Yesterday, May 10, 2016, the House and Energy Commerce Committee released a report, which demonstrates the Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andrew Slavitt provided false testimony in a House Energy and Commerce Subcommittee on Oversight and Investigations hearing, “An Overdue Checkup Part II: Examining the ACA's [Affordable Care Act] State Insurance Marketplaces.”  The hearing was held December 8, 2015.

Mr. Slavitt testified, under oath, that CMS had recovered “over $200 million in grant dollars to the federal government.”  But the committee’s investigation found that figure was highly inaccurate and that his testimony raises “significant questions regarding the truthfulness of his statements.”

Background:

• The Affordable Care Act (ACA), or Obamacare, authorized the Secretary of Health and Human Services (HHS) to award grants to states so they could create marketplace exchanges.  CMS, the HHS agency that oversees the implementation of Obamacare, awarded $5.5 billion in planning and establishment grants to create state-based exchanges.  These funds were required by law to be only used for planning and establishing the exchanges and not their operating costs.  CMS was also charged with making sure the grant money was spent correctly.
• Sixteen states and the District of Columbia created their own marketplace exchanges and were awarded $4.6 billion out of the $5.5 billion in grant money.  The remaining 34 states that opted to use the federally-facilitated exchange instead, or Healthcare.gov, had their unspent grant money de-obligated by CMS, approximately $300 million, and it was returned to the U.S. Treasury.
• The law required state-based exchanges to be self-sustaining by January, 2015. But the state-based exchanges have had serious problems since they first became functional in October 2013. Exchanges in Hawaii, Oregon, Nevada, and New Mexico have failed and more state-based exchanges are expected to collapse because of their high operating costs and low participation rates, especially by young, healthy adults.
• In 2015 and 2016, CMS, in a desperate attempt to keep the struggling state-based market exchanges operating, awarded “no-cost extensions” grants so the exchanges could continue to spend monies on “establishment” activities.
• On April 27, 2015, the Health and Human Services Office of the Inspector General (HHSOIG) released a report.  The HHSOIG found that state exchanges might illegally use the grant money for operational costs and that CMS was not conducting proper oversight.  For example, the HHSOIG found that the Washington state exchange was planning to use $10 million in establishment grant monies for operating costs, which was against the law.

The purpose of the Subcommittee on Oversight and Investigations hearing in December was to “examine how state-based exchanges [SBE] spent grant dollars, and better understand the sustainability challenges facing the exchanges, and CMS’ role in overseeing the SBEs.  In his opening remarks before the committee, Mr. Slavitt testified that ‘over $200 million of the original grant awards have already been returned to the federal government, and we’re in the process of collecting and returning more.’”

For months the committee repeatedly asked CMS for the documents to support Slavitt’s claim.  Finally, on March 18, 2016, CMS produced a chart that showed it had only recovered $21.5 million in unspent federal funds of the $4.6 billion awarded to the states, not the $200 million that Slavitt claimed.  In fact, according to the committee report, the $21.5 million “recovered” money was not recovered at all but had also been de-obligated by CMS because the time frame to use the grants had expired.

In addition, the $300 million that was returned by the 34 states that did not create exchanges was not part of the $4.6 billion disbursed to the 16 states and the District of Columbia.

The committee report states that Mr. Slavitt mislead the committee in two ways in that “he misstated the amount of grant money returned to the Treasury, and he wrongfully implied that the funds were returned because of improper spending and CMS’ oversight efforts.”  Furthermore, “none of the funds reflect grant dollars recouped by CMS due to improper spending.”

CMS’s job has the responsibility to conduct vigorous oversight of the billions of taxpayer funds it dished out to the state exchanges and to recoup any dollars that they spent unlawfully or, correct the record when their testimony before Congress is wrong. 

So where did the $200 million figure come from?  As Ricky Ricardo used to say, it looks like CMS “got some splainin to do.”