(This story was updated at 4:48 p.m. ET.)
More Medicare Advantage plans nabbed top quality marks for their 2016 plans than last year, a potential sign that private insurers are trying to meet the federal government's standards for high-quality products and coordinated healthcare for seniors.
But the CMS' star ratings, released Thursday, also showed that private Medicare plans are still failing on many levels, particularly when it comes to prescription drug benefits.
Overall, 81 companies covering 179 individual health plan contracts—or about half of all plans for 2016—received at least four stars, according to a Modern Healthcare analysis of 2016 Medicare Advantage star-rating data (PDF). That group factors in Advantage plans that also have Part D prescription drug coverage. In 2015, 40% of all plans received four stars. When weighted by enrollment, the CMS said almost 3 out of 4 beneficiaries are enrolled in plans that have medical and drug coverage and have garnered at least four stars.
The CMS instituted its star rating system for Medicare's private insurance coverage almost a decade ago as a way to make sure Medicare beneficiaries were getting high-quality care from their insurance companies. The agency has emphasized (PDF) that insurers must be held accountable “for the care provided by physicians, hospitals and providers to their enrollees.”
Star ratings factor into several measures, including clinical outcomes, patient experience and access to care. For example, more stars are awarded to health plans with provider networks that routinely check for osteoporosis in women who suffer a fracture and those networks that have lower hospital readmissions.
Attaining four stars has clear marketing advantages, but the CMS has tied financial incentives to the rating system as well. Plans that earn at least four stars receive a 5% boost to their monthly per-member payments from Medicare, while those with lower scores receive nothing extra.
The average star rating among the 369 private Medicare contracts for 2016 was 4.03, according to CMS. Plans can receive anywhere from one to five stars, in half-star increments. The 2016 average was higher than the 3.92 mark for 2015. But not all plans passed with flying colors. Some actually failed outright.
Six individual health plans are technically eligible for termination from Medicare's program because they have received fewer than three stars for the past three years. WellCare Health Plans owns two of those plans. Cuatro (known as Access Medicare), Health Care Service Corp., Touchstone Health and UnitedHealth Group manage the other plan contracts in question.
In the 2016 final rate notice issued earlier this year, the CMS said it would send nonrenewal letters in February 2016 to plans that don't meet the star guidelines, which would effectively end their contracts by Dec. 31, 2016.
Further, stand-alone Part D plans, which are managed by pharmacy benefit management (PBM) companies and insurers, have fared worse year over year. Those plans had an average star rating of 3.4, compared with 3.75 a year ago.
“This really speaks to how badly the PBM industry is struggling with Part D,” said John Gorman, a former CMS official and Washington-based consultant who works with health insurers. “There are consistent problems in the member experience in Part D.”
Most of the problems stem from companies that have outdated technology and automatically reject prescriptions that shouldn't be rejected, Gorman said. That results in patients getting stonewalled when they try to pick up their medications, with little understanding of what happened behind the scenes.
Insurers that partner with retail pharmacies, such as those at Target or CVS, stand a better chance of improving their quality scores because of the convenience such pharmacies offer. “Retail pharmacy is the most underutilized source of care for elders and the disabled, and the companies that are leveraging those locations are the ones with the highest ratings,” Gorman said.
The CMS has levied millions of dollars in fines on Medicare insurers this year, many of which have been tied to pharmacy benefits violations and poor appeals processes for members who have complaints. Analysts predict those penalties, which are being doled out a record-level pace this year, will continue to proliferate.
Lawmakers have tried to save health plans from getting the ax, even though the federal government has given those plans poor quality marks. Rep. Vern Buchanan (R-Fla.) introduced a House bill this year that would temporarily delay the CMS' ability to end Medicare Advantage plan contracts based on their star ratings. WellCare is based in Tampa, Fla. Sens. Bob Casey (D-Pa.) and Rob Portman (R-Ohio) proposed a Senate version of the bill.
Plans with low quality scores over several years have argued that they cover people who have multiple chronic conditions and complex care needs, although few believe the proposed bills will become law.
“I don't see any of that having a chance in hell of passing, and I don't see CMS doing anything administratively to help these guys,” Gorman said. He added that the CMS could have taken action last year against the six plans on “death row” but the agency “handed out squirt guns to the firing squad because they didn't want disruption in an election year.”
Eight companies covering 12 contracts received five stars for 2016 Advantage-Part D benefits, the highest possible score. Seven of those contracts also offer special-needs plans, or SNPs, which are Medicare Advantage plans for people with complex and costly diseases. Another four companies comprising five contracts, earned five stars for either Advantage-only contracts or Part D-only contracts.
Kaiser Permanente's insurance arm, Kaiser Foundation Health Plan, dominated the highest-rated plans again. The sprawling Oakland, Calif.-based system, which is thriving financially and is on pace for $60 billion in revenue (PDF) this year, is just as much an insurer as it is a network of doctors and hospitals. Other health systems with Medicare plans—including Gundersen Health System in La Crosse, Wis., HealthPartners in Bloomington, Minn., and Spectrum Health System in Grand Rapids, Mich.,—also were among the highest-rated Medicare plans.
Kaiser's high Medicare quality scores will lead to even more revenue, and it's difficult for other companies to mimic that strategy on a broader scale. “You can't replicate Kaiser,” Gorman said. “Everybody's trying, but the reality of it is, there's no substitute for the vertical integration Kaiser's got.”
But while many of the large for-profit insurers will collect millions in Medicare bonus payments, Humana will lose quite a bit, according to a research note from Sarah James, a financial analyst at Wedbush Securities. Humana will lose $244 million, according to the note. UnitedHealth is expected to cash in $132 million. Aetna, Anthem and Cigna Corp. could add almost $50 million each in Advantage bonuses.
Experts say that large swings in Medicare Advantage bonuses indicate that complacency has caught some insurers off guard. Richard Lieberman, chief data scientist at Mile High Healthcare Analytics, found that of the 395 Advantage and stand-alone Part D contracts that had ratings in both 2015 and 2016, 29% had their star rating decrease by at least 0.5 stars.
“It emphasizes the notion that continuous quality improvement means continuous, underlined and bolded,” Lieberman said. “You just can't kind of push an organization to get to four stars and say, 'Oh great, we made it, now we get our bonus.' This says very clearly: Don't sit on your laurels.”