Secretary of Health and Human Services (HHS) Kathleen Sebelius has misled the American public again.
HHS just announced that enrollment in Medicare Advantage (MA) is projected to increase by 11 percent next year. That’s good news. But the Secretary goes terribly wrong when she credits the increase to Obamacare, stating, “Thanks to the Affordable Care Act, the Medicare Advantage and Prescription Drug programs have been strengthened and continue to improve for beneficiaries.”
As Heritage has pointed out before, Obamacare severely damages MA. The law is projected to cut $156 billion from the program between 2013 and 2022. Because of these cuts, the Medicare actuary predicts that enrollment in MA will decrease 50 percent by 2017. For those who remain in MA, Heritage estimates, “By 2017, Medicare beneficiaries who would have enrolled in Medicare Advantage under prior law will lose an average of $1,841 due to the MA changes alone and $3,714 when the effects of the entire bill…are considered.”
MA is an alternative for beneficiaries who don’t want to enroll in traditional Medicare and buy additional insurance to cover Medicare’s big benefit gaps. Private plans compete against one another to provide benefits to Medicare beneficiaries; the benefits are invariably more generous than traditional Medicare. Next year, enrollment is projected to increase to 30 percent of total Medicare beneficiaries.
So what happened to this year’s Obamacare cuts to MA plans? The Obama Administration effectively hid them through an administrative maneuver that is politically clever but legally questionable.
HHS relied on additional funding from the Quality Bonus Payment demonstration program to make payments to MA plans from 2012 to 2014. The special program differs substantially from the bonus program provided 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. But in the HHS demonstration program, the bonus payments are awarded to plans rated 3 and above, essentially rating almost all plans “above average” and giving them bonus payments.
The special bonus payments offset the MA cuts scheduled under Obamacare beginning this year. In a report on this bonus program, the Government Accountability Office (GAO) states, “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 nonpartisan GAO concluded that this demonstration is the most expensive since 1995, costing taxpayers $8.35 billion. Not surprisingly, the GAO recommended that the White House cancel the demonstration program, citing its ineffectiveness and poor design.
Worse, the HHS demonstration does not satisfy the legal requirements of a demonstration program. It does not provide additional incentives to improve efficiency or save money, as determined by the GAO’s report. Therefore, the Secretary does not have the authority to implement it, and the GAO has again recommended that it be discontinued.
Even if the Administration doesn’t follow GAO’s recommendation—and there is no indication that it will—the HHS demonstration program will end in 2014. Without the additional dollars to offset the Obamacare payment cuts, an estimated 30 percent of America’s seniors will feel the pain of lost coverage and reduced benefits.
MA is being savaged by the new health law on the installment plan. That is the one thing the sponsors of Obamacare can take credit for.