ObamaCare's Health Grant Boondoggle

The latest long-term budget outlook from the Congressional Budget Office is extremely clear about the fact that the single biggest challenge to the nation's fiscal future is the growth of health spending, primarily within Medicare and Medicaid. (More on the CBO's report later.) What an editorial in today's Wall Street Journal makes clear is that the Department of Health and Health and Human Services, which runs the Centers for Medicare and Medicaid Services, is an unbelievably poor steward of these programs and the massive amounts of taxpayer-funded spending they entail:

HHS already makes more grants than all other agencies combined, and it is the purchaser of health care for about one of three Americans via Medicare, Medicaid or both. The problem is that HHS spends its money—$788 billion for entitlements in 2012 and another $78 billion to run HHS's 300-odd programs—so badly.

Ernst & Young's annual outside audit of the HHS balance sheet last November was considered a triumph because several material weaknesses were downgraded merely to significant deficiencies. But on a "day-to-day or even monthly basis" HHS cannot accurately track its spending, according to the audit. The agency is in violation of numerous federal accounting rules written specifically for the bureaucracy, to say nothing of the financial reporting required of public companies.

The HHS inspector general revealed this year that his team can barely monitor HHS because its staff is too busy chasing the criminals exploiting HHS's incompetence. Experts disagree about how much is stolen from taxpayers through entitlement fraud—the Government Accountability Office puts it at $48 billion annually—but one sign of the problem is that Medicare allows doctors (or "doctors") to register for billing privileges as "other."

One particular ObamaCare boondoggle that needs fly-specking is the HHS decision to finance nonprofit insurance companies with up to $7.25 billion in ultra-low-cost loans. These co-ops were a consolation prize for liberals after Democratic opposition killed the government-run public option, and the co-ops are supposed to be managed by and for consumers. But it turns out that running an insurance company is hard for amateurs who can't attract private financing.

HHS officially estimates that the default rate on the loans will hit between 35% and 40%, which would be bad enough. But White House budget documents show that HHS expects to lose $3.1 billion of the $3.4 billion appropriated so far—which implies a default rate of 91%. 

In a related piece, Steven Greer, who worked briefly with the new Medicare innovation center created by ObamaCare, details the waste and inefficiency at the center, which is expected to make $10 billion grants over the next decade, and calls for it to be abolished.