Medicare Advantage quality bonus program ineffective: Urban Institute

The Centers for Medicare and Medicaid Services’ quality bonus program is ineffective in many cases, overpays Medicare Advantage organizations and needs reform, according to the Urban Institute.

The bonus program, established by the Affordable Care Act in 2010, offers 5% bonus payments to Medicare Advantage contracts with ratings of four stars or higher. In 2022, quality bonus program payments totaled $10 billion, up from $3 billion in 2015. The institute’s report noted that combined, United Healthcare and Humana received $4.7 billion in bonuses last year.

Despite more than half of Medicare Advantage plans receiving bonuses for high star ratings, the program has not led to plan beneficiaries receiving better care than they would in traditional Medicare plans, the report concluded.

“As Medicare Advantage grows, it becomes more important to look at how that program affects Medicare spending as a whole,” said Laura Skopec, lead author and senior research associate at the Urban Institute Health Policy Center. “Paying MA too much hurts everyone by increasing Part B premiums.”

Unlike CMS’ other pay-for-performance programs, the quality bonus program does not penalize low-performing Medicare Advantage contracts to pay for better performers.

The institute’s findings are in line with issues noted by others. Members of the Medicare Payment Advisory Commission and Democratic policymakers have expressed concerns about the program including inflated scores, limited data sets and its uselessness to consumers choosing a plan.

To Skopec, a key problem of the program is that it does not include measures that address critical areas of underperformance in Medicare Advantage contracts. That absence means comparisons can’t be made between Medicare Advantage and traditional Medicare plans.

“We could conceive of having more measures that focus on areas where people have expressed concerns about Medicare Advantage, like the quality of post-acute care, or disenrollment among people with high medical needs and those aren’t covered in the current programming,” she said.

Other conclusions of the Urban Institute’s research include:

  • Existing quality bonus measures are often not helpful to beneficiaries trying to choose between Medicare Advantage organizations.
  • Plans tend to receive similar composite scores that amount to vastly different star ratings. For example, an organization that scores 79% on a care access measure may earn a contract two stars, whereas a group that scores 84% ​​may earn five stars. “It’s not clear at all that the actual beneficiaries would notice that much difference between 79% and 84%,” Skopec said. “But all of the distinctions of who gets bonuses fall within that five percentage point range.”
  • Increased scores and bonus payments are tied more to changes in CMS policy and the pandemic rather than improvements in clinical quality, population health or administrative effectiveness. In 2014, the average star rating across Medicare Advantage contracts was 3.86, compared with 4.15 in 2023.

While reform of the bonus program would require legislation, the report urges CMS to shift its focus and target outlier performance, rewarding only the best contracts with bonuses and financially penalizing the worst. That would protect Medicare Advantage beneficiaries from low-performing plans while reducing overall Medicare spending.

Another suggestion from the institute is for CMS to measure performance at the plan or local level so it is more useful to beneficiaries, most of whom do not use star ratings to make decisions about coverage. Currently, the quality bonus program and star ratings system reward Medicare Advantage contracts, which can include dozens of different plans and cover multiple states.

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