Brett Arends
5 min read
Some 33 million Americans, most of them seniors, get their health insurance through a privatized Medicare Advantage plan instead of regular, government-run Medicare.
But new fears are now being raised that many may have been sold the wrong plan, against their interests, by brokers and salesmen putting profits before people.
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Experts from the Cornell University medical school, writing in the Journal of the American Medical Association, warn that many brokers are receiving commissions potentially totaling thousands of dollars per client to “steer” people into Medicare Advantage and away from traditional Medicare even if that isn’t in their best interest.
This follows a bombshell lawsuit just filed by the U.S. Department of Justice accusing many insurance brokers of taking illegal “kickbacks” from insurance companies to sell seniors on certain Medicare Advantage plans regardless of whether it’s the right plan for them.
The brokers and the insurance companies, to be sure, deny the accusations and insist they will fight the Justice Department lawsuit.
In the latest issue of JAMA, Cornell’s Lawrence Casalino, Amelia Bond and Dhruv Khullar calculate that an insurance broker can land nearly $6,000 in lifetime commissions by selling a 65-year-old a privatized Medicare Advantage plan. Meanwhile they will likely earn only “50% to 70%” as much if the client instead opts for government-run original Medicare, supplemented by private Medigap and Part D prescription plans.
Federal regulations cap sales commissions on Medicare Advantage plans at $626 in the first year, they write. But the broker is allowed to get up to half that amount, or $313, for every year the enrollee stays on the policy. As people aged 65 have an average life expectancy of 18 years, “this generates $5,947 in commissions” for a Medicare Advantage policy, the Weill Cornell Medical College researchers point out.
Meanwhile, commissions that a broker is likely to get for selling Medigap and Part D private health plans to an enrollee in traditional, government-run Medicare “are likely to sum to 50% to 70% of this total,” they estimate.
