Three Republican senators have sent a letter to the Centers for Medicare and Medicaid Services expressing concern for the “lack of oversight for more than $1 billion in federal grants” given to state-based marketplaces.
In the letter to CMS Acting Administrator Andy Slavitt, the senators — Orrin Hatch of Utah, Chuck Grassley of Iowa, and John Barrasso of Wyoming — note a handful of state-based exchanges have switched to the federal marketplace, run by CMS, and inquire if the agency will seek reimbursement for funds the states received from CMS to set up a state-based marketplace.
“The failure of these [state exchanges] to use federal grant money efficiently and effectively has led to the waste of more than a billion in taxpayer dollars,” the senators wrote in the letter. These funds originally flowed from the federal treasury, “which is where they should return when they are recouped from contractors,” they add.
Among the states that have switched or are considering making a change to their exchange model are Maryland, Hawaii, Oregon and Nevada. According to the NBC affiliate in Portland, Ore., KGW, Oregon spent $300 million in federal funds on its exchange, much of it to have Oracle build the exchange. Meanwhile, Maryland has agreed to repay for $45 million to avoid litigation over its performance.
In the letter, dated Monday, the senators write that “whether this [Maryland] and similarly recouped money will be returned to the federal treasury or simply become a windfall to states, rewarding them for failure, should not be an open question.”
The previous CMS administrator, Marilyn Tavenner, said previously that the recoupment of the funds is a state matter, reversing an earlier position taken by Health and Human Services Secretary Sylvia Mathews Burwell, who said during her confirmation hearing in June 2014 that “where the federal government and the taxpayer have had funds misused, we need to use the full extent of the law to get those funds back for the taxpayer,” the letter says.
“We agree with Secretary Burwell’s position. Unfortunately, the administration has failed to follow these words with actions,” the senators add. The letter asks CMS to clarify by August 21 the administration’s position on these funds and where the money will go.
CMS declined to answer any questions raised by the letter, but through a spokesperson says that they have received the letter and plan to respond to it.
The state-based exchanges were always a mistake, believes MD Sam Smith, president of Encino, Calif.-based Genesis Financial. “Chasing the dollars already spent is like chasing field mice in an open field,” Smith, a former president of the California Association of Health Underwriters, says. “Better they should spend their time implementing some of the changes we have proposed that build on what's right about the Affordable Care Act.”
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