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Insurance plans' bonuses hit

A federal auditor said the pay was not OKd by Congress and not likely to improve care.

The Obama administration should cancel plans for $8.4 billion in "quality" bonuses to insurance companies that provide Medicare coverage because Congress didn't authorize the spending and it's unlikely to improve care for the elderly, government auditors said.

The bonuses for Medicare Advantage plans run by companies including UnitedHealth Group Inc. and Humana Inc. would pay about $5 billion more through 2014 than what Congress authorized in the U.S. health-care system overhaul, the Government Accountability Office said in a report today. The agency, a nonpartisan investigative arm of Congress, said the majority of the extra money is going to plans rated less than four stars.

The 2010 health-care law approved by Congress cut payments to Advantage plans, while offering bonuses to those that earned at least four out of five stars in a system the government uses to rate plans. Instead of implementing the health law's bonus system, the Obama administration created its own that awards bonuses starting this year to plans rated as low as three stars.

The government "seems to be using a technicality to side-step Congress and write itself a blank check to spend more money for political purposes leading into this year's elections," Senator Orrin Hatch, a Utah Republican who requested the audit, said in a statement.

The Obama administration today defended the bonuses, saying the payments support a "national strategy to improve the delivery of health-care services, patient-health outcomes and population health."

'Generous Bonuses'

Without the administration's more generous bonuses, "many plans would not have an immediate incentive to improve the quality of care" they provide, Jim Esquea, the assistant secretary for legislation at the Health and Human Services Department, said in written comments attached to the audit.

The administration released a report today saying the health law will reduce Medicare spending by $200 billion through 2016, and that beneficiaries would save $59 billion in out-of-pocket costs. Excessive payments to Medicare Advantage plans would be cut by $68 billion, according to the report.

Private plans

About 25 percent of Medicare's 47 million beneficiaries were in the private Advantage plans in 2010, according to the program's trustees. When the health law was passed that year, Medicare's actuaries projected that enrollment in Advantage plans would fall by half by 2017 because of the cuts in payments, as insurers reduced extra benefits they had offered to entice seniors, such as coverage for eyeglasses and gym memberships. Enrollment in the private plans has grown about 12 percent since 2009, according to the Kaiser Family Foundation.