Congress should find ways to improve the Medicare Advantage private fee-for-service program, not starve an option that beneficiaries clearly value, an insurance company executive says.

Catherine Schmitt, a vice president at Blue Cross and Blue Shield of Michigan, Detroit, defended the Medicare private FFS program here today at a hearing of the House Ways and Means Committee health subcommittee on the program.

Rep. Pete Stark, the chairman of the subcommittee, convened the hearing in the wake of press reports suggesting that aggressive marketers have contributed to recent rapid growth in Medicare private FFS plan enrollment by misrepresenting the plans.

Enrollment in the private FFS plans has increased to 1.5 million today, from about 200,000 in 2005.

Supporters of Medicare Advantage private FFS plans say that they can offer the same kinds of extras, such as health screening benefits, that Medicare Advantage managed care plans provide, and that they can give plan members the flexibility to use any doctor or hospital that is willing to accept the plan members’ coverage.

Critics of the private FFS plans say that the plans cost the federal government about 19% more per beneficiary than the traditional Medicare plan, and that private FFS plan members often have a difficult time finding providers who are willing to accept their insurance.

Stark said he believes some Medicare private FFS plans may be trying to scare away sicker beneficiaries by imposing higher out-of-pocket costs than traditional Medicare for services such as home health care.

Schmitt said she is appalled by reports of marketing abuses but wants members of Congress to understand that Medicare private FFS plans can be especially valuable in rural areas, because they can bring popular Medicare Advantage program features, such as health screening benefits, to communities in which setting up a managed care plan provider network is difficult or impossible.

Schmitt warned against taking support away from the private FFS program and other Medicare Advantage programs.

In the 1990s, when Congress restricted funding for the old Medicare plus Choice private plan program, the program “became unsustainable in many counties after years of medical cost increases outstripped growth in plan payments,” Schmitt testified, according to a written version of her remarks. “The result was widespread loss of coverage for Medicare beneficiaries.”

Meanwhile, officials at America’s Health Insurance Plans, Washington, have sent the Ways and Means health subcommittee leaders a letter describing a new set of Medicare plan marketing principles that the AHIP board has adopted.

AHIP is urging the Centers for Medicare & Medicaid Services and the National Association of Insurance Commissioners, Kansas City, Mo., “to take on this issue, including requiring health plans to report all broker/agent relationships in the marketing of their products,” AHIP officials write in their letter.

“As an industry, we maintain a strict zero tolerance policy when it comes to inappropriate sales and marketing practices by agents, brokers, or plan marketing staff,” AHIP officials write. “We believe it is imperative that seniors have complete and accurate information to make informed decisions to meet their individual health care needs.”

A health agent group, the National Association of Health Underwriters, Arlington, Va., is “extremely concerned about ethical sales practices concerning all Medicare-related insurance products, including Medicare Advantage plans,” NAHU Executive Vice President Janet Trautwein said in a statement concerning the Medicare private FFS hearing.

“NAHU is well aware of some recent publicity depicting a few ‘bad apples’ in our industry who have been behaving in what appears to be an unethical manner,” Trautwein said. But, “it is important to note the vast majority of health insurance producers work very hard every day to find quality and appropriate health coverage at the best possible price for millions of employers, individuals and families.”

David Lipschutz, a representative for California Health Advocates, Los Angeles, a group that represents California Medicare beneficiaries, testified at the hearing that his group believes the Medicare private FFS program suffers from systemic problems, not simply the shortcomings of bad apples.

Congress could strengthen the program by taking steps such as requiring carriers to determine whether a minimum percentage of providers in an area will accept private FFS coverage before trying to sell a private FFS plan in that area, Lipschutz testified.

Congress also could require the same kind of standardization of Medicare Advantage plans that is required of Medicare supplement insurance plans, Lipschutz said.

Congress could, for example, require that Medicare Advantage plans keep patients’ out-of-pocket costs for services such as home health care at or below the level imposed for the same services by the traditional Medicare program, Lipschutz said.

Lipschutz also recommended that carriers change their compensation structures, to reduce incentives for replacing consumers’ existing Medicare coverage.

“Further, because enrollment in [private FFS] plans raises costs to Medicare, commission structures that create incentives for sale of [private FFS] plans over subsidized [Medicare supplement] plans may bear scrutiny under anti-kickback and fraud and abuse statutes,” Lipschutz said.