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Is Medicare Advantage a Scam or Legit?

by David Bynon, last updated

Medicare Advantage is legitimate, but it’s an easy target for scammers. So, it’s important to do your research before joining a plan.

This article will explore Medicare Advantage (Part C), the private health insurance option for people on Medicare. We’ll help you understand how people with Medicare are getting scammed and how bad actors are committing Medicare fraud and wasting taxpayer dollars.

Key Takeaways

  • Medicare Part C is one of four parts of the Medicare program. It is the same thing as Medicare Advantage, and it’s legitimate.
  • Every Medicare Part C insurance plan is reviewed, approved, and closely monitored by the federal government.
  • Fraud happens when plans and healthcare providers try to get more money by misdiagnosing patients, billing for services and supplies never received, or billing for the same service multiple times.
  • Medicare beneficiaries are scammed when they accept a cold call from a phony Medicare representative or agent and give out their personal information or accept an offer that’s too good to be true.

Understanding Medicare Part C

Medicare Part C is Medicare Advantage. It’s the program that allows private insurance companies to offer their health plans to people on Medicare. It is an option, not mandatory.

These plans are 100% legitimate. Medicare approves them.

As an alternative to Original Medicare, Medicare Part C plans must provide all Medicare coverage benefits in Part A (hospital insurance) and Part B (medical insurance). That said, private health plans have flexibility in providing benefits to their enrollees.

What does that mean?

It means that every plan decides the out-of-pocket costs for various services, as well as monthly premiums. They also get to decide the process members must follow to receive services. It’s how they control costs.

How Medicare Part C Plans Are Compensated

Medicare Advantage plans are capitated health plans. Unlike traditional Medicare which pays a fee per service, Medicare Advantage plans are contracted to provide government-funded benefits in return for a per person or per capita amount.

HMO and PPO health plans are useful in managing long-term healthcare costs. The controls they put in place, and how they compensate providers in their network, help reduce waste.

The amount the government pays a plan for each member is determined by each member’s risk score. Risk scores are determined based on both patient diagnoses and member demographic information. A Medicare patient with a long history of smoking would have a higher score than one who has never smoked.

How Fraud Happens in Medicare Part C

Medicare Advantage plans for patients with higher risk scores or severe diagnoses are often compensated at a higher rate. This is how the government justifies getting plans to accept patients with preexisting conditions.

In an effort to increase a patient’s score, some healthcare providers might misdiagnose patients. Health insurers might also code certain diagnoses differently to increase their risk scores and get higher payouts from Medicare.

Intentional fraud through the practice of diagnosing errors is insidious and dangerous. Patients may experience mental and emotional distress if they are given incorrect diagnoses. Patients may be subject to unnecessary treatment, routine screenings, and even prescribed harmful medication so that providers can increase their payout.

About 10 percent of patient deaths are due to diagnostic errors. After cancer and heart disease, medical errors are the third leading cause of death. About four million Americans will suffer severe harm annually from a diagnosis error. Although many are accidental, intentionally giving false diagnoses to patients is dangerous and unethical.

Diagnostic fraud decreases the quality of care that is available to patients. It harms the overall Medicare system.

How Scams Happen in Medicare Part C

Since its inception, the Medicare Advantage program has been an easy target for scammers pretending to be Medicare representatives. These are some of the clever tactics scam artists use to fool people.

Phony Medicare Representative

This scam involves cold-calling people ages 65 and older. The caller claims to be an “official Medicare agent” with a new Medicare plan that will save thousands of dollars. The caller pushes the new plan, insisting that it is only available during the current open enrollment period.

A tempting offer, right?

The Centers for Medicare and Medicaid Services (CMS) does not have sales representatives. In almost all cases, all communications from CMS come in writing. Generally, you should only get calls for three reasons:

  1. If you call 1-800-MEDICARE and leave a message, they will call you back.
  2. If you call 1-800-MEDICARE and a representative said that someone would call you back, they will call you.
  3. If you join a Medicare health plan, the plan or the agent who helped you join can call you.

The advice from experts is to avoid cold calls. Don’t answer any questions or provide any information. Simply ask the caller to remove you from their call list and hang up.

Be aware that many legitimate insurance agents that sell Medicare Supplement (Medigap) insurance buy internet and phone leads. This is particularly true during the annual Medicare open enrollment period. Federal law prohibits legitimate insurance agents from calling you if you did not request it.

MedicareWire recommends avoiding requesting Medicare information online. Instead, pick up the phone and call the plan, agent, or agency of your choice. They are happy to help you answer your questions, like “How much do Medicare Advantage plans cost?” Only give out your information as needed.

Phony Rebates

In this phone call scam, the caller pretends to represent the Medicare beneficiary’s prescription drug plan. They tell you that you’re due a big rebate because you’ve reached the plan’s coverage gap, also known as the donut hole.

The catch, and the whole purpose of the call, is to get you to reveal your Social Security number, birth date, and bank account number so they can deposit your rebate. If you don’t provide the information they need, they can’t get your rebate or reimbursement to you.

Unfortunately, people who fall for this trick often find themselves with big charges on their credit card.

Loss of Coverage Threats

In this scam scenario, a Medicare beneficiary receives a call to let them know their Medicare benefits are about to be canceled because they don’t have prescription drug coverage (Medicare Part D). This caller just happens to have the perfect Part D plan, with the most benefits and the lowest cost.

If you receive a call from someone telling you that you must get a drug plan or you’ll lose your other benefits, it’s a scam. Medicare Part D is optional, not mandatory.

Deceptive Sales Tactics

Regretfully, it isn’t uncommon for health insurance agents to use deceptive or aggressive tactics to try and get your business. So it’s important to understand what agents can and can’t do when advising you on your Medicare insurance options.

Federal government regulations specify how insurance agents and brokers may advertise, market, and communicate Medicare insurance products. For instance, it is not legal to market Medicare insurance at educational events and in locations where healthcare is delivered. Additionally, it is not legal to market anything except Medicare insurance during a personal marketing appointment. For instance, if you request information about Medicare Advantage plans, an insurance agent can’t recommend a life insurance policy.

You’ll find a complete list of rules that people representing Medicare plans must follow on Medicare.gov.

NOTE: Even though we are not an insurance agency, MedicareWire fully supports and complies with all Medicare Communications and Marketing Guidelines. If you find anything on MedicareWire that you believe violates federal regulations, please contact us.

How To Report Scams and Medicare Fraud

There is an easy way to report Medicare fraud. Call 1-800-MEDICARE (1-800-633-4227).

Medicare suggests the following as reasons to report fraud:

  • A provider that bills Medicare for services or supplies they never provided.
  • A provider that charges Medicare twice for a service or item you received.
  • A person who steals your Medicare card or Medicare number and uses it to submit claims in your name.
  • A company that offers you a Medicare plan that wasn’t approved by Medicare.

Whistleblowers can help to de-incentivize Medicare Part C fraud by requiring greater scrutiny of government contracts or imposing harsh fines on unethical providers.

Citations and References

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