GOP: HHS’s $8 Billion “Quality Bonus” Medicare Demo Meant to Mask Obamacare Cuts

Republicans are accusing the Department of Health and Human Services of implementing an $8.35 billion Medicare Advantage demonstration to mask cuts to the program stemming from the Obama administration’s Affordable Care Act (ACA).

In April, the Government Accountability Office (GAO) examined the Medicare Advantage Quality Bonus Payment Demonstration, which HHS says is meant to provide incentives to more Medicare Advantage (MA) plans to improve senior care in place of the ACA’s plan for quality incentives.

The ACA seeks to tie MA payments to each plan’s performance rating, graded on a five-star system, by introducing rebates based on plans’ ratings and offering bonuses to plans with four or more stars.


The Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary estimated that the president’s healthcare reform bill would reduce payments to MA plans by $145 million over a nine-year span.

In November 2010, CMS announced that it would conduct a nationwide demonstration from 2012 through 2014 to test an alternative method for calculating and awarding bonuses to MA plans, rather than implement the ACA’s bonus structure. This alternate method extended bonuses to plans with three or more stars and increased the size of the bonuses in 2012 and 2013 compared to the ACA’s plan, among other differences.

The nonpartisan GAO noted in its report that the initiative “dwarfs all other Medicare demonstrations” conducted since 1995 in size and scope, and ultimately recommended that it be canceled for several reasons—providing a foundation for the GOP’s assertions.


“[T]he expanded bonuses and higher MA enrollment [that would result from the demonstration] mainly benefit average performing plans–those receiving 3-star and 3.5-star ratings,” the GAO wrote in its report. “In addition, OACT [Office of the Actuary] estimated that the demonstration will offset more than one-third of the reduction in MA payments projected to occur under ACA during the demonstration years. The largest annual offset will occur in 2012—71 percent—followed by 32 percent in 2013 and 16 percent in 2014.”

Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, is now contending that the demonstration program was created to mask cuts to MA plans stemming from the ACA until after the presidential election. 

Politico reports:

House Oversight and Government Reform Committee Chairman Darrell Issa subpoenaed the Obama administration Monday for documents he believes will expose Medicare malfeasance by Department of Health and Human Services officials.

Medicare Advantage was due for substantial cuts authorized by the Affordable Care Act, but the pilot program provided quality bonus payments to the private insurance plans that are effectively offsetting more than 70 percent of the cuts this year, according to the Government Accountability Office.

Republicans have cried foul, arguing that the bonus payments were meant to blunt the impact of the health law’s cuts so seniors wouldn’t see any reductions before the election. Issa said the pilot program is the largest ever conducted by HHS and required the agency to waive budget neutrality rules in order to implement it.

HHS denies any wrongdoing with the demonstration.

“The quality bonus payment demo is providing incentives to more [Medicare Advantage] plans to improve care, giving more patients high-quality choices in the program,” HHS said in a statement to Fox News. “It is consistent with previous demos.”

Rep. Issa has called the demonstration an “unbelievable abuse of power” and alleges the program was created to provide funding for what “Obamacare took away.”

Written by Alyssa Gerace