White House refuses to drop $8 billion Medicare private plan demo

Washington The Obama administration’s top health official will not rescind a Medicare demonstration project that a government watchdog agency concluded is mainly benefiting average health plans instead of just those providing a higher quality of coverage.

Health and Human Services Secretary Kathleen Sebelius defended the Medicare Advantage quality bonus program during an April 27 hearing before the House Education and the Workforce Committee. Committee members strongly criticized HHS over findings in a recent Government Accountability Office report, which called for ending an $8 billion project that will offset some of the Medicare Advantage cuts mandated by the 2010 health system reform law.

“We have no intention of canceling the project,” Sebelius said.

In November 2010, the Centers for Medicare & Medicaid Services announced it would run the three-year demonstration project beginning in 2012. The program would reward private Medicare plans according to a five-star rating system based on quality measures, patient experience and contractor performance. Five-star plans would receive the highest bonuses.

Under several reforms in the health law, Medicare payments to private plans were set to be cut by $145 billion. Lawmakers authorized bonuses for higher-quality plans. But the agency would forgo the bonus structure set in the law by rewarding plans that achieve a three-star rating and increasing incentives to insurers that obtain four- and five-star scores. Most bonuses under the demo will be paid to plans earning three or 3.5 stars, the report said.

Republican lawmakers accused HHS of creating the demonstration to prop up Medicare Advantage plans, which otherwise would scale back benefits or raise patient premiums as a result of the reform law cuts.

“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 Hatch (R, Utah), who had requested the GAO study.

Sebelius called the report inaccurate. Medicare Advantage payments for physician and hospital services historically have been nearly 15% more than the costs for similar services in traditional Medicare fee-for-service. The difference has decreased to 7% because of system reforms, she said.

The GAO recommended that HHS abandon the demonstration and allow the quality bonus program in the reform law to take effect as outlined. But the agency is resisting, because it finds the project as it is structured to be consistent with HHS goals for the program, said Jim Esquea, the HHS assistant secretary for legislation, in response to the report.

“Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to [Medicare Advantage] enrollees,” he said.