A new report by the Government Accountability Office has called on the Obama administration to shut down a program that would have diverted $8.4 billion from elsewhere in the budget to help offset scheduled Medicare cuts that otherwise would have gone into effect during the 2012 election year.
Over the course of the health care debate, Republicans attacked President Obama's legislation for making cuts to Medicare Advantage, a program that provides health care to seniors through private plans that contract with the federal government. About one out of four Medicare beneficiaries, or nearly 12 million seniors, are in a Medicare Advantage plan. But in November 2010, the Obama administration's Center for Medicare and Medicaid Services announced a "demonstration" program to offer "bonus payments" to certain plans within Medicare Advantage.
Though the GAO did not specifically say that election year politics were behind the decision, the report released today makes it difficult to reach a another conclusion. Had Obamacare gone into effect as written, millions of enrollees would have seen their benefits cut in 2012. But as a result of this project, 71 percent of scheduled payment cuts will be offset, according to the GAO.
The Obama administration has justified the project as an experiment to see how certain bonus payments work. But the GAO concluded that, "(t)he design of the demonstration precludes a credible evaluation of its effectiveness in achieving CMS’s stated research goal." Also, the GAO found that the size of the project "dwarfs all other Medicare demonstrations—both mandatory and discretionary—conducted since 1995 in its estimated budgetary impact and is larger in size and scope than many of them." The report added "that the estimated budgetary impact of the demonstration, adjusted for inflation, is at least seven times larger than that of any other Medicare demonstration conducted since 1995 and is greater than the combined budgetary impact of all of those demonstrations." This is evident in the chart below:
In addition, the Obama administration has not specifically explained how it is going to pay for the program. Remember, savings from cutting Medicare are supposed to be used to finance the coverage expansions in Obamacare. The GAO writes that, "(White House Office of Management and Budget) officials told us that they considered the costs of the demonstration in the context of other administrative actions in the Medicare program that are expected to generate savings. However, they did not confirm whether specific offsets were identified to account for the total costs of the demonstration."
The GAO recommended that the Obama administration cancel the program, but noted that the Department of Health and Human Services disagreed with this conclusion.