Democrats at a joint hearing of two House Ways and Means Subcommittees offered harsh criticism of how the Centers for Medicare and Medicaid Services has failed to meet requirements regarding audits of Medicare Advantage plans, and raised the specter of delegating such authority to the states instead.

In opening the joint hearing of the subcommittees on Health and Oversight, Health Subcommittee Chairman Pete Stark, D-Calif., opined that the hearing would be more appropriately seen as being on the lack of oversight of CMS and 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 administration,” he said.

The basis of the hearing was reported from the Government Accountability Office, which found that CMS had failed to meet the minimum requirements set out for it to conduct audits of Medicare Advantage plans.

“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. “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.”

Among those criticizing the CMS was Rep. Rahm Emanuel, D-Ill., who said Congress faces the choice between having CMS “do what it is supposed to” or potentially delegating greater authority to the states to oversee Medicare Advantage plans. “Somebody has got to do the policing,” he said. Emanuel also paraphrased President Abraham Lincoln’s remark to a slow acting general with the comment, “If you’re not using your army, may we borrow it?”

Otherwise, Emanuel warned he “would be more than willing” to give the states greater authority to regulate Medicare Advantage plans.

Representing CMS at the hearing, Chief Financial Officer Timothy Hill said, “We are going to use our army,” and would be taking a far more active role in ensuring that all of the requirements for CMS’ audits of Medicare Advantage programs will be met going forward.

Rep. Earl Pomeroy, D-N.D., a former state insurance commissioner, then suggested CMS did not even have the resources to fulfill its duties, saying “you don’t even have an army” capable of fully auditing plans.

Other Democrats on the panel expressed outrage over the lack of oversight being undertaken at CMS. Rep. Ron Kind, D-Wis., referred to Medicare Advantage as “the Blackwater of healthcare” in reference to the private security contractor facing accusations of lawlessness in Iraq.

“I guarantee you there’s not a taxpayer in America who wouldn’t be horrified,” at the lack of oversight on the part of CMS, he said.

Republicans on the panel sought to temper the criticism, noting that in the cases where CMS had audited some plans, the level of error it found was comparatively minor.

Rep. Kenny Hulshof, R-Mo, noted that in 2003, the federal government spent roughly $36.8 billion on Medicare advantage, and that CMS audits of “about 22%” of the market found a net overpayment of only $35 million. “That’s net,” he added, “because in addition to overpayments there are also underpayments.”

The total effect, he said, translates to an error rate of only 0.4%, far less than that of other programs, such as the roughly 22% error rate for fee-for-service programs.

Jeffery Steinhoff, managing director of financial management and assistance at GAO, said the two rates were not really comparable given the differences between the types of plans. Stark, however, noted that regardless of the comparison, CMS had brought down its error rate for Medicare Advantage significantly in the past decade and deserved “a round of applause” for their efforts.

Overall, however, Steinhoff argued that CMS had engaged in “a minimal compliance effort” regarding the audits. “Perhaps the past six or seven years will be a very expensive lesson learned,” he said, adding that whatever the outcome there would need to be a “sea change” at CMS.

Hill said CMS is working to better meet the audit requirements and will continue to do so. For his part, Stark sought to eliminate any confusion between criticizing the oversight of Medicare Advantage with criticizing Medicare Advantage itself. “I happen to think Medicare Advantage plans offer good health care,” he said, noting that half the residents of his district belong to a single Medicare Advantage plan.