GAO auditors call for end to Medicare bonus program

WASHINGTON – In a rebuke to the Obama administration, government auditors are calling for the cancellation of an $8 billion Medicare program that congressional Republicans have criticized as a political ploy.

The nonpartisan Government Accountability Office says in a report to be released today that the $8.3 billion the administration has earmarked for quality bonuses to Medicare Advantage insurance plans would postpone the pain of cuts to the plans under the new health care law. Most of the money would go to plans rated merely average.

The administration is defending the program, saying that without the bonuses many plans wouldn’t have an incentive to improve quality.

But Sen. Orrin Hatch, R-Utah, said the GAO report suggests that the administration abused its authority, pumping money to the plans to avoid more criticism over unpopular cuts.

Medicare Advantage is a popular private insurance alternative to the traditional health care program for seniors. More than 3,000 private plans serve nearly 12 million beneficiaries, about one-fourth of Medicare recipients. They offer lower out-of-pocket costs, usually in exchange for some limitations on choice.

President Barack Obama’s health care law trimmed Medicare Advantage to compensate for prior years of overpayments that had allowed the plans to offer attractive benefits – and pocket healthy profits.

Republicans fiercely attacked those cuts during their successful campaign to take control of the House in the 2010 midterm elections. Seniors, a key constituency of swing voters, responded by backing GOP candidates.

After the election, the administration announced what it called a “demonstration program” to test whether a generous bonus program would lead to faster, broader improvements in quality. (The health care overhaul law had already provided a smaller bonus program only for top-rated plans.)

The GAO, the investigative agency of Congress, did not address GOP allegations that the bonuses are politically motivated. But its report found the program highly unusual. It “dwarfs” all other Medicare pilots undertaken in nearly 20 years, the GAO said.

Most of the bonus money is going to plans that receive three to three-and-half stars on Medicare’s five-star rating scale, the report said.

Available through 2014, the bonuses will soften much of the initial impact of the Medicare Advantage cuts, acting like a temporary reprieve.

This year, for example, the bonus program offset more than two-thirds of the cuts in the health care law. Indeed, Medicare Advantage enrollment is up by 10 percent and premiums have gone down on average.

But the GAO questioned whether the bonus program will achieve its goal of finding better incentives to promote quality. “The design of the demonstration precludes a credible evaluation of its effectiveness in achieving (the administration’s) stated research goal.”

The bonus program is the costliest demonstration program in Medicare history. The money for it will come from the Medicare trust fund.