CMS is in denial about the CO-OPs. Here are the facts.
by Nathan Nascimento, Senior Policy Adviser
Obamacare’s CO-OP disaster was really no disaster at all (according to Andy Slavitt).
That outlook sums up the recent testimony of Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS) — which is the agency responsible for implementing Obamacare. Slavitt testified Thursday before the Senate Finance Committee on the status of the CO-Ops and dismissed the failures of the program as a common problem of “most small businesses competing in this space.”
By Slavitt’s reckoning, the failure of over half of the 24 CO-OPs — in which over 750,000 (more) Americans lost their health care coverage and more than $1.2 billion in taxpayer dollars were wasted — was no surprise, and bore no connection to failed oversight on the part of the Obama administration.
Given the CO-OPs’ dismal track record, Slavitt also offered an unusually optimistic outlook for the remaining CO-OPs, forecasting that “each of the co-ops in business today has every opportunity to be successful this year.”
While signs continue to emerge that the financial situations of the remaining CO-OPs are worsening, Slavitt’s testimony indicates an alarming disconnect from reality. Here are the four most troubling claims from Thursday’s hearing — and what the facts really are.
#1. “It doesn’t surprise me that in the first couple of years that the co-ops are going to lose money.”
Slavitt justified the dismal finances of the CO-OPs by comparing them with the typical start-up small business (backed by billions of tax dollars). However, Slavitt’s claim implies that the Obama administration may never have expected the program to succeed.
Two years into Obamacare’s implementation, more than a billion taxpayer dollars have been wasted through the CO-OPs, and hundreds of thousands have been kicked off their health insurance plans.
#2. “Each of the [Obamacare] co-ops in business today has every opportunity to be successful this year.”
Obamacare created 24 taxpayer-backed CO-OPs. Thirteen have now shut down, leaving only 11 remaining. Of those remaining CO-OPs, all but one is still losing money — racking up a combined total of $200 million in losses through the first nine months of 2015.
Even the Obama administration has admitted in recent months that it “cannot rule out” that more CO-OPs will have “solvency issues.” Meanwhile, CO-OPs in Maine and Illinois announced recently that they will freeze enrollment to try to stop the bleeding.
#3. “There will be cash in the CO-OPs themselves when they get through paying the providers and paying off claims.”
When pressed on whether the CO-OPs would be able to repay any of the millions they received in federal loans, Slavitt offered an extremely optimistic outlook: Once the CO-OPs have paid the bills they owe to health care providers, they will still have cash left over to repay their taxpayer-backed loans.
The reality? Many CO-OPs likely will be unable to even pony up the cash they still owe to doctors. In New York, for instance, providers — and potentially state taxpayers — are on the hook for a total of over $200 million in unpaid bills.
#4. CMS is providing proper oversight of Obamacare and taxpayer dollars.
Throughout the hearing, the head of CMS maintained the agency’s commitment to providing proper oversight over its programs and being a prudent steward of tax dollars. Unfortunately, CMS’s track record suggests just the opposite.
Senator Orrin Hatch (R-UT), the committee chairman, argued that CMS has “cooked their books” on CO-OPs, noting that CMS allowed them to prop up their financial statements through an accounting gimmick: defining taxpayer-backed loans as “assets.” An accounting gimmick that no small business would get away with.
Evidence also suggests that CMS continued to dole out loan awards to CO-OPs it knew were failing. Senator Rob Portman (R-OH) argued that “throughout 2014 HHS was writing a series of multi-million dollar checks to the CO-OPs,” even though “publicly available documents…showed that every single one of those co-ops that failed was not just losing money…it also showed they had dangerously high medical loss ratios.”
Time for Washington to own up to the CO-OP fiasco.
As CMS tries to avoid responsibility for Obamacare’s CO-OP disaster — while denying the failure of the program altogether — tax dollars continue to be wasted, and even more Americans may lose their coverage as additional CO-OPs shut down.
It’s time for Washington to admit its failures. Americans need patient-centered reforms that empower them to find health care uniquely suited to their needs — not more excuses.
