BUSINESS
04/23/2012 11:11 am ET

Medicare Program Wastes $8 Billion In Payouts To Private Insurers: GAO Reports

A program meant to reward health insurance companies for delivering high-quality care is wasting billions of dollars, according to a government report released Monday, first reported in the New York Times.

Created by the health care reform law, the government initiative pays bonuses to private insurers who participate in Medicare Advantage, an alternative to traditional, government-run Medicare. Bonuses were intended as a way to reward the best, most-efficient plans under the program. However, the government audit reports that bonuses are being paid to many more plans than Congress intended--to the tune of $8.3 billion. The auditors recommend that Congress end the program, according to the newspaper.

The Centers for Medicare and Medicaid Services expanded the bonus program to include plans covering 90 percent of the 12 million people in private Medicare health insurance plans, more than the one-third Congress intended, the report says.

The health care reform law called for a $132 billion reduction in how much Medicare Advantage plans get paid to provide health care coverage to beneficiaries through 2019. The bonus payments were meant to encourage health insurance companies to boost their performance by offering financial incentives. Prior to the law, the cost of enrolling a Medicare beneficiaries in a private plan was 14 percent higher per-person than covering an individual in traditional Medicare, which prompted Congress to reduce the payments the plans receive.The cuts in the health care reform law will save taxpayers $68 billion by 2016, according to a report issued by the Centers for Medicare and Medicaid Services Monday.

Federal investigators also uncovered wasteful spending on a smaller scale in Texas, the Houston Chronicle reports. Under a longstanding program, Medicare pays 10 percent bonuses to physicians who practice in rural areas and other locales where there aren't enough doctors.

Federal overseers didn't update their records about who was eligible for these bonuses so Medicare paid out $64 million in extra payments between 2003 and 2011 to doctors who shouldn't have gotten them, the newspaper reports. The Office of Inspector General for the Department of Health and Human Services uncovered the improper payments last autumn. Texas authorities notified the federal government of the changes in those doctors' statuses in 2004 but the federal Health Resources and Services Administration didn't act on the information, according to the newspaper.

Photo by Flickr user purpleslog

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