Oct 2015: Porker of the Month - CMS Acting Commissioner Andy Slavitt
|Acting Commissioner Andy Slavitt|
Centers for Medicare & Medicaid Services
Consumer Operated and Oriented Plans (CO-OPs) were created under the Affordable Care Act (ACA) or Obamacare as a compromise to placate certain Democratic Senators who preferred a government-run option for healthcare reform. Out of the 23 CO-OPs that were created, nine have either closed their doors or will do so by the end of the year, leaving thousands of Americans scrambling for new health insurance.
The cause of these collapses was clear from the start. The law prevented individuals with healthcare provider experience from constituting a majority on any CO-OP governing board. As new entities, CO-OPs had little to no access to actuarial data or patient histories to determine premiums. The law also prohibited CO-OPs from engaging in the more lucrative large employer market, forcing them to only pursue smaller individual and group markets.
Undaunted by these obvious red flags, CMS allocated $2.4 billion in start-up loans for the 23 CO-OPs. Now that nine have failed, taxpayers have lost approximately $983 million or 41 percent of the total amount. To make matters worse, federal officials admitted on September 28, 2015 that more CO-OPs are soon poised to collapse. A Department of Health and Human Services (HHS) Office of Inspector General report on July 30, 2015 revealed that 22 of 23 CO-OPs lost money in 2014.
In a brazen effort to allow failing CO-OPs to masquerade as financially viable, Acting Commissioner Slavitt allowed CMS Center for Consumer information and Insurance Oversight CO-OP Division Director Kelly O’Brien to send a letter on July 9, 2015 informing the CO-OPs that they could “request that surplus notes be applied to … start-up loans. Applying surplus notes to the start-up loans will enable CO-OP borrowers to record those loans as assets in financial filings with regulators.” In other words, the CO-OP loans would now become assets. This is akin to a homeowner claiming their mortgage loan liability could be counted as an asset. In an October 9, 2015 article in Politico Pro, David Paul, a principal at Alirt Insurance Research, said, “The big game is to have the capitalization of these companies be solvent so that the insurance departments aren’t required or don’t feel compelled to step in. It is kind of dressing up these companies showing more capital than they really should hold.”
Indeed, these questionable and somewhat unprecedented accounting procedures to move some money around and keep some CO-OPs afloat by making their finances looks better on paper than they really are will not avoid their eventual demise. To date, five CO-Ops, Colorado HealthOP, New Mexico Health Connections, Nevada Health Co-op, Health Republic Insurance of Oregon, and Common Ground Healthcare Cooperative in Wisconsin, have taken advantage of this loophole. Yet even with that “financial assistance,” three out of those five have announced they will shut down.
CAGW President Tom Schatz said, “No amount of loopholes or fiscal gimmicks can hide the financial disaster caused by the CO-OPs. The fact that taxpayer money was abused to prop up this scheme further is cause for more outrage.”
For allowing his agency’s to exacerbate the CO-OP boondoggle through a shaky accounting scheme, CAGW names Acting CMS Commissioner Andy Slavitt its October Porker of the Month.
Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.
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