are there any enforcement in the so-called 
guidelines you are putting forth, CMS putting forth, these 
guidelines? What is going to be the sanction if you violate 
these guidelines?
    Ms. Block. The sanctions will be appropriate to violations 
and I guarantee you that they will be appropriate to the 
violations if there are violations.
    Mr. Stupak. Any sanctions on the company that Judiciary 
House here that we had today? Are you considering any sanctions 
against that company?
    Ms. Block. That company is under a corrective action plan. 
All of those corrective action plans remain in place and 
further, by the way, all investigations also remain in place.
    Mr. Stupak. My questions was sanctions.
    Ms. Block. Criminal action against any of those agents, 
those things are in no way impeded and there are criminal 
penalties that can be taken against agents who are----
    Mr. Stupak. Judiciary House, the one we heard from today, 
any sanctions, any criminal penalties, any recommendations made 
by CMS on that example we had today?
    Ms. Block. We have learned very recently of that particular 
incident and the plan as far as I know did everything it needed 
to do. It terminated its relationship with those unscrupulous 
agents. That is what you would expect would happen. The 
relationship was terminated. Those people are no longer working 
for that organization.
    Mr. Stupak. OK. My time is way over but, what would you do, 
Mr. Poolman and Ms. Holland, if Judiciary House occurred in 
your State and if you had the authority? What would you do? 
What sanctions do you have?
    Mr. Poolman. Well, clearly, what would happen is we would 
go after the agent which I think happened in the District of 
Columbia, but the interesting thing about this is that there is 
a contractual relationship between an agent and a company and 
if the regulatory process was set-up just like any other 
company. Let us say it is a life insurance company selling an 
annuity and somebody was duped into buying an annuity we could, 
therefore, go back and make the company make the transaction 
right to begin with. And that is the authority we don't have 
right now. We don't have any market conduct authority to hold 
those companies accountable. If we did, then the company would 
be held accountable in making the transaction right, getting 
that particular person or persons in this case, dis-enrolled 
from the program and enrolled in the right kind of program and 
holding that company accountable in doing so.
    Mr. Stupak. Thank you. Ms. Holland. Sure.
    Ms. Holland. If I may add something to that, I referred to 
in my testimony an exam that we conducted on Humana because of 
people's complaints.
    Mr. Stupak. Right.
    Ms. Holland. We actually found that in the course of that 
examination that there were 68 agents selling products in our 
State who were not licensed. They had no appointments but again 
as Commissioner Poolman indicated that we were unable to 
address that with them other than to tell them we expected 
their agents to be appointed. The examination actually 
identified numerous other failures on the part of the company, 
things that we would have addressed immediately had we had the 
authority.
    And so I brought that examination to Ms. Block personally 
in March. I was interested to hear today that she indicated 
that they require agents to be licensed by their companies, so 
we certainly will be pursuing those agents, and I hope now that 
I know that CMS will be pursuing actions against those 
companies, Humana, specifically, for permitting 68 agents to be 
selling products in my State without a license.
    Mr. Stupak. Thank you. I am way over on my time.
    Mr. Whitfield, for questions.
    Mr. Whitfield. Ms. Holland and Mr. Poolman, both of you in 
your testimony made it quite clear that you did not feel that 
CMS was adequate in protecting the citizens of Oklahoma and 
North Dakota, respectively as it relates to Medicare products. 
But Ms. Block, in her testimony talked about these Memorandums 
of Understanding with, I think she said 26 States and Puerto 
Rico. Has North Dakota entered into a Memorandum of 
Understanding with CMS and Oklahoma also? And in her testimony 
she, maybe I didn't hear her correctly but I understood her to 
say that this Memorandum of Understanding gives the States the 
complete authority to go in and deal with problems with 
insurance agents. Is that not correct?
    Mr. Poolman. Congressman, no, that is not correct. Being 
very frank it is basically as I understand it an information 
sharing agreement. There is no absolute downside to signing a 
Memorandum of Understanding with CMS when we have a 
responsibility in my State, a constitutional responsibility to 
protect the people of North Dakota. So to share information and 
in getting that information is incredibly important to us.
    Mr. Whitfield. All right.
    Mr. Poolman. To be able to effectively regulate the agents 
out of it, it gives us no authority on the company side to be 
able to hold those folks accountable.
    Mr. Whitfield. Ms. Holland.
    Ms. Holland. Yes, just as an example the MOU came about it 
because of our concerns about being able to address agents 
within our jurisdiction. It was the NAIC that really initiated 
the conversation with the MOU. That sat on the desk of, 
completed on the desks of CMS until I called and said I had an 
examination report and I would not deliver it until I had that 
MOU. And that spawned the delivery of the MOUs for the States 
that received them. But up until that time we had been waiting 
for some months for that MOU which the States had signed, those 
that participated, and still had not received that information. 
But again all it does is, as Commissioner Poolman said is 
agrees to an exchange of information.
    Mr. Whitfield. Well, you heard the commissioner from or 
deputy commissioner from Mississippi saying that in his State 
it was unclear whether or not they had the legal authority to 
terminate a license. What about in North Dakota and Oklahoma, 
what is your decision on that?
    Mr. Poolman. Because we do not have authority over the 
product, if you were to pull a license for the sale of a 
product that you don't have regulatory authority over there is 
some confusion. And if we pull a license, Congressman, there is 
an appeals process that those folks can go through, in fact, 
they can go to the district court and then the Supreme Court to 
appeal that. So we have to have very solid legal ground.
    In some of the cases that you have heard today I think we 
could eventually go after those folks and we are in North 
Dakota, by they way. We have open investigations in going after 
those agents that are unscrupulous in this regard. And we think 
we have the authority when it comes to agents but it has not 
been tested yet, and we want to make sure it is very clear 
authority.
    Mr. Whitfield. And you, same thing, Ms. Holland.
    Ms. Holland. We are pursuing it aggressively. Quite frankly 
I have an anti-fraud unit on, actually a law enforcement team 
on staff and I send my law enforcement team out to pursue any 
misbehavior, certainly.
    Mr. Whitfield. Well, Ms. Block, you have heard these 
concerns expressed by the insurance commissioners in these 
States, do you feel like they do not have a right to terminate 
the licensing of these insurance agents?
    Ms. Block. I believe they have an absolute right. We 
strongly encourage them to do that and we would like to work 
collaboratively with them to identify and track-down and pursue 
everyone who is acting inappropriately or illegally in any 
State.
    Mr. Whitfield. OK. So then what is the problem, why have we 
not been able to work together? Or have we been able to work 
together? Mr. Poolman.
    Mr. Poolman. Well, Congressman, it is not a matter of not 
working together, it is a matter of where does the authority 
lie to protect the people in my State and other States? And as 
I have said to you before we believe we have authority when it 
comes to agents, but the problem is, is making the consumer 
right and whole in the end of a transaction that has gone 
wrong. And if we have the ability to regulate from a market 
conduct standpoint, from a advertising standpoint, those types 
of things, we then have some leverage with the company to make 
them market right in our State.
    Mr. Whitfield. You and Ms. Holland then would be objecting 
to the preemption of the State's authority in this area? Do you 
interpret that the Federal act that established these Medicare 
Advantages preempts State law in this regard?
    Mr. Poolman. Congressman, before Medicare Modernization Act 
we had regulatory authority over benefits, appeals processes, 
rates, all of those types of things. Now we have basically 
regulatory authority over some licensing and solvency, and that 
is it. Nothing related to market issues.
    Mr. Whitfield. So your authority has been diminished 
significantly in your view.
    Mr. Poolman. Yes, sir.
    Mr. Whitfield. OK.
    Ms. Holland. And I think an example of that was one of the 
gentlemen today when you--from the carrier that was defending 
his--the agent population say, reminding everybody that those 
were independent agents not his agents, which I thought was 
such a disingenuous comment because quite frankly an agent is 
always an agent of the company by licensure, by contract. But 
under the MMA, appointments, that critical link that actually 
creates that contract, have been discontinued.
     So indeed we have free agents out there where we can 
address the agent but if it is an unlicensed agent I can't find 
that person unless I do an examination on the company.
     And if I try an examination on the company, like I did 
with Humana, they are digging their heels in and screaming 
preemption every opportunity they get.
     They have. It was through our persistence and insistence.
    Mr. Whitfield. Yes. Well, normally I think the American 
people when they think about authority, they fear Federal 
authority more than State authority. You take the IRS, the FBI, 
the Justice Department, but in this instance it appears that 
CMS is either not being aggressive in dealing with this, the 
fear is not there, in this particular instance. But with that 
my time has expired, Mr. Chairman.
    Ms. Holland. Well, may I just respond to that in one 
respect because I have all due respect for Ms. Block and her 
comment about really wanting to do something. I think that is 
sincere. I think it is a reality of resources. I don't have a 
CMS representative in my State. If one of my beneficiaries 
calls from Tahlequah, OK and needs help I can send one of my 
law enforcement officers out there in an hour to see what is 
going on. I have to call CMS and they are not going to come to 
Tahlequah, OK and deal with my senior population.
    I think that is what we are trying to suggest to you is 
that we have got the resources on the ground that have been 
there. We have been dealing with these issues on these 
products, health care, whatever the products are, for again, 
136 years. What has changed? The idea of it being Federal 
dollars is another area that appears disingenuous to me it is 
taxpayer dollars. And those seniors are paying those taxes and 
those seniors are paying premiums. And I am paying those taxes. 
So we should all be working together.
    Mr. Stupak. Mr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman. Ms. Block, let me 
just ask you the statement was made by, I don't remember which 
commissioner, it may have been, in fact, made by both 
commissioners that it seemed that CMS was unable or unwilling 
to do the job as far as enforcement. How would you respond to 
that statement?
    Ms. Block. CMS is perfectly willing to do the job and has 
every intention of doing the job. And again I will suggest that 
the best way to do the job is through a partnership of the 
Federal Government and the States that have a critical role to 
play and we would like to strengthen that partnership and do 
the job effectively together.
    Mr. Burgess. I think we just heard in some of the very last 
statements made by the commissioner from Oklahoma about, they 
are there. They are on the ground. They have the enforcement 
officials who are on duty and at their beck and call, so I 
guess I would ask the question why not use their offices as a 
force multiplier for CMS in order to reign in unscrupulous 
behavior.
    Ms. Block. But we do. I don't know how I can stress to this 
committee that the States have jurisdiction over the licensed 
agents in their States. And to address the issue that Ms. 
Holland raised we absolutely require that all agents be 
licensed and where there is a violation of that we have 
mechanisms to deal with that with the sponsoring organization.
    Mr. Burgess. Now, can anyone on the panel provide this 
committee with documentary evidence where that licensing 
authority did not exist, an enforcement action followed as a 
result of that? Or that those licensing obligations were 
abrogated and an enforcement action was taken on behalf of 
either CMS or the State Department of Insurance?
    Ms. Holland. No, I think we acted within our authority to 
address the licensure issues but licensure, the specific 
licensure of any one agent is intrinsically tied to their 
relationship with the company. And the current MMA has severed 
that tie at least in terms of our ability to tie that agent 
back to the company and compel the company, through sanctions 
and otherwise, for getting the behavior that we want.
    Mr. Burgess. Ms. Block, you are nodding your head, you 
agree with that statement?
    Ms. Block. Yes, I am. Ms. Holland is addressing an issue 
that is generally referred to as appointments.
    Mr. Burgess. I am sorry.
    Ms. Block. And I thoroughly understand the issue.
    Ms. Holland. Appointments.
    Ms. Block. Appointments and what we are proposing, and we 
would hope to move very quickly, in order to be able to deal 
with this, is that we will require every plan selling Medicare 
Advantage products, particularly Private Fee-for-Service 
products, to provide to CMS the names of all of their licensed 
agents and all of their agents need to be licensed. We will 
then in turn make those names available to every State on 
request so that we will develop a centralized, presumably, Web 
site access. That would be the easiest way of doing it, to put 
it on a Web site so that every State insurance commissioner 
will be able to look at that Web site and will be able to see 
the name of every agent who is working for every company 
selling in their State. That is something, it is not in place, 
yet.
    Mr. Burgess. It is not, OK.
    Ms. Block. But it is going to be in place very soon, I 
guarantee.
    Mr. Burgess. All right. Well, it has been 2\1/2\ years 
since, I guess a year and a half, since the implementation of 
the part D program and it is probably time that that occurred.
    How is the Medicare Advantage Program different from say 
the multi-state insurance company that would be governed under 
the ERISA statutes. Is it a similar situation with the 
preemption? Is it a parallel universe that the Medicare 
Advantage plans occupy? How does that work?
    Ms. Block. They are not governed under ERISA, they are 
governed under Medicare statute and regulation, and that is 
why, in my oral statement and I believe I go into even more 
detail in my written statement, I describe the very rigorous 
review process that every plan and every plan's benefit package 
goes through at CMS because CMS has the authority to oversee 
these plans and before a plans benefit package is accepted, it 
is reviewed by CMS and would go through that process every 
single year.
    Mr. Burgess. Let me just interrupt you because the chairman 
is not going to be nearly as indulgent with me going over as he 
is with other members of the committee.
    Do you have similar problems, let me just ask the 
commissioners do you have similar problems with ERISA plans 
that you have with the Medicare Advantage plans?
    Mr. Poolman. Congressman, I think that is a great question 
and it is a great point. Let me give you an example, if a 
consumer calls my office and they are under a self-funded plan 
that has been created by a business and they can't get their 
claim paid? I have to essentially refer them to the Department 
of Labor who administers ERISA. I have no authority to go 
enforce that company or force the insurance company that is 
administering that plan to pay that claim even if it was right 
to be paid. It is very similar to what is happening here. And 
it is a black hole of regulation because those folks get no 
response from the DOL either.
    Mr. Burgess. Yes, I think I fell into that black hole as a 
practitioner once.
    Mr. Poolman. Yes, you did.
    Mr. Burgess. But do we see the abuses in the ERISA system 
that we have been talking about here this afternoon?
    Mr. Poolman. As, Congressman, as more companies are getting 
away from fully insured plans because of the standardization of 
those plans and creating their own benefit plans we are seeing 
more abuses in that regard and we are having to shuffle them 
off to the Federal Government and they are essentially calling 
you.
    Mr. Burgess. Is there, and that is fine, I will take those 
calls. Is there a risk of a learning curve with people 
observing what is happening with the Medicare Advantage plans 
that are having a spill-over effect to the ERISA plans, the 
race to the bottom, if you will?
    Mr. Poolman. The difference, Congressman, is that ERISA 
plans are created by business owners and I would sense a much 
less vulnerable population then the folks buying typical 
Medicare Advantage plans because they are seniors that are in 
many cases duped. On the ERISA side it is a business owner 
setting-up a plan and they are far more sophisticated 
purchasers when buying a self-funded plan for their business.
    Mr. Burgess. OK. Let me just ask one last question now I 
know in the State of Texas, I believe the insurance 
commissioner is an appointed position by the governor, and you 
are both elected, is that correct? If I were to want to vote 
for either one of you in the primary election would I vote in 
the Democratic or Republican primary?
    Ms. Holland. One of each, Congressman.
    Mr. Burgess. One of each.
    Mr. Poolman. You have a bipartisan representation here. I 
am a Republican and my colleague is a Democrat.
    Mr. Burgess. I was just trying to figure out a way to ask 
that question delecately.
    Mr. Poolman. I am very open with that and that, well, I 
will let it go at that.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Stupak. Ms. Holland, Mr. Poolman, when Ms. Block was 
talking about this Web site with the insurance agents on it, is 
that going to solve the problems here?
    Ms. Holland. I think there is a couple of things here. 
First of all, the National Association of Insurance 
Commissioners maintains a National Insurance Producer Registry, 
the NIPR.
    Mr. Stupak. It is already there.
    Ms. Holland. It has every licensed agent on it, it is 
notified of terminations and so forth. It is accessible to 
companies and regulators. It is not accessible to the general 
public, however, anyone can call us and we can access that 
information. We all share information through State-based 
regulatory systems, as well, which requires companies to send 
us an appointment, when they appoint an agent.
    Mr. Stupak. Right.
    Ms. Holland. An appointment is necessary to get a license. 
If that appointment is cancelled for any reason the company has 
to report that and why. In the absence of that appointment 
process again, we won't have that information.
    Mr. Stupak. And the Medicare Modernization Act took away 
the appointments, right?
    Ms. Holland. Right, it does not require an appointment, no. 
The problem and the only thing that I would suggest in the 
example that Ms. Block gave is the 68 agents who were doing 
business in my State wouldn't be on her report, and I still 
wouldn't know about them. It was only through the process of my 
investigation and examination of that company that that came to 
light.
    Mr. Stupak. But if we put the appointment rule back in.
    Ms. Holland. That would work. It would help tremendously.
    Mr. Stupak. And would that also give you some jurisdiction 
or control over these policies that are being sold? It doesn't, 
it is only the agents, right?
    Ms. Holland. Well, no, it does allow us to hold the company 
accountable for that.
    Mr. Stupak. For their agent which you cannot do right now.
     So really to solve this issue, you really need, No. 1, the 
appointment rule back so you have some control over the agent 
with company. Second, you have to have some control over 
product being sold.
    Ms. Holland. Indeed.
    Mr. Stupak. If CMS put forth a Web site that listed oh, 
corrective actions, and Ms. Block mentioned corrective action 
plans that they are looking at right now for 98 companies, 
complaints, dis-enrollment data, would that be helpful?
    Ms. Holland. I think any information about company 
activities and actions is helpful to regulators. We are always 
interested.
    Mr. Poolman. Mr. Chairman, I think any of that information 
as Commissioner Holland said is important. We have some 
questions about the corrective action plans and the oversight 
function of CMS and who is going to make sure that are they 
going to report back to anybody that who has taken what steps 
to make sure and what happens if they are not? What is the 
process that they are going to go through? That will come 
through some communication, I am sure, with CMS, but we are 
hoping that there is vigorous enforcement of self-corrective 
action plans that is out there. And if not, what is the, then 
the flip side of that in terms of punitive intentions against 
the company that is not following their own corrective action 
plan?
    Mr. Stupak. So, Ms. Block, why wouldn't CMS put this 
information, CMS currently pulls information on nursing homes, 
home health agencies, so beneficiaries and their families have 
the information about staffing levels, health outcome measures, 
and sanctions have been post. So why doesn't CMS then put the 
corrective action plans on the Web site, complaints, dis-
enrollment and this information available and not just for 
these insurance commissioners but for all seniors? Why wouldn't 
we do the same thing?
    Ms. Block. We are in the process of doing that, sir, as we 
speak.
    Mr. Stupak. All right. That would be a good first step. How 
about this idea about the appointment rule, would you be 
opposed to giving them back they appointment rule on their MMA, 
that the commissioners asked for?
    Ms. Block. There has been a great deal of discussion about 
that and it is still under discussion, but let me say I need to 
clarify because I think what I am proposing was not completely 
understood. What I am proposing is that we would post the name 
of every agent who is selling attached to the name of the 
company for whom they are selling. So, Ms. Holland would be 
able to make the connection between John Jones and WellCare or 
Humana or whatever other companies John Jones is selling for. 
So she would have that information and she would know that John 
Jones, if she is having a problem with him, is an agent for a 
particular company. That is the information that we are talking 
about making available.
    Mr. Stupak. Would that solve the problem, Ms. Holland?
    Ms. Holland. Well, an independent agent can sell product 
from any number of companies.
    Mr. Stupak. Sure.
    Ms. Holland. If you are not required to obtain an 
appointment and then subsequently not licensed, they could be 
carrying out a portfolio of any number of companies and have no 
attachment to any one company until such time as they presented 
an application for processing. At that time, that is backwards.
    Mr. Stupak. OK.
    Ms. Block, will you make available those 98 action plans 
that you are currently under right now that you have proposed?
    Ms. Block. Yes.
    Mr. Stupak. OK. And you will make them available to the 
committee then forthwith?
    Ms. Block. Yes, sir.
    Mr. Stupak. OK. Mr. Whitfield, did you have some questions?
    Mr. Whitfield. Mr. Chairman, I don't have any questions, 
but Mr. Poolman, in his testimony, enclosed some letters that 
were sent to Humana regarding a specific issue and in order to 
just complete the record we have copies of the response from 
Humana to Mr. Poolman and just ask Humana's consent that they 
be placed in the record to complete the record.
    Mr. Stupak. OK. My only concern, Humana, in the letter is 
that dated June 2, 2006, said they only had 44 residents of 
North Dakota and Commissioner Poolman's testimony on page 6, I 
believe, you mention there are 130 seniors from North Dakota. 
So I am just trying to figure out the discrepancy.
    Mr. Whitfield. Well, I am not speaking for the truthfulness 
of the document.
    Mr. Stupak. Oh.
    Mr. Whitfield. I am simply saying that he asked the 
question and we are putting the document in so that people 
could.
    Mr. Stupak. You don't mind that it goes on record.
    Mr. Poolman. Mr. Chairman, that is fine with me.
    In all due fairness to the company they deserve the 
opportunity to respond. In this case there were two separate 
privacy incidents, in breach of privacy, and I think my 
testimony refers to the aggregate not both instances 
separately.
    Mr. Stupak. Very good. OK. Without objection then that will 
be entered in the record.
    Any other questions for this panel? If not, let me thank 
the panel, the commissioners and Ms. Block, for their time and 
their testimony and their answers to our questions are very 
enlightening. I ask for unanimous consent that the hearing 
record will remain open for 30 days for additional questions 
for the record. Without objection the record will remain open. 
I ask unanimous consent that exhibits 1 through 19 from our 
document binder be entered into the record. Without objection, 
documents will be entered in the record. That concludes our 
hearing. Without objections the meeting of the subcommittee is 
adjourned.
    [Whereupon, at 1:52 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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