Gov't survey Health Insurance Company Mailer

WASHINGTON_The Obama administration warned insurance companies Monday they face possible legal action for allegedly trying to scare seniors with misleading information about the potential for lost benefits under health care legislation in Congress.

"As we continue our research into this issue, we are instructing you to immediately discontinue all such mailings to beneficiaries and to remove any related materials directed to Medicare enrollees from your Web sites," said a notice from the Centers for Medicare and Medicaid.

Teresa DeCaro, an agency official, sent the notice to all companies that sell private Medicare coverage and stand-alone drug plans to seniors. The warning came as President Barack Obama's health care legislation is moving toward key tests in a Senate committee over the next several days, and with public polls showing widespread skepticism among seniors.

In one case, the Health and Human Services Department, which oversees CMS, launched an investigation of Humana after getting a complaint from Sen. Max Baucus, D-Mont., a senior lawmaker usually viewed as a reliable ally of the insurance industry.

"It is wholly unacceptable for insurance companies to mislead seniors regarding any subject _ particularly on a subject as important to them, and to the nation, as health care reform," Baucus said Monday, disclosing the HHS investigation.

Humana Inc., headquartered in Louisville, Ky., is cooperating with the investigation and stopped the mailer earlier this month, company spokesman Tom Noland said Monday.

Federal subsidies to private Medicare plans average about 14 percent higher than those involved in traditional fee-for-service coverage under the program for those aged 65 and older, and the health care bills pending in Congress call for reducing or eliminating the difference.

The insurance industry is fighting the change, in part by trying to mobilize seniors to oppose them.

The Senate committee that Baucus chairs _ Finance _ will vote this week on a sweeping health care plan that he's proposed to expand coverage and try to control costs. It would cut Medicare and Medicaid spending by about $500 billion over 10 years, but Baucus says that would lead to greater efficiency, not reduced benefits.

"The health care reform bill we released ... strengthens Medicare and does not cut benefits," said Baucus. "From lower prescription drug costs, to free preventive care, to better treatment for chronic conditions, seniors have so much to gain from health reform _ and I'm not going to let insurance company profits stand in the way of improving Medicare for seniors."

Humana is one of the largest private carriers serving seniors under a program called Medicare Advantage. About one-fourth of the elderly and disabled people covered under Medicare participate in the Advantage program, which offers a choice of private plans that usually deliver added benefits.

Humana has about 1.4 million Medicare Advantage enrollees, and the program accounts for about half the company's revenue, Noland said.

The Humana mailer focused squarely on the Medicare Advantage program.

"While these programs need to be made more efficient, if the proposed funding cut levels become law, millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage health plans so valuable," it said.

It urged seniors to sign up with Humana for regular updates on the health care legislation, and encouraged them to contact their lawmakers in Washington.

In a warning letter to Humana, HHS said the government is concerned that the mailer "is misleading and confusing" partly because the company's lobbying campaign could be mistaken for an official communication about Medicare benefits.

HHS ordered the company to immediately halt any such mailings, and remove any related materials from its Web site. In the letter, the government also said it may take other action against Humana.

Although most prominent Democrats back a government-sponsored insurance plan to compete with private carriers, Baucus did not include one in his proposal because he doesn't think it can pass the Senate. During the Bush administration, he broke with his party to support a Medicare prescription drug benefit delivered through private insurance plans, with no government role in negotiating prices.

Insurers, however, are pushing back against his plan to revamp health care. Not only would it cut payments to private Medicare plans, but it would also impose a $6-billion annual fee on the industry, partly to recoup profits from an influx of new taxpayer-subsidized customers.

Humana opposes a government-run insurance option, arguing that it would "undermine the coverage that is working today for millions of Americans," Noland said.

Polls show that seniors are more skeptical of the health care overhaul than the U.S. population as a whole.