Quality May Get Attention of Medicare Advantage Plans with Rebate Promise

Medicare Advantage plans—faced with funding cuts starting in 2011 under the new healthcare reform law—may be taking a greater interest in providing greater quality care. Starting in 2012, their payments will be tied to the star rating scores that are now posted on the Centers for Medicare and Medicaid Services (CMS) Web site and Plan Finder, a Web tool designed to help beneficiaries select Medicare Advantage plans.

Plans receiving four or more stars will be eligible for quality bonuses of up to 5% of local fee for service costs when phased in. In addition, the higher rated plans will also be able to keep a larger percentage of rebate dollars plans use to reduce beneficiaries' cost sharing, according to a report from Avalere Health, healthcare advisory company in Washington, DC.

In the long run, the incentives could blunt some of the estimated $200 billion in cuts to Medicare Advantage plan payments for the highest quality plans. This may also prompt shifts in enrollment as plan benefit designs become increasingly reliant on their performance, Avalere reports. Currently, about 11 million beneficiaries are enrolled in Medicare Advantage—about a quarter of the Medicare population.

At the current time, nearly half (47%) of Medicare Advantage beneficiaries are enrolled in plans that received only medium quality ratings or less (three or fewer stars). Almost 39% were in plans rated "3.5" and up, and only 0.3% of enrollees were in a 5-star, or top rated, plan. (Another 14.1% are unaccounted for, due to a plan being too new to measure or insufficient data.)

Avalere made the comparisons by using CMS 2010 Part C Report Card, released in November 2009, and enrollment data released in April 2010 to see if the beneficiaries' plan selections correspond with five star quality ratings assigned by the government.

Many plans are likely to be focused on improving their scores as payment becomes increasingly tied to quality, said Bonnie Washington, a vice president at Avalere Health. "In the short term, that may mean more attention on dealing with complaints or their customer service. Long term, we'll likely see more focus in areas such as outcomes, improving beneficiary experience, and disease management, which may ultimately benefit consumers."