Analysts: Most Medicare Advantage Plans to Get Quality Bonuses

By Allison Bell

About 91% of Medicare Advantage plans participating in a 3-year federal demonstration project will get some quality bonus money in 2012, and participating plans with ratings of 4 stars or more on a 5-star scale will split about $1.1 billion in bonus money.

Gretchen Jacobson and other analysts have reported those figures in a review released by the Henry J. Kaiser Family Foundation, Menlo Park, Calif. The analysts look at how the Medicare Advantage star rating and bonus payment program might work in the coming year.

The Centers for Medicare & Medicaid Services (CMS) developed the star rating system in an effort to give Medicare beneficiaries some information about plan quality, and Congress included a provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) that requires CMS to use quality information when allocating funding to Medicare Advantage plan providers starting in 2012.

CMS uses quality survey data and plan administrative data to assign star ratings.

Laws now on the books call for CMS to cut total Medicare Advantage payments $6 billion from the level originally expected for 2012. The 2012 quality bonus payments should make up for about $3.1 billion of that reduction in funding, the analysts estimate.

CMS officials say they will not make any bonus payments to the 9% of plans with ratings of 2 stars or lower. Plans with 3-star or 3.5-star ratings will get about $2 billion in bonus payments. Plans with 4-star or 5-star ratings will get more quality bonus payments on a per-plan basis than plans with lower ratings.

Plans will get an average of $281 in bonus payments per enrollee. Nonprofit plans will get an average of $347 per enrollee, and for-profit plans will get an average of $255 per enrollee. The $93 difference exists because the nonprofit plans tend to have higher star ratings, the analysts say.

Nonprofit plans in the demonstration project have an average rating of 4.09 stars, and the for-profit plans have an average rating of 3.22 stars, the analysts say.