The last thing Obama needs is another losing fight over this in 2012, so it appears that his administration devised a way of avoiding it. According to a Government Accountability Office report published yesterday, the administration has been doling out cash from an $8 billion slush fund to temporarily cushion the blow from these cuts. The pain will come later, presumably after his re-election.
For decades, the federal government has been experimenting with the way Medicare provides health care to seniors. Most seniors still use the program's fee-for-service system, with the government billed directly by doctors and hospitals for all health received. But more than 12 million, or a quarter of all Medicare recipients, participate in Medicare Advantage, in which private insurers compete to provide services for seniors. Medicare Advantage participants pay premiums to a health insurer of their choice. The insurers also receive a subsidy from the government for each patient.
Democrats never liked this program. It was on the top of the list of things to cut when it came time to pay for Obamacare. Of the $500 billion dollars in Medicare cuts they made through 2019, $140 billion was supposed to come from reduced payments to Medicare Advantage providers. Over $6 billion in cuts were supposed to happen this year. But when you cut payments to health insurance providers, they end up cutting back on benefits, hiking premiums, or both, and those are not helpful in an election year.
Enter the Medicare Advantage Quality Bonus Payment Demonstration program, an $8.3 billion slush fund created by the Center for Medicare & Medicaid Services. Ostensibly, this fund was designed to test how best to structure bonus incentives for insurers who provided better care. Instead, it is patching up politically damaging Medicare cuts. It will alleviate 71 percent of the Medicare Advantage cuts in 2012, and then the percentage plummets in the two years after the election to 32 percent and then 16 percent.
In its report yesterday, GAO concluded that "[t]he design of the demonstration precludes a credible evaluation of its effectiveness in achieving CMS's stated research goal." According to the GAO, the $8 billion bonus program "dwarfs all other Medicare demonstrations -- both mandatory and discretionary -- conducted since 1995." Asked by the GAO to identify exactly where they got this $8 billion from, the Obama administration failed to name any specific offsets and said the spending should be considered "in the context of other administrative actions in the Medicare program."
Obama's $8 billion Medicare Advantage slush fund is a blatant attempt to stave off seniors' disapproval with Obamacare's effects in an election year. When this temporary patch runs out, millions will be shocked by skyrocketing Medicare premiums and possibly also the deterioration of care. By that time, Obama will never have to face the voters again.