Cancel Medicare Advantage Demo, Says GAO

A report released Monday by the Government Accountability Office says that a Medicare bonus program to reward high-performing health plans is expensive, poorly run, and should be cancelled.

The report notes that the Medicare Advantage (MA) Quality Bonus Payment Demonstration program will pay out $8.4 billion over 10 years with much of that money going to health plans that perform at only an average level.

The GAO contends that the demo, set up in November 2010, is simply a back-door way to restore to health plans some of the reduced Medicare payments included in the ACA.

In comments included in the report, the Centers for Medicaid & Medicare Services counters that the project supports the triple aim of healthcare?better care, better health, and lower cost. Without the demo, many plans wouldn't have an "immediate incentive to improve the quality of care delivered to Medicare Advantage enrollees," says CMS.

The five-star rating program, created to help monitor Medicare Advantage plan performance, has been around since 2007, but began to generate real interest among health plans when the bonus payments for four and five star health plans were added to the Patient Protection and Affordable Care Act in March 2010. The rating system is based on more than 40 quality measures, including preventive screenings and managing chronic conditions.

The Office of the Actuary at CMS estimated that the reforms in the Affordable Care Act would result in reduced payments to Medicare Advantage plans, which in turn could cause plans to offer less robust benefit packages.

To counter that outcome, CMS announced that instead of implementing the ACA bonus payments, it would implement a three-year demonstration project that would expand the bonus program to three-star health plans, accelerate bonuses for four and five-star plans, and increase the bonuses for 2012 and 2013.

Based on 2011 star ratings 84% of the 446 Medicare Advantage plans representing 90% of enrolled beneficiaries will qualify for some type of bonus. Keeping the original ACA bonus standards would mean only 24% would receive bonuses.

Keeping the ACA bonus plan is exactly what the report authors recommend. "The Secretary of Health and Human Services should cancel the MA Quality Bonus Payment Demonstration and allow the MA quality bonus payment system established by PPACA to take effect."

The report was prepared at the behest of Congress. In addition to cost, the GAO report cites these concerns about the demonstration project:

• It's not required to be budget neutral.
• The program design precludes a credible evaluation of its effectiveness.
• The bonuses and increased enrollment benefit average performing plans (3 and 3.5 star plans)

In response, CMS says it "does not concur" with the GAO recommendation to cancel the demonstration, which is scheduled to end in 2014. CMS contends that demo is intended to kick-start the process and "will lead to faster and larger quality improvements, as well as increased efficiency compared to the ACA."

It notes that the design features "are consistent with the overall goal of improving quality" in the Medicare Advantage program and do not "preclude a credible evaluation."

In an e-mail exchange, a CMS spokesperson added that the demonstration project has helped CMS improve its star-rating system "to place much greater emphasis on clinical outcomes and beneficiary experience measures. We are holding plans to higher standards of quality." He said Medicare Advantage plan payments today, including the costs of the demonstration, "are lower than what they would have been prior to the Affordable Care Act by $200 billion."

Nathan Goldstein, CEO of Gorman Health Group, a Medicare managed care consulting firm in Washington, DC, told HealthLeaders Media that the GAO report misses the carrot-and-stick aspect of the MA bonuses. "It's not all sunshine and roses. Sure, an average plan may get some bonus payments, but CMS has made it clear that a plan that remains at three stars or below for three years can be terminated from the program."

He also notes that some of the largest health plans in America, such as UnitedHealth Group and Humana, are among the three-star plans. "They will make the investment to get improve their star ratings."

In a statement, an industry group, America's Health Insurance Plans, says the GAO report "provides an incomplete picture of the demonstration project, which AHIP contends "establishes an appropriate transition to the new MA payment system." It cites a study in the January 2012 edition of Health Affairs that foundthat beneficiaries with diabetes in an MA special-needs plan had "7% more primary care physician office visits; 9% lower hospital admission rates; 19% fewer hospital days; and 28% fewer hospital readmissions compared to patients in FFS Medicare."

The GAO is not alone in its criticism of the demo project. The independent Medicare Payment Advisory Commission states in its March 2012 report to Congress that the demo will result in an estimated $2.8 billion in program costs for 2012 versus $200 million in bonus payments under the ACA. "Limited Medicare dollars should go to truly high-performing plans." MedPac reiterates its position that "demonstrations should not be used as a mechanism to increase payments."