Medicare Advantage Star Rating System Questioned

Kaiser Health News reports on “Second Guessing Medicare’s Star Rating System.”


Find the article (by Marilyn Werber Serafini, KHN Staff Writer, May 20, 2012, and in collaboration with the Washington Post) at: http://www.kaiserhealthnews.org/Stories/2012/May/21/Medicare-star-ratings-quality.aspx.

KHN reports that “as the federal government pumps billions of bonus dollars into private Medicare health plans to encourage better care, the quality rating system used to award the bonuses is coming under increasing fire.”

The report indicates that both the Government Accountability Office and the Medicare Payment Advisory Commission (MedPAC) question whether the $8 billion-plus program is mostly rewarding mediocre patient care. Find the GAO report at: http://gao.gov/assets/590/589473.pdf.  Find the MedPAC report at: http://www.medpac.gov/chapters/Mar12_Ch12.pdf.

The star ratings are part of a push by the Obama administration to increase the quality of care provided by private plans that contract with Medicare. The ratings are based on 36 measures, ranging from rates of hospital readmissions to the volume of consumer complaints a plan gets. See this KNH article for background: http://www.kaiserhealthnews.org/stories/2011/october/12/insurers-improve-quality-revenue.aspx.

The administration had argued that Medicare Advantage plans cost more than traditional Medicare without providing better results for patients. The 2010 federal health law tried to remedy that discrepancy by cutting plan payments by $136 billion over ten years. But the star-rating bonus system is intended to restore some of that money to high-performing plans.

Supporters say the program is a part of a broad initiative to boost the quality of patient care and point to demonstrable improvements – for instance, a San Diego physicians’ group that discovered 700 Medicare patients with diabetes who were not getting annual eye exams, even though failure to get early treatment can result in blindness. (The article provides more detail here and gives a pro and con on the data analysis providers, large versus small, may be able to undertake to achieve such results.)

The program was actually created in 2007 as a guide to help seniors compare the quality of private health plans in the Medicare Advantage program. One quarter of older and disabled people now opt out of the traditional, government-run Medicare program in favor of private, mostly managed care plans. These often have lower premiums and extra benefits, such as coverage of hearing aids and eye glasses.

But the ratings had mostly been ignored by health plans and their enrollees. KHN reports that “only about a third of Medicare beneficiaries knew about the star ratings, and only half of that group considered the scores when choosing a health plan, according to a survey that Harris Interactive conducted last September for insurer Kaiser Permanente.”

The 2010 healthcare law changed that by attaching financial rewards to the program’s ratings. But the first round of ratings last fall showed that most plans have a long way to go. Only 12 earned a perfect score of five, on a scale of one to five, and about 9 percent were below average. The majority received scores of three, or three and a half stars – enough to earn the bonus money.
Going forward, here’s what to expect: After 2014, plans will need four or five stars to get bonuses. And if they have fewer than three stars, they won't be allowed to enroll beneficiaries through Medicare's website, and risk being booted from Medicare altogether. Already, five-star plans don't have to wait until open season to enroll new customers. Poor performers are branded with an icon on Medicare's website.

And here is the bottom line: The KHN article reports that “for some health plans, the bonus money accounts for as much as 7 percent of revenues, which can translate into a couple of billion dollars for a large health plan in a large state. Compensation of senior managers in Medicare Advantage has now been oriented around achieving star ratings.”

The money is particularly attractive to Medicare Advantage plans as the health law gradually reduces payment rates to bring them in line with what the government spends on beneficiaries in the traditional government-run program. This year, they will lose $6 billion in federal payments, and the bonus money is estimated to offset that reduction by about half.

The GAO and MedPAC are questioning the strategy of rewarding plans with average ratings. Bonuses are now going to plans that cover 93 percent of enrollees “at a time when Medicare already faces serious problems with cost control and long-term financing,” according to a March MedPAC report.

KHN quotes onathan Blum, deputy administrator for Medicare: “the incentives were made available to average-rated plans to spur rapid improvements. The higher the plan rates, the larger the payment it can get and that is turned back to providing a more generous package of benefits."