Healthcare Business News

Controversial bonus program seen boosting Advantage plans

By Rich Daly and Jessica Zigmond
Posted: January 15, 2013 - 3:30 pm ET

A much-maligned CMS bonus program for Medicare Advantage plans may have helped improve the quality of such plans and averted deep drops in their enrollments, according to preliminary government data.

The share of Medicare Advantage plans with higher quality ratings, based on Medicare's star-rating system, has increased, according to an analysis of 2012 Medicare Advantage plan data by Medicare Payment Advisory Commission staff. That improvement was at least partially attributed to a massive CMS demonstration program.

“For MA, initial results indicate that plans are changing their behavior in response to potential bonuses by paying closer attention to quality measures, with improved documentation coding as a contributing factor for many plans,” Carlos Zarabozo, MedPAC staff member, said at its Jan. 10 meeting.

Those improvements included the share of Medicare Advantage local PPOs with at least four stars on the five-star quality rating scale increasing from 13% in 2012 to 35% in 2013.

Also, MedPAC found enrollments in Medicare Advantage plans have continued to rise, despite Medicare trustee projections that the 2010 healthcare law would cut 27% of its enrollment by 2017. Enrollments rose by 10% from 2011 to 2012, to 13.3 million policyholders, or 27% of all Medicare beneficiaries.

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Gretchen Jacobson, principal policy analyst for the Kaiser Family Foundation, said some of the data reflect trends her organization has seen. However, even though the data show the bonus program is correlating with increased quality and enrollments, it is not yet clear that it is causing them.

The three-year $8.35 billion bonus program was launched in lieu of a much smaller bonus payment program for quality improvements authorized by the Patient Protection and Affordable Care Act. The replacement program, seven times larger than any previous Medicare demonstration program, drew widespread criticism for providing bonuses to most Medicare Advantage plans, including mediocre plans rated as low as 3 stars.

“We took the position that that was an inappropriate use of the secretary's demonstration authority in that there was no testable hypothesis other than that people responded to money and we knew that before we started the project,” Glenn Hackbarth, MedPAC chairman, said at the Jan. 10 hearing.

The bonus program also was derided by congressional Republicans as a cynical smokescreen to temporarily delay during the 2012 election year impacts from deep cuts to popular Medicare Advantage plans required by the healthcare law.

This year, the bonus program is expected to provide only a small fraction of the roughly $3 billion in bonus payments it paid in 2012. However, nearly as much in bonus payments will be distributed to Medicare Advantage programs through a separate quality bonus payment system established by the 2010 healthcare law, Jacobson said. That bonus initiative changed the insurance plans' payment system to provide ongoing bonuses based on whether plans achieved specific star ratings for certain conditions.

Separately, a study in the Journal of the American Medical Association found a positive connection between Medicare Advantage quality star ratings and enrollment.

In a study of 952,352 first-time enrollees for 2011, researchers found higher-star ratings were associated with increased chances of enrolling in a plan by 9.5 percentage points per 1-star increase. And in the study of 322,699 enrollees who switched plans that year, higher-star ratings also led to increased enrollment, by a rate of 4.4 percentage points for every 1-star increase.

Researchers from the CMS and the agency's Innovation Center found that for first-time enrollees in Medicare Advantage, a plan's star rating alone was more strongly tied to enrollment than the plan being the highest-rated plan available, whereas for those who switched plans, a plan's rating by itself was less important than if the plan was rated at least as high as the enrollee's previous plan.

The study's authors also noted that although the association between star ratings and enrollment was “consistently positive,” enrollments for subgroups such as black, low-income, rural and the youngest beneficiaries were less strongly associated with star ratings.

Meanwhile, the study said more research is needed to determine whether the selection of highly rated plans has implications for beneficiaries' quality of care, health outcomes or satisfaction—and whether the star-rating program leads to improvements in these areas as a whole in the Medicare Advantage program. The authors also noted some limitations in their study, such as not being able to determine conclusively whether beneficiaries seek out highly rate plans, or rather just shun the lower-rated ones.

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