Your Medicare Advantage broker may be more focused on making money than on your best interest as a result of a recent ruling by a Texas judge allowing Medicare Advantage brokers to reap payments that might otherwise be spent on healthcare services.
Chief Judge Reed O'Connor of U.S. District Court for the Northern District of Texas ruled that the Centers for Medicare & Medicaid Services exceeded its statutory authority and was "arbitrary [and] capricious" in trying to cap administrative payments and prohibit certain incentive contracts between Medicare Advantage plans and third-party marketing organizations. Medicare Advantage is the private health-insurance version of traditional Medicare, which is run by the federal government.
The CMS rule, which was issued in April 2024 but never implemented, had sought to classify administrative payments to agents and brokers as compensation and cap them at a fixed fee of $100, rather than allowing them to be paid at fair market value.
Two industry trade groups -- Americans for Beneficiary Choice and the Council for Medicare Choice -- filed lawsuits against the Department of Health and Human Services and CMS challenging the new rules.
O'Connor ruled that the CMS rules were an overreach of the agency's authority under the Administrative Procedure Act.
"CMS may only regulate how compensation is used, not engage in ratemaking," the judge wrote in his ruling.
The price cap paid to agents and brokers for new Medicare Advantage enrollees was $611 in 2024. Medicare Advantage companies can also reimburse third-party firms for administrative services -- which is what CMS was trying to cap.
"The amount that plans are willing to pay brokers is an indicator of the major role brokers play," said Matthew Fiedler, a senior fellow in economic studies at the Center on Health Policy at the Brookings Institution. "Rolling it back could have mattered quite a bit. We would see a pretty big change in the market. We'd see fewer commercials. If plans aren't spending money on broker fees, they could be spending that money on healthcare services."
Read: Medicare Advantage's 'secretive maze' of costly marketing and incentives needs an overhaul, Senate report says
In 2024, 32.8 million people were enrolled in a Medicare Advantage plan, accounting for 54% of the eligible Medicare population, according to KFF. Medicare Advantage has been generally lucrative for the companies that provide it, but it costs the government more than traditional Medicare. Medicare Advantage costs the government and taxpayers an extra 22% per enrollee, or approximately an additional $83 billion a year, according to the Medicare Payment Advisory Commission.