The head of the agency that oversees President Barack Obama’s health-care legislation suggested it should not be held responsible for the 12 Obamacare health insurance co-ops that closed their doors to customers last year, according to prepared testimony he is scheduled to deliver today before the Senate Finance Committee.
Andy Slavitt, acting administrator for Centers for Medicare and Medicaid Services (CMS), was not apologetic in his testimony and accepted no personal responsibility for the co-op failures in 15 states, according to an advance copy of his testimony obtained by The Daily Caller News Foundation. The closures sent millions of Americans scrambling for new health insurance just in time for Christmas at the end of 2015.
Slavitt defended CMS’s oversight system for the co-op’s by citing a July 2013 Department of Health and Human Services inspector general’s report that approved CMS safeguards.
He told the senators the IG determined, “CMS established a prospective oversight system to safeguard co-op funding and ensure timely implementation of the program.” He did not mention the IG report had been released before the co-op program actually began offering health insurance policies in November 2013.
He also disclosed that CMS conducted site visits in 2015 for only about half of the Obamacare health co-ops, despite clear signs that a wave of financial failures were sweeping the co-op system. Slavitt blamed the defaults on other culprits: an obscure federal advisory committee, the center’s giant actuarial consultant Deloitte Consulting, and congressional budget cuts that affected the co-op program.His testimony before the Senate committee is the first comment by any administration official since the co-ops began to unravel in 2014.
Slavitt did not reveal in his testimony how many additional co-ops are still in trouble. He did say an unspecified number face a financial condition that demanded “enhanced oversight” or are mandated to create a “corrective action plan.” Co-ops serving Maine, Massachusetts and New Hampshire are considered in perilous financial condition and could close their doors by the end of this year.
State regulators in Vermont never approved another Obamacare co-op due to a “fatally flawed” financial plan and the fact that the co-op arranged a sweetheart financial deal for its president.
Slavitt is a former executive at United Health Group, the nation’s largest health insurance company who received a rare “ethics waiver” to join CMS. Obama nominated him to continue as the permanent CMS administrator, and he still faces a future Senate confirmation vote to keep his job.
The acting administrator told senators, “it is too early to tell how much money may be recovered,” of the $2.5 billion that was appropriated for 24 experimental non-profit health insurance cooperatives.
The co-op program was inserted into the Obamacare reform law to satisfy political activists who wanted a universal single payer program, an option that remains a favorite of self-described socialist and presidential candidate Bernie Sanders of Vermont. The co-op program was supposed to compete with commercial insurers.
Slavitt succeeded Marilyn Tavenner, who resigned after the failure of the Obamacare launch. The way he responds to the co-op debacle could determine his confirmation prospects in front of the Senate. Slavitt told the Senate committee CMS has begun a “recovery process” for the failed co-ops and “once the wind down of these CO-OPs is complete, we will use every available tool to recoup Federal funding.”
Based on CMS loan data, the total amount awarded to the failed co-ops constitutes at least $1.4 billion of the $2.5 billion allocated for the program. Slavitt revealed in his testimony that despite the financial distress sweeping through all the co-ops in 2015, CMS officials conducted site visits to only 15 states. The co-ops operate in 26 states.
“Since March 2015, CMS has conducted site visits of CO-OPs in 15 states,” he said in his prepared testimony. He did not identify any of the states.
Slavitt said some of the responsibility for the failures could be traced to an obscure federal advisory committee appointed by the Government Accountability Office that established the “framework” for the co-ops.
“The framework for implementing the CO- OP Program was based on a report submitted by a Federal Advisory Committee appointed by the Government Accountability Office,” he told the Senate committee.
He additionally pointed a finger at the CMS actuarial consultant, Deloitte Consulting. He told the Senators the application process “was rigorous, objective, and conducted with input and expertise from an independent party, Deloitte Consulting, LLP.”
Slavitt criticized Congress for reducing the original $6 billion appropriation to $2.5 billion. Congress shaved $2.2 billion off the program when Democrats held majorities in both the Senate and House. A second cut amounted to $3.5 billion, which came in 2012 after Senate leaders and Vice President Joe Biden negotiated a sweeping new 2012 federal budget that avoided the “fiscal cliff.”
The Senate passed that bill by a margin of 89–8, which included 49 Democrats and Sen. Sanders.
Interest in the troubled co-op program is drawing the attention at other Senate committees too.
Yesterday, Sen. Ron Johnson, the Republican from Wisconsin who chairs the Senate Homeland Security and Governmental Affairs Committee, wrote Slavitt and demanded that CMS spell out how much money taxpayers lost in the co-op program.
“The number of failed CO-OPs and the anticipation of additional closures raise concerns about how CMS will recoup the $2.4 billion it loaned to the 23 CO-OPs,” Johnson, a Wisconsin Republican, told Slavitt.
Senator Orrin Hatch, the Republican chairman of the finance committee said in his opening remarks that CMS “cooked their books” from the very beginning.
The Utah senator noted that CMS redefined the billions of dollars given to the co-ops in “solvency loans” as “assets.” Actuaries normally consider debt a liability for a company.
He said the co-ops “were doomed to fail from the outset.”
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