Dive Brief:
- Medicare Advantage’s quality bonus program is a significant source of revenue for MA insurers, but generally doesn’t translate to higher quality care for beneficiaries, according to a new report from the Urban Institute.
- Researchers also found score inflation in MA star ratings and the QBP, resulting in overly generous bonuses for average performance on quality metrics.
- The QBP should be reformed or even replaced to protect beneficiaries and lower Medicare spending, the nonprofit argued.
Dive Insight:
More than half of Medicare beneficiaries are currently enrolled in MA plans, which often bundle hospital, outpatient and drug coverage, and can offer more flexible benefits like gym memberships.
The federal government contracts with private payers to administer benefits in the program, paying them a capitated, per-enrollee rate. Plans are also eligible for bonuses through the QBP, which was established by the Affordable Care Act in 2010.
The program offers 5% bonus payments to MA plans with ratings of four stars or above. QBP payments have attracted scrutiny as they’ve risen — last year, QBP payments totaled $10 billion.
The Urban Institute report, which is based on a review of existing research and a new analysis of 2023 MA star ratings data and MA enrollment, concluded that more than half of MA plans receive bonuses for high star ratings, but the program hasn’t resulted in better care outcomes than traditional fee-for-service Medicare.
As of 2023, the average star rating across contracts was 4.15 stars. Benchmark bonuses begin at 4 stars, meaning average performance yields bonuses for plans, the Urban Institute said.
Rising scores and bonus payments in recent years are due more to shifting CMS policy and the COVID-19 pandemic rather than improving plan quality or administrative efficacy, according to the report. It’s proved to be a double-edged sword for payers, whose 2024 earnings outlooks are being pressured after star ratings fell significantly following the pandemic.
Unlike other Medicare pay-for-performance programs, the QBP doesn’t pull dollars from poor-performing plans to reward their higher-performing peers, which drives higher overall spending, the report said.
Watchdogs and policymakers have raised concerns that the QBP overpays MA plans without creating commensurate quality or administrative improvement. Congressional advisory board MedPAC has recommended replacing the QBP with a different value incentive program to balance penalties and bonuses equally.
Worries about the QBP align with larger concerns about government overpayment to MA plans, which is estimated to reach more than $75 billion this year.
Fundamental reforms to the QBP would require legislation, but the CMS could shift policies to financially penalize the worst-performing plans in order to lower overall Medicare spend as the program’s hospital trust fund threatens insolvency, the Urban Institute suggested. Regulators could also measure plan performance at the local level, so that star ratings would be more helpful for beneficiaries in selecting plans.
