GAO Gives Up on Auditing Government Over Medicare Projections, Cites 'Uncertainties'

It's official. The United States' financial projections are on such shaky ground that to audit them would be an exercise in futility.

In so many words, that was the conclusion of the Government Accountability Office this week as it threw up its hands when asked to issue an opinion on the Treasury Department's government-wide financial statements for 2010. The wonky watchdog office cited several problems with the government's numbers but particularly called out its projections on Medicare in explaining its ultimate decision not to release a decision.

Though projected Medicare savings were used to build the case for the Obama administration's health care overhaul, the GAO report -- rather, non-report -- declared "significant uncertainties" in those assumptions.

The audit stated that as a result, "we are unable to, and we do not, express an opinion on the 2010 Statement of Social Insurance," which covers long-term budget projections for Social Security, Medicare and other benefits programs. The statement is the latest budgetary document to raise questions about whether the government's plans for reining in Medicare will hold.

"We couldn't determine whether the numbers were fairly presented in the statement," Robert Dacey, chief GAO accountant, told "There are a lot of concerns about whether or not (planned cost reductions) could be achieved."

As listed, the projections show unfathomable shortfalls in the long term, but the reality might be even worse.

The GAO report cited an alternative projection showing the long-term shortfall over 75 years could actually be $12.4 trillion more than the $22.8 trillion estimated by the federal government. The huge gap between possible budget scenarios made it virtually impossible to weigh in, Dacey said.

The office noted concerns that Medicare costs will probably exceed those in current projections, in part because of a law that would nix planned reductions in doctor payments through the end of next year. The report specifically questioned a projection that doctor payment rates would be reduced by 30 percent over three years.

"There are significant uncertainties concerning the achievement of these projected decreases in Medicare costs," GAO said.

These concerns are not new.

Medicare's chief actuary caused a stir earlier this year when he openly challenged the projections of the Board of Trustees. Richard Foster, chief actuary with the Centers for Medicare and Medicaid Services, issued a statement in August citing the same concerns found in the GAO audit. He called the 30 percent rate-reduction goal "implausible."

Further, he said Congress would "have to intervene" to prevent Medicare payments from falling so low as to trigger the "withdrawal of providers from the Medicare market." Foster said long-term projections show some Medicare prices falling to less than half their level under prior law and "far below" what private insurers pay. He suggested that would have to change in order for doctors to keep accepting Medicare patients, calling the Medicare numbers into serious question.

David Walker, former comptroller general and trustee for Social Security and Medicare, said the GAO decision was directly related to the troubles raised by the actuary. He said in a statement that while the audit will probably not attract a lot of attention, "the decision of the GAO to disclaim an opinion on the Statement of Social Insurance after they issued a clean opinion on the same statement last year shows that the federal government is moving in the wrong direction from a financial accounting and accountability perspective."

In the latest report, the GAO gave "clean opinions" to the budget numbers for 19 of 24 major agencies, but problems with the rest of the agencies and Medicare threw off the exercise. The GAO cited financial problems with the Defense Department's statements, as well as those of the Department of Homeland Security and Department of Labor.

"Even though significant progress has been made since the enactment of key financial management reforms in the 1990s, our report on the U.S. government's consolidated financial statement illustrates that much work remains to be done to improve federal financial management," Gene Dodaro, acting U.S. comptroller general, said in a written statement.