The influential Medicare Payment Advisory Commission is pointing to what its staff sees as major flaws in the Medicare Advantage star-rating system as it calls for a complete overhaul of the program in an attempt to cut $6 billion annually in excess spending.
MedPAC proposed that the current MA star-ratings system, called the quality bonus program, be replaced with another dubbed the value incentive program, according to its annual 473-page June report to Congress.
MedPAC claims that the MA star ratings need a revamp considering its design enables health plans to fluff up their performance, adding about $6 billion a year to Medicare spending.
“For the past several years, the commission has pointed out the flaws of the Medicare Advantage quality bonus program in terms of its complexity, inequities in distributing financial rewards, and opportunities for organizations to obtain unwarranted bonuses by consolidating contracts,” the report said.
The proposed new program would change several key areas that determine star ratings for health plans including its bonus-only structure, performance targets, number of quality measures used and the risk adjustment.
MedPAC noted that the current structure allows many health plans to manipulate the system to improve their quality scores and achieve bonuses.
While the MedPAC report is merely advisory, and neither Congress nor the CMS are required to follow the report’s proposals, lawmakers and the industry pay attention to the commission’s findings.
But there are doubts the suggestions will be taken seriously. Medicare Advantage is extremely popular and membership is only growing. The Trump administration wouldn’t want to do anything to anger seniors like potentially changing benefits in their MA plans, said Richard Lieberman, chief data scientist at Mile High Healthcare Analytics, a consultancy.
“One of the problems with the MedPAC proposal is although it’s academically rigorous and makes sense, it doesn’t have a stakeholder that is going to be behind it. Everybody loses,” he said.
A CMS spokesman said in a statement that the agency “appreciates” the work from MedPAC and “will consider their input for any potential future policymaking.”
Health plans opposed most of MedPAC’s suggested changes, particularly the call to make the star ratings budget-neutral.
Right now, health plans that earn four stars or higher receive a 5% boost to their monthly per-member payments from Medicare. Plans with lower star ratings aren’t on the hook for any penalties but Medicare can kick out consistently low performers.
About 52% of Medicare Advantage plans that offer prescription drug coverage received a bonus in 2019 and roughly 74% of MA members with prescription drug coverage are in plans with four or five stars.
This differs from how stars are distributed in the hospital star-ratings program run by the CMS. Although hospitals don’t receive bonuses for a higher number of stars, the majority receive three or four stars. Just 293 hospitals received five stars in February 2019.