The Medicare Advantage Quality Bonus Program: High Cost for Uncertain Gain

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The Medicare Advantage Quality Bonus Program, Urban Institute, Laura Skopec and Robert A. Berenson

The following is an introduction and a portion of a very readable report to which the link can be found at the end of this introduction. The findings are similar as to what Kip Sullivan and others have been reporting all along. To which I have reported and confirmed on Angry Bear on numerous occasions. The one liner finding to this being, the Quality Bonus Program (QBP) is a significant source of overpayment in the MA system. There are places, I did editing to emphasize particular points. Mostly this is the author’s work which I largey agree with today.

“High Cost for Uncertain Gain“

The Medicare Advantage (MA)’s QBP or Quality Bonus Program was established by the Affordable Care Act as part of a package of MA reforms. The reforms were mostly expected to reduce payments to MA organizations. Since then, policymakers have expressed growing concern the Quality Bonus Programs (QBP) along with the MA risk adjustment program still overpays MA organizations. The QBP also does not achieve the goal of quality improvement and helping beneficiaries select plans.

In this report, the Urban Institute provides an overview of the QBP, its role in the MA payment system, describes the star ratings measures and how they are scored, and explores the shortcomings of the QBP.

WHY THIS MATTERS

Over half of Medicare beneficiaries are now enrolled in MA. Meanwhile, the QBP has become a significant source of revenue for MA insurers and totaling over $10 billion in payments in 2022. This leads to the question of new and major changes to the MA QBP. Changes needed to create a program more aligned with the goals of helping beneficiaries make informed choices and encouraging MA organizations to improve performance. Reforming the QBP could also help reduce Medicare spending, extending the life of the Medicare Hospital Insurance trust fund.

KEY TAKEAWAYS

• While clinical quality measures account for over half of the measures used in the star rating system, after weighting, ~two-thirds of a contract’s star rating is determined by beneficiary experience with care and MA administrative effectiveness. On review, however, we find that:
  • measures of beneficiary experience do not permit meaningful distinctions across MA contracts and
  • administrative effectiveness measures do not target important deficiencies regulators have identified within MA organizations.
• The star rating system and the QBP suffer from many problems, including the following:
  • score inflation, which results in overly generous bonuses,
  • limitations in underlying data sets, which lead to measures focused on the needs of a younger and healthier beneficiaries rather than beneficiaries facing serious illnesses, and
  • performance is not measured at the plan or local level which limits the usefulness of star ratings for beneficiaries’ choice.
• Contrary to the QBP’s goals, beneficiaries typically do not use star ratings when selecting plans.
• Despite the 10-year commitment to paying MA plans substantial bonuses to support successful quality improvement, the preponderance of research does not demonstrate beneficiaries, on average, receive higher quality care in MA than they would in the traditional Medicare program.
• MedPAC suggests a replacement for the QBP would rely on a small set of population health measures to determine MA plan quality at the local level. It would also assess rewards and penalties to make the program budget neutral.
• MedPAC’s suggested replacement has merit. We would prefer focusing accountability on protecting beneficiaries from poor plan administration rather than attempting to measure MA contracts’ effects on clinical quality. Clinical quality largely reflects provider performance rather than MA organizations’ contributions. While MA plans can choose providers for their networks, many plans are broad-network PPOs and HMOs that do not narrowly tailor their networks to include higher-performing providers.

How It Was Done

Urban Institute reviewed the literature and conducted an analysis of the 2023 MA star ratings data and related MA enrollment data. This allowed the Urban Institute to explore the QBP and its role in the MA payment system, described the star ratings measures and how they are scored, and identified the shortcomings of the QBP.

What Was Found (Briefly)

The MA star rating system and the QBP do not appear to be achieving their goals of informing beneficiaries or encouraging MA insurers to improve quality. Instead, the QBP is a significant source of overpayment in the MA system. More than half of contracts receive bonuses for “high quality,” and these contracts represented over 75 percent of MA enrollment in 2023 (CMS, “2023 Medicare Advantage). The QBP has not identified persistently low-performing plans, despite continued concern about access to post acute care and high disenrollment among high-need populations in MA. In short, the QBP is a windfall for insurers that does not provide valuable information to beneficiaries or protect them from poor performance.

The Medicare Advantage Quality Bonus Program: High Cost for Uncertain Gain, urban.org, Laura Skopec and Robert A. Berenson

A deeper dive. So, what does this indicate? The QBP is a significant source of overpayment in the MA system. More than half of contracts receive bonuses for “high quality,” and these contracts represented over 75 percent of MA enrollment in 2023. High quality as measure by the QBP. The QBP is a windfall for insurers, does not provide valuable information to beneficiaries, or protect them from poor performance.

As mentioned above, about half of Medicare beneficiaries are enrolled in MA plans in 2022 (Freed et al. 2022). These private plans are paid a capitated, per-enrollee rate to offer Medicare coverage, based partly on the traditional Medicare costs in their local area. MA organizations are also paid bonuses for performance on quality metrics as part of the QBP. There are several types of MA plans, including plans available to all Medicare eligibles, Special Needs Plans (SNPs) that limit enrollment to those dually eligible for Medicare and Medicaid or with specific chronic conditions, and MA plans offered by employers to their retirees. These MA plan types are eligible for bonuses, but the analysis focuses on the MA plans available to all Medicare beneficiaries.

The QBP is a significant source of revenue for insurers participating in MA, totaling $10 billion in extra payments in 2022 (Biniek et al. 2022). Inflation in QBP costs has contributed to growing policy concerns the QBP and the underlying MA star ratings are not achieving their goals of encouraging quality improvement among MA insurers. Neither is it helping seniors make informed plan choices (MedPAC 2020).

Research has shown that the MA QBP has not been successful at improving quality in the MA program (Markovitz et al. 2021a; Markovitz et al. 2021b; Layton and Ryan 2015; Meyers et al. 2021a; Meyers et al. 2021b; Agarwal et al. 2021; Ochieng and Biniek 2022).

Evidence also suggests the double bonuses available under the QBP in counties with low traditional Medicare costs (box 1) result in inequitable MA spending and bonuses based on race or ethnicity (Markovitz et al. 2021b). The QBP is also not aligned with the measures of quality that experts use in research to assess clinical quality in MA, including mortality rates for specific conditions (Abaluck et al. 2021), inpatient admissions and readmissions overall for specific conditions (Cohen et al. 2022), or hospice use (Park et al. 2022). Even a recent study by Optum, a subsidiary of United Health Group, did not use star ratings measures to assess quality in its MA contracts compared to care in traditional Medicare (Cohen et al. 2022). Instead, it used alternative quality measures, including rate of inpatient admission, inpatient admission through the emergency department, emergency department visits, avoidable emergency department visits, 30-day inpatient readmission, admission for stroke or acute myocardial infarction, and hospitalization for COPD or asthma exacerbation.

These alternative measures may be absent from star ratings because they would be difficult to routinely and accurately collect across the MA program due to differences in measure specification and data definitions and the need for case-mix adjustment. However, their absence of star ratings raises the question of whether the clinically related measures the Centers for Medicare & Medicaid Services (CMS) does collect are meaningful to beneficiaries or justify the substantial extra funding MA contracts receive in the QBP. In its 2023 Report to Congress, MedPAC noted the comparisons between MA and traditional Medicare are hampered by differences in data collection and coding between the two programs (MedPAC 2023).

Another body of research has demonstrated that the QBP also suffers from significant score inflation, as described in “The Lake Wobegon Effect—Where Every Medicare Plan is ‘Above Average’” (Teno and Ankuda 2022). Evidence shows that insurers combined contracts to boost star ratings before 2020. A practice undermining the program’s purpose (Teno and Ankuda 2022; Gilfillan and Berwick 2021; MedPAC 2020).

As of 2023, the enrollment-weighted average star rating across MA contracts was 4.15 stars. Since benchmark bonuses begin at 4.0 stars and above, average performance within the MA system yields bonus payments. Finally, the QBP also does not include measures addressing the documented problems in MA, such as difficulty accessing high-quality post-acute care, denials of prior authorization, and high rates of switching to traditional Medicare among seriously ill beneficiaries (CMS OIG 2022; Ochieng and Biniek 2022; GAO 2021; Meyers et al. 2020b; Meyers et al. 2019; Schwartz et al. 2019; Meyers et al. 2018).2

Overall, the MA QBP comes at a high cost without proven benefits to beneficiaries or the Medicare program.

This study provides evidence that the QBP is not meeting its goals and that the goals and operational approach must be overhauled to focus on protecting beneficiaries, taxpayers, and the Medicare trust fund.

According to MedPAC, the MA star rating system has two primary goals (MedPAC 2020):

1. Provide information to Medicare beneficiaries to help them make informed plan choices.
2. Serve as the basis for the QBP, which provides financial incentives to MA organizations to improve quality. CMS introduced the MA star rating system in the 2008 plan year (MedPAC 2008). The system was designed to monitor MA performance and to help beneficiaries select among MA plans by providing a simple, overall 1 to 5 rating of plans’ quality. The original star rating system did not affect MA payment.

In 2010, the ACA created the QBP, which increased MA benchmarks and rebate percentages for contracts with star ratings of 4.0 or more starting in the 2012 plan year. The ACA also provided bonuses for new and low-enrollment MA contracts, though smaller than those awarded to high performing plans. Congress designed the QBP to encourage MA organizations to improve clinical quality, beneficiary experience, and administrative effectiveness.

Problems with the MA QBP

Score Inflation

In 2014, the average star rating across MA contracts was 3.86, and 51.8 percent of contracts were rated 4.0 or higher.14 By 2022, the average star rating, boosted partly by COVID-19 flexibilities, was 4.37, and 68.4 percent of contracts had a rating of 4.0 or higher.15 This score inflation declined somewhat in 2023, with average ratings falling to 4.15 and 51.3 percent of contracts rated 4 stars or higher. However, average ratings remained above 4.0 in 2023 because of significant growth in the number of 5-star contracts over time.

These increases in star ratings and the share of contracts and enrollees receiving bonuses have not been linked to externally-validated increases in MA contract performance in clinical quality, population health, or administrative effectiveness (Markovitz et al. 2021a; MedPAC 2023). Instead, these score increases appear to be related to changes in CMS policy.

Measures of Beneficiary Experience Do Not Permit Distinction across MA Contracts

Beneficiary experience accounted for about one-third of an MA contract’s star rating in 2023 (not including prescription drug plan ratings). However, as noted, CMS will decrease this emphasis on beneficiary experience in 2026.

The range of performance on the beneficiary experience measures is narrow, with only a few percentage points separating a 1-star performance from a 5-star performance. Such slight differences are not meaningful. For example, on “ratings of care quality,” a score of less than 84 yields 1 star, while a score at or above 88 yields 5 stars. Similar performance compression is evident for the other CAHPS measures. Although the individual CAHPS questions may be important for identifying global experience with care, the measures constructed by CMS do not provide useful information that should affect star ratings.

Beneficiary experience measures also suffer from the known response bias in CAHPS and other surveys. First, the CAHPS sample frame does not include enrollees in long-term care facilities, leaving out a vulnerable Medicare population. In addition, survey respondents’ race and ethnicity affect how they answer questions about their experiences potentially masking significant disparities in care experiences.

It is understandable and reasonable that CMS would rely largely on established and validated surveys like CAHPS. However, while CAHPS may be useful for tracking overall health system performance and trends in overall MA contract performance, the narrow range of responses suggests these measures may be inappropriate for distinguishing among contracts to provide financial rewards. Further, as we discuss in the next section, MA contract performance on CAHPS likely reflects more on the performance of the provider network than on the MA organizations’ performance.

The QBP Does Not Measure Performance at the Local Level

The star rating system measures quality at the MA contract level, rather than the plan level, because of concerns about sample size. The financial rewards of the QBP incentivized MA insurers to maximize enrollment in high-rated contracts. Because CMS does not impose a geographic limit on contracts, this led to a wave of contract consolidations. Until January 2020, MA insurers could consolidate contracts and choose the star rating that would apply for the first two
years of the “new” contract. One study estimated that this led to $1.1 billion in extra payments to MA between 2012 and 2016. In January 2020, MA insurers were assigned the weighted average star rating when combining contracts. This approach still allows insurers to game the system by combining small, low-rated contracts with large, highly-rated contracts.

The broad geographic distribution of popular MA contracts is a problem both for beneficiary transparency and payment accuracy. Beneficiaries cannot glean useful information about their likely experiences in their local area from a star rating that includes data from hundreds of plans in over 20 states. While plan-level measurement may not be possible due to sample size, limiting MA contracts to a single state or small group of contiguous states could help make ratings more useful for beneficiaries and tie quality bonuses directly to specific practices within a plan or network.

Administrative Effectiveness Measures Do Not Target the Major Issues with MA

The administration effectiveness measures included in star ratings are more directly under the control of MA contracts than clinical quality or beneficiary experience measures. These include measures of health plan complaints, disenrollment, appeals, and call centers. However, these measures do not target key problems in MA identified by researchers and regulators, including the following: difficulty accessing high-quality post-acute care, denials of prior authorization, high rates of switching to traditional Medicare among seriously ill beneficiaries, prior authorization denials, and network adequacy.

Beneficiaries Do Not Use Star Ratings to Make Choices

Research shows that beneficiaries do not use star ratings when making enrollment decisions. Some research suggests seniors do appear to respond to the lower premiums and cost sharing that highly-rated plans can offer because of star rating bonuses, but not to the star ratings themselves.

Insurers Receive Substantial Rewards for Average Performance

Under current law, the MA QBP does not include any penalties for poor performance. From the outset of the program, CMS policies and the statutory design resulted in more than half of MA contracts being in bonus status. For example, the CMS bonus “demonstration” program that went into effect in 2012 was expected to increase bonus payments to MA plans by $8.35 billion over 10 years, with most of those funds going to 3.0- and 3.5-star plans (GAO 2012). MedPAC estimated that, in 2012 alone, the demonstration increased QBP bonuses by $2.6 billion.

Just a brief Summary

Paying for performance has been a key goal in the Medicare program for nearly 20 years. However, despite a growing suite of value-based payment and quality measurement programs, there is little evidence that CMS’s two decades of effort have successfully reduced costs or increased the quality of care that Medicare or Medicaid beneficiaries receive from Medicare Advantage programs.

“Despite nearly two decades of experimentation with standardized measurement, public reporting, and reward-and-penalty programs, average quality performance remains about the same” The QBP and the star rating program in particular do not appear to be associated with improvements in MA organization performance. Instead, the QBP rewards MA contracts for providing roughly average clinical quality.