GAO says Medicare bonuses are bogus

Republicans see pre-election ploy

Federal investigators said Monday that the administration is wasting billions on extra bonuses for health plans and should cancel them right away, fueling Republican complaints that President Obama is trying to postpone his health care law’s unpopular Medicare cuts until after the election.

The bonuses for high-quality Medicare Advantage plans were designed to drive down the government’s long-term costs by putting seniors in approved private plans that cut their out-of-pocket costs in exchange for limits on care and choice. But the Government Accountability Office report says the bonuses will cost the government $8.3 billion over the next decade, almost three times what was intended.

The GAO says the Obama administration overextended the pilot program, and thus it isn’t likely to give the government useful information on how best to improve coverage for seniors, as the administration claimed.

“The design of the demonstration precludes a credible evaluation of its effectiveness” in determining “whether a scaled bonus structure leads to” better health care for seniors, the GAO says.

While the report by Congress’ nonpartisan investigative arm prompted a quick White House response, Republicans accused the administration of using the bonus program not as a tool to encourage the best private insurance plans for seniors, but as a way to expand the number of bonuses and thus hide the impact of unpopular Medicare cuts at a politically awkward time.

“The Obama administration seems to be using a technicality to sidestep Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections,” said Sen. Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee. “This is simply unacceptable. The White House does not have the authority to green light spending on whatever program it wants.”

The GAO report was issued amid growing concerns that the government’s major entitlement programs are fast approaching insolvency. An annual trustees report released Monday shows that Social Security benefits will run out in 2033, three years earlier than previously thought, while Medicare still is set to run dry in 2024.

The White House didn’t show any signs of retreating from its expansion of the bonus program, saying it goes hand-in-hand with other reforms to Medicare Advantage aimed at making the program more effective.

“So the context here is one of squeezing savings out of Medicare Advantage programs, reducing overpayments through these programs,” White House spokesman Jay Carney said. “And this demonstration project is simply a way to, we believe, ensure that these programs are as cost-efficient as possible.”

With both parties wrestling for the allegiance of older adults in November, Medicare Advantage has become especially contentious. The administration says the scheduled Medicare cuts simply correct a system that has overpaid doctors for years.

Lawmakers created a bonus program under the president’s Affordable Care Act to determine whether awarding extra funding to the highest-performing Medicare Advantage plans could encourage these four- and five-star plans to offer more at less cost. Covering about one-fourth of seniors, the alternative program works with 3,000 private insurance plans to offer coverage that more resembles a health maintenance organization (HMO) than traditional Medicare.

However, Department of Health and Human Services officials announced last year that they temporarily would make the bonus structure more generous by extending the bonuses to three-star plans as well.

The GAO found that most of the those bonuses would go to the three- and 3.5-star plans, costing the government an extra $5.34 billion, or almost two-thirds of the $8.3 billion that will be spent over the next 10 years. This year, the bonuses have offset about 70 percent of the cuts in the federal health care law, appearing to dampen their potential damage to Mr. Obama’s re-election prospects.

The agency also disagrees with the administration’s claim that it could collect better evidence by expanding the bonus program, saying the “demonstration” wasn’t set up in a way that could provide clear conclusions.

The GAO made the rare move of recommending that the program be canceled. Officials said they had listened to objections from HHS about its conclusions, but “we determined that our recommendation is warranted and our finding is sound.”

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