Insurance scammers prey on seniors

State regulators have limited authority to pursue companies for failing to supervise their agents. In August 2007, the Oklahoma Insurance Department did fine Humana $500,000 for using unlicensed agents to sell its Medicare Advantage and Part D plans. In general, however, the federal Centers for Medicare & Medicaid Services is responsible for regulating insurers that sell these policies.

Some state regulators think the feds haven't done enough to crack down on abusive sales practices. For example, seven Medicare Advantage companies voluntarily agreed in June 2007 to suspend marketing their private fee-for-service plans (types of Medicare Advantage policies) in response to concerns about marketing practices.

The companies -- Blue Cross Blue Shield of Tennessee, Coventry, Humana, Sterling, United HealthCare, Universal American Financial (Pyramid) and Wellcare -- were allowed to resume marketing after they took steps to protect against sales abuses, such as making sure salespeople pass a written test about Medicare Advantage and contacting customers to verify that they understood plan rules. However, "the problems are still out there," Lipschutz says.

Drug-plan scams

Sales abuses linked to Medicare Advantage plans aren't the only problems stemming from the prescription-drug program. Fake drug-discount cards have also been a big problem, says Sally Hurme of AARP's financial-security unit. An individual may be offered a card that costs less than Medicare Part D, but the agent doesn't disclose that it provides very limited coverage or none at all.

And some criminals use these cards to steal even more money. For instance, in the so-called $299 drug-plan scam, an agent claiming to be from Medicare offers someone a Part D plan that's often nonexistent. Then he asks for the person's bank-account information in order to arrange an initial payment of $299. Once the crook gets that information, he can use it to access the victim's account.

The home care hustle

Crooks also prey on older people's fear of going broke paying for long-term care by selling them bogus contracts for home health care. Among the victims was Eva Muller, says her friend Ingrid Eglsaer, who each year traveled from Vancouver, British Columbia, to Venice, Fla., to visit Muller. Several years ago, Eglsaer says, Muller "started having trouble with her memory." So Eglsaer helped her go through the unopened mail she had hoarded.

In 2005, Eglsaer found a canceled check for $3,500 and asked Muller what it was for. She didn't remember. Digging through Muller's paperwork, Eglsaer discovered that the money had gone to a home health care plan that was supposed to provide Muller with discounts on services from 2005 to 2011.

But when Eglsaer contacted the company after Muller broke her arm, "the company was evasive and kept avoiding me," she says. (The company went by several names, including the Independent Living Home Care Membership Association.)

Eglsaer persisted over the next several months. "Once they saw that I was digging in my heels, they refunded the $3,500," she says.

She also complained to the Florida Department of Children and Families, which notified the state financial-services department. After receiving similar complaints from a number of people (or their family members and friends) who had paid $2,000 to $4,000 for home health care plans that allegedly didn't pay off, the department subpoenaed the company's records and found 44 victims -- many in their 80s and 90s and suffering from dementia -- who had bought the policies.

"It would have been hard for many of them to comprehend what they were purchasing at the time," says Barry Lanier, the chief of the bureau of investigation for the Florida Department of Financial Services.

The department suspended the licenses of two agents for two years.

Lanier recommends that before buying any plan for home health care, you contact your state insurance department to check up on both the agent and the policy (find links to your state's department on Kiplinger's insurance page).

"We've seen cases in which an agent who sold a legitimate policy comes back later and persuades the victim to drop that policy and buy a bogus one," Lanier says. He encourages either an adult child or a close friend to take a strong role as a senior's advocate.

Video: Senior scam alert

Greenwood, of the San Diego district attorney's office, says elders should consider allowing their bank to send a duplicate copy of their monthly statement to a trusted family member or professional adviser.

"That would help spot suspicious activity early," he says. "Most cases of financial elder abuse aren't discovered or reported until six to nine months after the initial losses have occurred."

This article was reported by Kimberly Lankford for Kiplinger's Personal Finance Magazine.

Updated Sept. 23, 2009

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