In an extremely disturbing new report, the Government Accountability Office (GAO) has found that private health plans violated Medicare law by limiting patients’ access to the providers of their choice. It also found that these plans increased out-of-pocket costs for beneficiaries and cost the government far more than if patients had remained in traditional Medicare.

The non-partisan GAO study is a comprehensive assessment of a Bush Administration demonstration project involving preferred provider organizations (PPOs). Unlike Medicare HMOs, which generally cover only services furnished by doctors and hospitals in their own limited networks, PPOs are less restrictive. By law, patients in PPOs must be given access to any provider, even those who are outside the plan’s network, who agrees to the plan’s payment terms. The Administration, which wants to triple enrollment in private health plans over the next five years, has said that PPOs will save money and offer Medicare beneficiaries greater choice.

However, the GAO study found the opposite. It found that the government is spending on average $700 a year more for each senior in the PPO demonstration than it would have spent if that same senior had stayed in traditional Medicare. Over two years, taxpayers paid an estimated $100 million extra for this trial program. These increased payments were intended to entice private health plans into the Medicare market. Instead, insurance companies pocketed the money without providing services they are legally bound to provide.

GAO also found that the demonstration PPOs are not offering beneficiaries additional choice. Rather, in clear violation of Medicare law, the Bush Administration allowed 29 of the 33 PPO plans to limit provider choice for beneficiaries. The report found that beneficiaries who went outside their PPO networks were often "liable for the full cost of their care." In Maryland, 3,000 Medicare PPO enrollees were denied access to the provider of their choice for various services, including skilled nursing services, home health care, and dental care.

This GAO report is particularly troubling because it clearly shows the intent of the Bush Administration is to weaken traditional Medicare by diverting money to private health care plans. This PPO demonstration is only the first step. The Medicare bill enacted last year will give health plans an additional $14 billion to cover Medicare beneficiaries, even though only 11 percent of seniors belong to them. At the same time, the Administration seems intent on boosting health plans’ profits at the expense of seniors and the American taxpayer.

When Congress comes back for its lame duck session in mid-November, I will introduce legislation that will require the Medicare program administrator to immediately notify all 98,000 PPO enrollees that they are entitled to services by both in- and out-of-network providers, and to initiate refunds to all seniors who have paid out-of-pocket for services that should have been covered by their PPO.

Earlier this year, I also introduced the Preserving Medicare for All Act, which would significantly change the new Medicare law that is scheduled to take full effect in 2006. My bill would lower prescription drug costs by allowing the federal government to negotiate lower drug costs with pharmaceutical companies, provide a guaranteed, universally available drug benefit in Medicare, eliminate excess payments to private health plans, end discrimination against employer retiree plans and repeal expenditure caps that will result in harsh cuts to Medicare providers and patients.

Medicare has been one of the most successful programs in our nation’s history. I will continue to fight any efforts to weaken this important program, which provides more than 41 million Americans with the health care they need and deserve.

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