Obama Administration Hides Medicare Advantage Cuts in Demonstration Project

Published September 20, 2012

President Obama has big changes planned for Medicare Advantage, which relies on private insurers’ plans that contract with Medicare to provide coverage. It is highly popular among rural seniors who have trouble finding doctors who accept Medicare payments.

A significant portion of the Medicare cuts in Obama’s health care law come from Medicare Advantage, taking $150 billion from the program over the next decade. As with other areas of Medicare, Obama’s cuts to reimbursement rates to health care providers are likely to result in longer wait times and higher out-of-pocket costs for seniors.

In the run-up to the November election, the Obama administration is disguising the cuts to Medicare by creating a demonstration project that doesn’t actually measure anything, according to House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Oversight subcommittee Chairman Cliff Stearns (R-FL).

This approach, they say, allows the administration to dole out $8 billion to cushion the cuts planned for Medicare. Once the election is over, however, the administration can simply discontinue the demonstration program and the real cuts to Medicare called for in Obama’s law can begin.  

GAO Critical of Plan

Upton and Stearns say the demonstration program is just a smokescreen for the significant Medicare Advantage cuts called for in Obama’s sweeping health care law.

An April Government Accountability Office report, requested by Sen. Orrin Hatch (R-UT), found the Medicare Advantage Quality Bonus demonstration project wasn’t really a “demo” at all. In fact, the GAO’s general counsel sent a letter to HHS Secretary Kathleen Sebelius which stated the Centers for Medicare & Medicaid Services (CMS) lacked the legal authority for the Medicare Advantage quality bonus demo as currently constructed.  

Devon Herrick, a senior fellow with the National Center for Policy Analysis, says the Democratic leadership in Congress has often complained about the private Medicare Advantage plans paying on average about 13 percent more than traditional fee-for-service Medicare.

“Over the next few years the Affordable Care Act cuts about $156 billion worth of subsidies from Medicare Advantage plans,” Herrick said. “Nearly one in four seniors are enrolled in a Medicare Advantage plan. Half of these may lose their plans, as plans that are no longer profitable close due to the budget cuts. However, millions of seniors being thrown off their private Medicare plans in an election year is not something that’s welcome by the Administration.

“That is why many critics wonder if the Medicare Advantage Quality Bonus demo isn’t just a way to keep plans afloat until well after the election,” Herrick continued.

No Metrics for Success

Linda Gorman, a senior fellow and director of the Health Care Policy Institute at the Independence Institute, says the metrics of success for this supposed demonstration project are absent.

“They never measure whether care should be given but isn’t given. For instance, what happens when the government health care program doesn’t grant you a hip replacement when you need one for one or two years? In other words, what happens when care is denied?” Gorman said.

Sally Pipes, president and CEO of the Pacific Research Institute, says Obama is gutting Medicare Advantage because he believes the program is too expensive and provides too many choices for rural seniors.

“There are currently about 13 million on Medicare Advantage right now. President Obama wants to cut the program by $150 billion over the next 10 years, drawing enrollment down to only 7.4 million, or roughly half the number that are currently signed up for the program. I really believe he wants to eliminate the program altogether,” says Pipes.

Targeting Consumer Empowerment

Gorman says Medicare Advantage is being targeted because the administration does not approve of its reliance on private plans and consumer choice, and Obama’s law plans to eliminate this approach or make it far less appealing to seniors.

“When you start the wholesale rearrangement of these practices like pieces on a chessboard, there’s a very high probability that someone will get harmed,” said Gorman.

Kenneth Artz ([email protected]) writes from Dallas, Texas.