Side Effects: The $8.35 Billion Attempt to Fool Seniors
Alyene Senger /
A new report by the Government Accountability Office (GAO) shows that a demonstration program created by the Obama Administration in Medicare Advantage (MA) is primarily designed to “demonstrate” how to hide politically unpopular parts of Obamacare.
The Quality Bonus Payment demonstration program will take place from 2012 to 2014 and differs substantially from the bonus program described in Obamacare. In the original statute, high-performing plans (those rated 4 and above on a five-star scale) would receive bonus payments as an incentive to improve quality. In the current demonstration program, bonus payments are awarded to plans rated 3 and above, essentially rating almost all plans “above average” and giving them bonus payments. The additional funding offsets Obamacare’s $145 billion in cuts to the popular MA program.
As Heritage has warned before, Obamacare’s cuts to MA would severely reduce the quality of the program and force enrollees back into traditional Medicare. Writing for Heritage, health care experts Jim Capretta and Robert Book explain, “Phased in between 2012 and 2017, the MA cuts will substantially restrict the ability of Medicare beneficiaries to choose the health plans that best meet their needs and will result in substantial reductions in coverage for many millions of seniors and disabled Americans.” Medicare’s Office of the Actuary predicts a 50 percent drop in enrollment by 2017.
About one-fourth of all Medicare beneficiaries are enrolled in MA, which continues to grow. Earlier this year, the Centers for Medicare and Medicaid Services announced that MA enrollment has increased by about 10 percent and average premiums fell by 7 percent. The Administration has tried to attribute these achievements to Obamacare, but the reality is that MA is successful because it allows competition among plans, which improves quality and adds benefits for seniors.
The impact of the bonus payments is most acute in 2012. The GAO states that “the demonstration will offset more than one-third of the reduction in MA payments projected to occur under [Obamacare] during the demonstration years. The largest annual offset will occur in 2012—71 percent.”
The fishy details continue. The GAO’s review of the demonstration’s budgetary impact shows that it is “at least seven times larger than that of any other Medicare demonstration conducted since 1995.” The estimated cost of the program is a whopping $8.35 billion over the next 10 years. The demonstration may be successful at concealing the impact of Obamacare’s cuts, but the GAO analysis shows that that’s about the extent of its effectiveness. The program’s poor design means it won’t even achieve its stated purpose.
The GAO recommended that the White House “should cancel the MA Quality Bonus Payment Demonstration and allow the MA quality bonus payment system established by [Obamacare] to take effect.”
It remains uncertain if the Obama Administration will take GAO’s recommendation seriously or if the $8.35 billion attempt to fool America’s seniors will continue.