How to Spot a Health Scam
Unscrupulous agents push insurance products that are high-priced and often bogus.
When Medicare introduced Part D coverage to pay for prescription drugs in 2006, it gave seniors a golden opportunity to save money -- and crooks a golden opportunity to steal it.
The law offers Medicare beneficiaries a bewildering array of new health-insurance options. They can now choose from dozens of Part D prescription-drug plans to supplement Medicare, or they can opt out of traditional Medicare and enroll in a Medicare Advantage plan to get both medical and drug coverage from a private insurer. All of the new choices have resulted in "an immense amount of confusion," says Micah Roderick, of the Illinois attorney general's office. They've also led to an epidemic of fraudulent sales practices, ranging from sales abuses to criminal activity:
To reap big commissions, some insurance agents sell seniors Medicare Advantage plans without explaining the limitations, and even sign people up without their knowledge.
Posing as Medicare representatives, unscrupulous agents use Part D to get a foot in the door -- or even into a whole senior high-rise building. Then they tout a slew of high-priced insurance policies, including annuities, life insurance, gap coverage for Medicare Advantage and other products that people may not need.
Once they have personal information about their victims, some of these renegade agents steal their identities.
In other cases, regulators have uncovered fraud rings selling fake drug-discount cards and bogus coverage for home health care. It's a huge racket, says Paul Greenwood, head of the elder-abuse prosecution unit for the San Diego district attorney's office. "These crooks realize there's money to be taken from elderly victims looking for a way to save on health-care costs."
Medicare Advantage rip-off
Medicare Advantage plans can be an attractive solution for many seniors. But such plans are also ripe for fraud because the government gives private insurers generous subsidies to sign people up.
To grab a piece of the action, insurers pay agents hefty commissions. Typically, agents earn $60 to $80 for each person they enroll in a Medicare Part D prescription-drug plan. But they get a whopping $400 to $500 for enrolling someone in a Medicare Advantage plan, according to a report by the Medicare Rights Center and California Health Advocates. "It's a quick one-time sale, and it's a lot of money," says Oklahoma insurance commissioner Kim Holland, who has been cracking down on Medicare Advantage sales abuses. The result may be a hard sell, with agents pushing Medicare Advantage rather than Part D. At worst, those commissions may be an incentive to commit fraud.
Barbara Jean Davis, 72, and her husband, Esty, 75, who live in Wilmington, N.C., had been covered by Medicare and retiree health benefits through Barbara's former employer, DuPont. Their premiums and co-payments were reasonable, and without the coverage, Esty, who suffers from a number of ailments, would have had to pay hundreds of dollars a month for his medications.
About a year ago, Barbara was contacted by an insurance agent offering a Humana Medicare Advantage policy, subsidized by the government, with a zero-dollar premium. Suspicious but curious, Barbara invited the agent to her home. In the middle of his pitch, Barbara and Esty received a phone call and found out that one of their best friends had suffered a heart attack.
Distracted, Barbara tried to get rid of the salesman. But he persuaded her and Esty to sign papers that would give them a "head start" should they decide to buy the Humana policy later. "He made it sound like we hadn't signed up for anything yet," says Barbara.
But the next time she ordered Esty's prescription, the pharmacist told her the DuPont insurance was no longer in effect. The agent "had canceled my insurance and signed me up with Humana without my say-so," says Barbara.
She didn't pursue action against the agent, focusing instead on getting her previous coverage back. Barbara canceled the Humana plan and sought help from Pat Pane, a specialist in medical-claims assistance. It still took four months for the Davises' Medicare and DuPont coverage to be reinstated.
Egregious as it sounds, the Davises' experience isn't uncommon. In Georgia, for example, "several individuals are facing criminal prosecution, a number of others are under investigation, and a special task force is dealing with this issue," says state insurance commissioner John Oxendine.
One issue, says Oxendine, is that the law makes it surprisingly easy to enroll someone fraudulently in a Medicare Advantage plan. With most insurance products, you know you're purchasing something because you have to pay a premium, says Oxendine. But you can enroll in a Medicare Advantage plan without writing a check because the federal government can pay the premium for you. Explains Oxendine, "If I had certain information about you, I could sign you up for Medicare Advantage and be paid a commission, and you wouldn't know it until you filed a claim."
In some cases, insurance agents who had an individual's Social Security or Medicare number signed him or her up without ever laying eyes on their "client." Says Oxendine: "We've even found cases of dead people being enrolled in Medicare Advantage plans."
In another ploy, individuals are asked to sign a paper ostensibly to let an agent get credit with his boss for making a sales pitch; in reality, they're signing up for the product. Some agents have enrolled individuals by using signatures from the sign-in sheet at a free-lunch seminar, or by posing as agents from Medicare, says David Lipschutz, of California Health Advocates.
If you discover that you (or your parent) have been fraudulently enrolled in a Medicare Advantage plan, contact your State Health Insurance Assistance Program (go to www.shiptalk.org for local links). Counselors can help you determine your next step. Now is a perfect time to act; if you already have a Medicare Advantage plan with drug coverage, you have until March 31 to switch to another plan.
Also contact your state insurance department and attorney general's office, which can punish agents for sales abuses. "We've arrested agents and publicized it," says Oxendine. "If you hear about somebody being handcuffed and put into a patrol car, it does have a deterrent effect."
In most cases, the agent is punished, not the insurance company. Although insurers use high commissions to entice agents to push their Medicare Advantage plans, the companies blame rogue agents for sales abuses. "We have not seen any evidence that the companies are a party to any of this fraudulent or criminal activity," says Oxendine. "However, the companies haven't been checking up on their agents as they should."
State regulators have limited authority to pursue companies for failing to supervise their agents. Last August, the Oklahoma Insurance Department did fine Humana $500,000 for using unlicensed agents to sell its Medicare Advantage and Part D plans. In general, however, the federal Centers for Medicare & Medicaid Services is responsible for regulating insurers that sell these policies.
Some state regulators think the feds haven't done enough to crack down on abusive sales practices. For example, seven Medicare Advantage companies voluntarily agreed last June to suspend marketing their private fee-for-service plans (types of Medicare Advantage policies) in response to concerns about marketing practices.
The companies -- Blue Cross Blue Shield of Tennessee, Coventry, Humana, Sterling, United HealthCare, Universal American Financial Corp. (Pyramid) and Wellcare -- were allowed to resume marketing after they took steps to protect against sales abuses, such as making sure salespeople pass a written test about Medicare Advantage and contacting customers to verify that they understood plan rules. "The problems are still out there," says Lipschutz. "Our fear is that people aren't going to find out about them until they try to use the benefits this year."
Sales abuses linked to Medicare Advantage plans aren't the only problem stemming from the prescription-drug program. Fake drug-discount cards have also been a big problem, says Sally Hurme, of AARP's financial-security unit. An individual may be offered a card that costs less than Medicare Part D, but the agent doesn't disclose that it provides very limited coverage -- or none at all.
And some criminals use these cards to steal even more money. For instance, in the so-called $299 drug-plan scam, an agent claiming to be from Medicare offers someone a Part D plan that's often nonexistent. Then he asks for the person's bank-account information in order to arrange an initial payment of $299. Once the crook gets that information, he can use it to access the victim's account.
Crooks also prey on older people's fear of going broke paying for long-term care by selling them bogus contracts for home health care. Among the victims is Eva Muller, says her friend, Ingrid Eglsaer, who each year traveled from Vancouver to Venice, Fla., to visit Muller. Several years ago, says Eglsaer, Muller "started having trouble with her memory." So Eglsaer helped her go through the unopened mail she hoarded.
In 2005, Eglsaer found a canceled check for $3,500 and asked Muller what it was for. She didn't remember. Digging through Muller's paperwork, Eglsaer discovered that the money had gone to a home-health-care plan that was supposed to provide Muller with discounts on services from 2005 to 2011. But when Eglsaer contacted the company after Muller broke her arm, "the company was evasive and kept avoiding me," she says. (The company went by several names, including Independent Living Home Care Membership Association.)
Eglsaer persisted over the next several months. "Once they saw that I was digging in my heels, they refunded the $3,500," she says. She also complained to the Florida Department of Children and Families, which notified the state financial-serv-ices department. After receiving similar complaints from a number of people (or their family members and friends) who had paid $2,000 to $4,000 for home-health-care plans that allegedly didn't pay off, the department subpoenaed the company's records and found 44 victims -- many in their eighties and nineties and suffering from dementia -- who had bought the policies. "It would have been hard for many of them to comprehend what they were purchasing at the time," says Barry Lanier, chief of the bureau of investigation for the Florida Department of Financial Services.
The department suspended the licenses of two agents for two years. Now, says Lanier, "we're going to do everything we can to try to get restitution."
He recommends that before buying any plan for home health care, you contact your state insurance department to check up on both the agent and the policy (find links to your state's department on the insurance page at Kiplinger.com). "We've seen cases in which an agent who sold a legitimate policy comes back later and persuades the victim to drop that policy and buy a bogus one," says Lanier. He encourages either an adult child or a very close friend to take a strong role as a senior's advocate.
Paul Greenwood of the San Diego district attorney's office says elders should consider allowing their bank to send a duplicate copy of their monthly statement to a trusted family member or professional adviser. "That would help spot suspicious activity early," says Greenwood. "Most cases of financial elder abuse aren't discovered or reported until six to nine months after the initial losses have occurred."