Understanding MA Plan Bonus Payments in 2012

Since the inception of Medicare private health plans under the Medicare Advantage (MA) program, plans have received ratings of one to five stars based on their performance on a number of quality measurements. These measurements reflect both medical and consumer experiences, including the quality of customer service, member satisfaction and health outcomes. The Affordable Care Act (ACA) changed the way plans are paid by eliminating overpayments to plans (before health reform, coverage under an MA plan cost Medicare 9 percent more per beneficiary than under Original Medicare). In addition, the ACA created a quality bonus payment system whereby plans are rewarded financially if they receive four- or five-star ratings. Plans are required to use bonus payments to provide extra benefits, such as coverage for eyeglasses and other vision care. However, the Centers for Medicare & Medicaid Services (CMS) expanded the policy through its demonstration authority to allow plans that receive star ratings of 3 or 3.5 to also receive bonus payments. The goal of the bonus payment policy is to create incentives for MA plans to improve the quality of their services, and subsequently, their quality ratings.

The vast majority—91 percent—of MA plans will receive bonus payments based on quality star ratings this year, according to a November report issued by the Kaiser Family Foundation titled “Medicare Advantage Plan Star Ratings and Bonus Payments in 2012.”The study also found that plans with star ratings of 3 or 3.5 (identifying them as average performers) will receive two-thirds of these bonuses. The remaining one-third of bonuses will be given to plans that achieve a star rating of four or higher. On average, MA plans will receive an estimated $281 bonus per enrollee in 2012, but that amount varies based on a number of factors, including the plan’s service area.

Read the Kaiser Family Foundation’s report “Medicare Advantage Plan Star Ratings and Bonus Payments in 2012.”

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