Senate subcommittee blames CMS officials for funding failing CO-OPs

The Centers for Medicare and Medicaid Service's (CMS) top brass faced another round of pointed questioning from lawmakers regarding failed consumer operated and oriented plans (CO-OPs), targeting new evidence that the agency continued funding the failed start-ups despite signs of financial insolvency.

During a hearing with the Senate's Permanent Subcommittee on Investigations, legislators grilled CMS Acting Administrator Andy Slavitt about the subcommittee's new investigation that found the Department of Health and Human Services (HHS) handed over more than a billion dollars in loans to CO-OPs despite warning signs of "severe financial distress."

More than half the 23 CO-OPs have shut down and leaders from the National Alliance of State Health CO-OPs have said it will be nearly impossible to pay back the loans. According to FierceHealthFinance, providers that cared for patients covered by failed CO-OPs stand to lose out on reimbursement they are still owed.

During the hearing, Slavitt argued that CMS officials had "very limited actual performance information" prior to 2015 that would have allowed the agency to properly evaluate the CO-OPs. He also stated that CO-OP challenges were a "small business start-up problem in a very difficult industry" and that "trial and error is part of creating success." 

But lawmakers pushed back, arguing that HHS had plenty of time to review financial reports from the first two quarters of 2015 and place struggling CO-OPs on a corrective action plan. The subcommittee's investigation revealed that HHS was aware that many CO-OPs faced significant financial distress in 2014, but took no corrective action and failed to put CO-OPs on enhanced oversight despite the accountability tools built into loan agreements. Five of the 12 failed CO-OPs were never subject to corrective action and five others had no corrective action until September 2015, two months before the plans shut down, according to the report.

Slavitt responded that calling the loan or shutting down CO-OPs would have had serious ramifications, but admitted that, in retrospect, certain CO-OPs should not have been allowed to continue in 2015 based on their performance data.

This week's hearing marks the second time in less than two months that Slavitt has faced questions from senators about the failed CO-OPs, with some Senators claiming that CMS encouraged the start-ups to "cook their books."

To learn more:
- watch the Senate Permanent Subcommittee on Investigations hearing
- here's the subcommittee's report

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