Democrats at a joint hearing of two House Ways and Means subcommittees today talked about giving state regulators the authority to oversee the Medicare Advantage program.

The Ways and Means Health Subcommittee and the Oversight Subcommittee convened the hearing to review the statutorily required audits of Medicare Advantage plans.

Rep. Fortney Pete Stark, D-Calif., chairman of the Health Subcommittee, said the real subject of the hearing is CMS neglect of Medicare Advantage programs.

“The focus of this hearing is on private government contractors receiving billions of dollars to administer a government program with no oversight or control by the [Bush] administration,” Stark said.

The U.S. Government Accountability Office concluded in a report released today that the CMS has failed to meet minimum Medicare Advantage plan auditing requirements.

“GAO reports that CMS audits only a small percentage of the bids that plans submit – even though the law requires them to audit one-third,” Stark said at the hearing. “What’s even more disturbing is that while they have failed to meet the terms of the law, even the small percentage they review reveals large discrepancies with millions of dollars in lost benefits and incorrect accounting. The few audits that are actually performed only show us what plans offer, not the benefits that they actually deliver. In a $73 billion program, we have no idea what benefits are being delivered. That’s not good government, it’s dereliction of duty.”

Rep. Rahm Emanuel, D-Ill., said Congress faces a choice between having the CMS “do what it is supposed to” or giving the states more authority to oversee Medicare Advantage plans.

“Somebody has got to do the policing,” Emanuel said.

Timothy Hill, the CMS chief financial officer, said the agency will be taking a far more active role in ensuring that the agency meets Medicare Advantage auditing requirements.

Rep. Earl Pomeroy, D-N.D., then suggested that the CMS did not even have the resources to audit the plans.

Republican subcommittee members sought to temper the criticism, noting that many of the errors that CMS auditors found were comparatively minor.

CMS audits of about $7 billion in Medicare Advantage program spending found a net overpayment of only $35 million in 2003, said Rep. Kenny Hulshof, R-Mo.

The net overpayment was relatively low “because, in addition to overpayments, there are also underpayments,” Hulshof said.

The 0.4% error rate is much lower than that for many other Medicare programs, Hulshof said.

CMS officials deserve a round of applause for their efforts to bring down Medicare Advantage error rates over the past decade, but the agency has engaged in “a minimal compliance effort” regarding the Medicare Advantage plan audits, according to Jeffrey Steinhoff, a GAO managing director.

“Perhaps the past 6 or 7 years will be a very expensive lesson learned,” Steinhoff said, arguing that CMS needs a “sea change.”

Stark emphasized that he is criticizing Medicare Advantage plan oversight, not Medicare Advantage plan coverage.

“I happen to think Medicare Advantage plans offer good health care,” Stark said.

Stark reported that half of the residents in his district – not insureds, but residents – belong to a single Medicare Advantage plan.