Obamacare Bonuses May Be Improving Medicare Advantage Plans

Photograph by Pat Greenhouse/The Boston Globe via Getty Images

A doctor visits an elderly patient in her home.

The Obama administration’s bonus system for insurers participating in Medicare Advantage, the private-market alternative to the government’s traditional health insurance program for the elderly, has been criticized by Republicans as a political giveaway and by the Government Accountability Office as illegal.

Unfortunately for his opponents, Obama’s bonuses may be succeeding at improving quality in Advantage plans, according to two analyses released today.

The government rates every Advantage plan from one to five stars, depending on how they perform on a range of tests including measures of patient care, like what proportion of members receive flu shots, and measures of customer satisfaction such as complaints to Medicare. More stars are better.

Since 2011, when the bonuses first became available, the average star rating for plans that offer drug coverage — the most popular type — has increased from 3.18 to 3.66, according to Avalere Health, a consulting firm in Washington that counts insurers among its customers.

Humana Inc. in 2013 will be the first publicly traded insurer to offer a five-star plan, in Wisconsin. There are now 11 five-star plans, up from 9 a year ago, and 127 with four or five stars, up from 106. The government says that 37 percent of Medicare beneficiaries will have access to four- and five-star plans in 2013, up from 28 percent this year.

“More people have access to four- and five-star plans,” said Avalere Chief Executive Officer Dan Mendelson. “On average the ratings are coming up, and some of the lower-rated plans are going out of business because they can’t sustain being active in the market without the bonus program.”

He credits the bonuses, which escalate to a maximum of 5 percent of government payments depending on how many stars a plan attains. Five-star plans get another important advantage: they can market year-round, and Medicare beneficiaries can drop their current plan and sign up for a five-star competitor any time they want, not just during Medicare’s open enrollment period, which started yesterday and ends December 7.

A separate report released today by the nonprofit Commonwealth Fund, based in New York, also credits Obama’s Affordable Care Act and the bonus system with improvements in Advantage plans. The plans “are likely to place greater emphasis on tracking and improving their performance as they strive to qualify for the bonus payments,” researchers led by Brian Biles, a health policy professor at George Washington University in Washington, said in the study.

None of this is mitigating to Republicans angry about the bonuses. Instead of enacting the health law’s bonus system, Obama’s administration created its own, which will be $5 billion more expensive through 2013 and gives extra payments to plans rated as low as three stars. The GAO has said the law didn’t authorize that level of modification and Obama’s bonuses should be canceled, advice the administration has ignored.

Julia Lawless, a spokeswoman for Senator Orrin Hatch, a Utah Republican who asked the GAO to investigate, said yesterday that the program amounts to “doling out money conveniently during an election year.”




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