April 23, 2012 / 2:50 PM / 6 years ago

U.S. watchdog blasts Medicare quality insurance project

* GAO says project awarded mediocre plans

* Watchdog calls for project’s cancellation

By David Morgan

WASHINGTON, April 23 (Reuters) - Medicare, the U.S. healthcare program for the elderly, is spending more than $8 billion on a quality-improvement project for private health coverage that mainly rewards plans with mediocre performances, a U.S. government watchdog said on Monday.

A report by the Government Accountability Office, or GAO, a nonpartisan investigative arm of Congress, recommends canceling the Medicare Advantage quality bonus payment project in preference for quality improvements prescribed by President Barack Obama’s healthcare law.

The administration had no immediate response. Separately, the administration released its own report predicting that the entire Medicare program would save more than $200 billion through 2016 due to the effects of Obama’s 2010 law, known as the Patient Protection and Affordable Care Act. Beneficiaries in traditional Medicare would enjoy $59.4 billion in lower costs.

The GAO report calls into question Medicare’s ability to improve care delivery, reduce costs and combat waste at a time when the $523 billion-a-year program and its 48 million beneficiaries face an uncertain future due to worries in Congress about the mounting federal debt and deficit.

Medicare Advantage, also known as Medicare Part C, allows beneficiaries to receive coverage from private insurers. But the program’s higher costs have long been an issue. Some of the largest providers of Medicare Advantage plans include UnitedHealth Group and Humana Inc.

The project, designed to promote quality by awarding performance bonuses to private insurers that offer coverage through Medicare, was undertaken to test whether annual quality improvements could be achieved more quickly than under Obama’s healthcare overhaul.

The aim was to provide strong incentives for Medicare Advantage plans to improve performance at various star rating levels. But the project also ensures that all plans receive bonuses at least as great as those that would occur under Obama’s healthcare law, rather than just the highest-performing ones.

But GAO found that the design serves to undermine the administration’s ability to achieve its stated goal.

“Rather than rewarding only high performing plans, most of the additional payments made under the demonstration will accrue to average performing plans,” GAO healthcare Director James Gosgrove said in a letter to Senator Orrin Hatch, top Republican on the Senate Finance Committee.

“The design shortcomings of the demonstration may undermine its ability to achieve (the administration‘s) stated research goal,” he added.

The GAO study circulated just ahead of an annual report by the Medicare trustees, which is expected to provide a new forecast for the program’s long-term financial health.

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