GAO to CMS: Not only is your demo expensive, it's probably illegal

The Government Accountability Office, among others, is now questioning whether this Medicare Advantage demo has a right to exist.

Earlier this month, after complaints from MedPAC and others that it was too big, CMS voluntarily cut back on its massive dual-eligible demo. Last week's complaint from GAO about another demo -- the Medicare Advantage (MA) Quality Bonus Payment Demonstration -- is unlikely to get as accommodating a reception from CMS.

The three-year demo was created in 2011 to provide "financial incentives" to Medicare Advantage plans to provide better care, via bonuses given to top-performing plans according to CMS' five-star ratings.

In a 10-page letter to HHS Secretary Kathleen Sebelius, GAO reminds the Secretary of its March prediction that the demonstration’s "reliance on predemonstration performance data, the absence of an appropriate comparison group of MA plans, and the demonstration’s design make it unlikely that the demonstration will produce meaningful results."

Now GAO says the $8 billion price tag is still too rich for their blood, but they have another complaint: "Our findings during the course of our evaluation of the demonstration also raised concerns about whether the demonstration falls within HHS’s section 402 authority" under the Social Security Amendments of 1967.

Section 402, GAO says,  "authorizes HHS to undertake demonstration projects to test new Medicare payment methodologies" so long as that would have, in the Section's language, "the effect of increasing the efficiency and economy of health services under such programs."

GAO says they'd already determined by the time of their last letter to HHS that "the demonstration’s payment changes do not consistently offer better incentives than PPACA.  In fact, in 2014, PPACA’s bonus structure provides many plans better incentives than the demonstration to achieve higher star ratings," which seems to undercut its statutory rationale.

They also mention that the demo's incentives will be based on data from before the launch of the demo, and CMS has yet to explain to them how that's actually even an incentive.

As Home Care magazine points out, this demo is believed by many to be the "product of political pressure to avoid cutting popular Medicare Advantage programs, which are more costly to the government than traditional Medicare," so it's understandable that CMS would try to brass it out without addressing GAO's claims.

As for GAO, they can do little except attempt to embarrass CMS into complying. But Congress could do more, and we note with interest that the letter is copied to the instigator of the investigation, powerful veteran Sen. Orrin Hatch (R.-Utah). Reps. Dave Camp (R-Mich.) and Wally Herger (R-Calif.) of the House Ways and Means committee have also sent a letter questioning the legality of the demo. It'll be interesting to see if someone escalates this with a bill.