Sen. Orrin Hatch (AP Photo/Jacquelyn Martin)

WASHINGTON (AP) — The U.S. Government Accountability Office (GAO) officials is agreeing with congressional Republicans and saying the Obama administration should cancel an $8.3 billion Medicare Advantage plan quality incentive bonus program.

Congressional Republicans have called the program a wasteful political ploy.

The GAO, a nonpartisan arm of Congress, said one major problem with the program is that most of the bonus money would go to plans just rated average. The auditors did find, however, that the bonuses would temporarily ease the pain of Medicare Advantage budget cuts resulting from provisions in the federal Patient Protection and Affordable Care Act of 2010 (PPACA).

The administration defended the program, saying the bonuses give many plans their main incentive to improve.

Sen. Orrin Hatch, R-Utah, said the GAO report suggests that the administration abused its authority, pumping money to the plans to avoid more criticism over the cuts.

Medicare Advantage is a program that gives Medicare enrollees the option of replacing traditional Medicare coverage with private managed care plans, or private fee-for-service plans that make some use of preferred provider networks. The 3,000 Medicare Advantage plans now serve about 12 million people, or about one-quarter of Medicare enrollees.

Medicare Advantage plans typically offer lower out-of-pocket costs than the traditional Medicare program, based on the idea that the Medicare Advantage plans will use provider discounts and care coordination to hold down the cost of care rather than relying on co-payments, deductibles and coinsurance amounts.

Critics say the low out-of-pocket costs lead to expensive and possibly excessive use of medical care, and that traditional Medicare enrollees have ended up subsidizing Medicare Advantage enrollees.

Medicare Advantage program supporters say the private plans offer benefits that should be part of any health plan, protect seniors against big out-of-pocket bills, and, in many cases, appeal to Medicare enrollees who need more care and care management than the enrollees who stick with traditional Medicare.

Democrats included Medicare Advantage cuts in PPACA. Republicans attacked the cuts during their successful campaign to take control of the House in the 2010 midterm elections. Seniors in many states were more likely to vote for the GOP candidates in 2010 than they were in 2008.

PPACA provided for a small bonus program for the very highest-rated Medicare Advantage plans.

After the 2010 elections, the Obama administration announced what it called a “demonstration program” to test whether a generous bonus program would lead to faster, broader improvements in Medicare Advantage plan quality. 

In the new report, the GAO does not address GOP allegations that the bonuses are politically motivated. GAO officials said the program is highly unusual, and they said it “dwarfs” all other Medicare pilots undertaken in nearly 20 years.

Most of the bonus money is going to plans that receive 3 to 3.5 stars out of a possible 5 stars on Medicare’s quality rating scale, the report said.

Available through 2014, the bonuses will soften much of the initial impact of the Medicare Advantage cuts, acting like a temporary reprieve.

This year, for example, the bonus program offset about 70% of the cuts in the health care law. Indeed, Medicare Advantage enrollment is up by 10% and premiums have gone down on average.

But GAO questioned whether the bonus program will achieve its goal of finding better incentives to promote quality. “The design of the demonstration precludes a credible evaluation of its effectiveness in achieving (the administration’s) stated research goal.”

The administration says it disagrees with the GAO findings and believes the bonuses will improve the quality of care.

“Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to (Medicare Advantage) enrollees,” the U.S. Department of Health and Human Services said in its formal response to the GAO.

Hatch, the ranking Republican on the Senate panel that oversees Medicare, is questioning whether the administration had the legal authority to create the program.

“The Obama administration seems to be using a technicality to sidestep Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections,” Hatch said.

“The White House does not have the authority to green-light spending on whatever program it wants,” he added. “This report is just the beginning — I will be demanding answers.”

HHS spokeswoman Erin Shields said the bonuses will help Medicare improve quality. “The temporary demonstration will build on the improvements due to star quality ratings to learn how to best incentivize quality while we bring payments down,” she said.

The Associated Press first reported on concerns about the bonus program last spring. Administration officials said at the time it had nothing to do with politics.

But another nonpartisan agency that advises lawmakers on Medicare also criticized the bonus plan as the administration was pursuing it.

The Medicare Payment Advisory Commission said the program amounts to “a mechanism to increase payments” and its design “sends the wrong message about what is important to the program and how improved quality can best be achieved.”