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November 14, 2016 11:00 PM

Medicare plans urge lame-duck Congress to fix quality-bonus glitch

Shelby Livingston
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    Ceci Connolly, president and CEO of the Alliance of Community Health Plans

    Insurers are pushing for the lame-duck Congress to fix an unintended glitch in the Affordable Care Act that shortchanges some Medicare Advantage plans on the incentive payments they earned for providing high-quality healthcare.

    The glitch, they say, prevents them from obtaining millions in bonuses that would otherwise be returned to seniors through improved care, enhanced benefits and lower copayments and premiums.

    “In this time of uncertainty, there's one healthcare improvement that Congress can make immediately: paying the promised bonuses to the highest quality plans in the nation,” said Ceci Connolly, president and CEO of the Alliance of Community Health Plans, an insurer organization. "We're thrilled to have the backing of the administration and bipartisan support in Congress. This is a great opportunity to deliver on expanded benefits and lower premiums for America's seniors.”

    Legislation, H.R. 4275, introduced last year in the House of Representatives by Rep. Mike Kelly, seeks to eliminate a provision in the healthcare law that inadvertently penalizes highly rated Medicare Advantage plans.

    Payments to Medicare Advantage plans are determined by comparing the plan's projected cost for serving a certain region when bidding to the CMS with the benchmark, or the maximum that Medicare will pay. Since 2012, payment has also been tied to star ratings that reward high-quality plans.

    Medicare Advantage plans that receive at least four out of five possible stars receive a 5% bonus payment to their monthly per-member payments from Medicare. Those with 3.5 or fewer scores receive no additional payments. The incentive payments are required by law to be used to increase services or lower costs.

    Nearly 70% of all Medicare Advantage beneficiaries will be enrolled in plans with four or more stars in 2017, according to the latest CMS data. About half of all Medicare Advantage plans earned four stars or higher for their 2017 overall rating. The average star rating among the 364 private Medicare contracts for 2017 was 4.

    Under a benchmark cap, Medicare reimbursement cannot exceed the amount initially projected by the plans. Benchmarks are calculated at the county level and they determine how much plans will be paid.

    The HHS has interpreted the Affordable Care Act to require quality incentive payments to be included in the calculation toward the Medicare benchmark cap. So a health plan that reaches the benchmark cap may not get its full incentive payment.

    That means the 5% incentives earned by many Medicare Advantage plans are either reduced or eliminated entirely, and seniors enrolled in those plans do not receive additional savings or benefits. Five-star plans in some counties could receive the same payment as a three-star plan.

    “We should get rid of this glitch,” said Larry McNeely, policy director at the National Coalition on Health Care. “We think whether you're a healthcare provider or healthcare plan, if you're delivering high quality care that's affordable, our payment incentive system should support you in doing that. So this is certainly a policy change that we did support and will continue to support.”

    The flaw in Medicare's funding mechanism has eaten away at health plans' revenue. In Pennsylvania, for example, the amount of quality incentive payments that Medicare plans would have received in 2016 if those payments were not limited by the benchmark cap total $58.4 million. The total revenue loss attributable to the glitch was $53.2 million in Ohio and $35.6 million in California in 2016, according to estimates by the Alliance of Community Health Plans.

    Minneapolis-based health plan UCare withdrew its Medicare Advantage products in Wisconsin because the benchmark cap made it impossible to pay for services to the plan's 7,000 enrollees, according to Connolly.

    The HHS could fix the flaw that's preventing high-quality Medicare Advantage plans from being rewarded, but it doesn't believe it has the administrative authority to do so. A legislative fix is the next option, and the idea has bipartisan support. If passed during the lame-duck session, the change would be reflected in the 2018 Medicare Advantage program.

    Medicare open enrollment for 2017 is already in full swing.

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