Why Kill the Medicare Advantage Demo?

The bonus for three-star health plans is a sticking point. The GAO is not alone is contending that the demo is just a back-door way to restore to health plans some of the reduced Medicare payments included in ACA. The independent Medicare Payment Advisory Commission, which advises Congress on Medicare issues, has warned that demonstration projects "should not be used as a mechanism to increase payments."

I think that in their assessments the GAO and MedPac are missing some important points. First, the demo is temporary, with a brief three-year lifespan: 2012 through 2014. That means the three-star plans have only three years of bonus eligibility.

Second, the bonuses are on a sliding scale. No health plan is going to be content with a three-star rating if it can make some changes and become a four- or even five-star plan with a larger bonus, some great perks such as year-round enrollment, and major bragging rights.

The list of health plans with three- or three-and-a-half-star ratings reads like a who's who of health plans with Aetna, Humana and UnitedHealth Group all looking for ways to improve their scores.

During an earnings call last year, Humana officials said they planned "to invest heavily in improving our stars' processes, procedures, and infrastructure to position us for further improvements in star metrics."