By ROBERT PEAR
Published: October 16, 2009
WASHINGTON — The Obama administration on Friday backed away from an order that had prohibited insurance companies from warning Medicare recipients about the possible loss of benefits under pending legislation to overhaul the health care system.
In Hawaii’s Health System, Lessons for Lawmakers (October 17, 2009) Medicare officials set off a political storm when they tried to stop such communications last month. Under new guidelines, insurance companies can communicate with Medicare beneficiaries on pending legislation, provided they do not use federal money to do so. In addition, insurers must get permission from beneficiaries before sending them information about legislation or asking them to join grass-roots advocacy efforts.
Beneficiaries can provide consent in writing, by telephone or on a Web site, the guidelines say.
At the same time, the Obama administration cited Humana on Friday for violation of Medicare rules, saying the company had misled beneficiaries by telling them they could lose valuable benefits under the legislation being pushed by President Obama and Democrats in Congress.
The actions on Friday were the latest skirmish between the Obama administration and the insurance industry. For months, the White House and insurance companies had worked together on efforts to overhaul the health care system. But the relationship deteriorated this week after two insurance trade groups issued reports saying the legislation would cause big increases in premiums.
Nearly one-fourth of the 45 million Medicare beneficiaries are in private plans. To help offset the cost of subsidizing coverage for the uninsured, Democrats have proposed cutting payments to these Medicare Advantage plans, which they say are overpaid.
In September, Medicare officials told Humana and other insurers to stop sending information about the proposals to Medicare beneficiaries.
Representative Dave Camp of Michigan, the senior Republican on the Ways and Means Subcommittee on Health, said Friday that the Obama administration was “backing away from its inappropriate and unconstitutional gag order on Medicare Advantage plans.”
“I am relieved that the administration is no longer misusing its regulatory authority to prohibit plans from communicating factual information to seniors about the Medicare cuts in health care reform,” Mr. Camp said.
Thomas T. Noland Jr., a senior vice president of Humana, said Friday, “We are pleased that this issue has been resolved.”
In letters sent to more than 900,000 subscribers in September, Humana said that if the proposed cuts 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.”
Humana also urged beneficiaries to call their members of Congress and defend the Medicare Advantage program.
In an official “notice of noncompliance” sent to Humana on Friday, the Obama administration said the company had violated its “data use agreement” with the government by using Medicare enrollment records to contact beneficiaries. It also said the Humana letters were “misleading to beneficiaries” and thus violated Medicare rules.
Humana is based in Kentucky, the home of Mitch McConnell, the Senate Republican leader. He said last month that the Obama administration was “using the full weight of the federal government’s enforcement powers to stifle free speech.”
The Obama administration had a strong incentive to resolve the dispute with Humana. Republican senators had put a “hold” on Mr. Obama’s nominees for jobs at the Department of Health and Human Services.
The administration cracked down on Humana at the urging of Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee. He insisted the legislation would strengthen Medicare, not cut benefits.
But the nonpartisan Congressional Budget Office told lawmakers that some people in Medicare Advantage plans could lose some of the extra benefits they now receive if Congress made the proposed cuts.
Democrats say private plans are paid 14 percent more than it would cost to cover the same people in traditional Medicare.