Medicare Advantage ratings prove a boon to insurers, patients
Study shows plan bonuses are a pathway to success
Vantage Health Plan executives saw an opportunity when they realized few of their female Medicare members were being screened for osteoporosis after they broke bones.
The test to identify women at increased risk for fractures is one of 40 measures that Medicare applies to produce its 5-star ratings comparing the private plans chosen by nearly a third of seniors over traditional coverage.
More than $3 billion is in play for insurers. Health plans earning at least 4 stars qualify for federal bonus payments. Those that don’t lose out.
To improve its score, Vantage last year bought a $10,000 mobile ultrasound unit so it could give bone density screenings to its elderly female members in their homes. The proportion of eligible women tested soared from 13% in 2014 to 71% in 2015.
“The 10 grand we spent on the ultrasound machine was more than worthwhile,” said Billy Justice, director of marketing and sales for Vantage, an insurer with 16,000 Medicare members in Louisiana.
Here’s why: Vantage lifted its overall star rating to 4 stars from 3.5 and set itself up for as much as $8 million in extra federal funding next year. By law, the bonus money must go to pay for extra benefits, which helps plans attract more members and, in turn, makes them more profitable.
Many Medicare plans undertook similar initiatives to improve their 2016 ratings, leading more to qualify for bonuses than ever before. Actions included offering members more preventive care and helping them better manage chronic conditions.
For Medicare beneficiaries, the development is good news.
“More plans are providing better care,” said Stacy Sanders, federal policy director at the Medicare Rights Center, an advocacy group. “To us, the incentives created from the bonus system are leading to quality improvement.”
Reducing high blood pressure is one example. The overall share of Medicare Advantage members who have their pressure under control is 71% in the 2016 star ratings, six points more than in 2015.
Aetna mailed complimentary blood pressure cuffs to its members to use at home last year. Now, 81% of its members have their pressure under management, up from 69% in 2013.
Since the bonus payments began in 2012, the percentage of Medicare plans earning 4 stars or more has doubled to 40%, the Kaiser Family Foundation (KHN is an editorially independent part of the foundation) reports. About 71% of seniors in 2016 are in a plan with at least 4 stars, up from 60% in 2015, 50% in 2014 and 38% in 2013, according to the Centers for Medicare & Medicaid Services (CMS).
There’s a payoff for insurers, too. Bigger bonuses lie ahead for most of the giant companies that dominate Medicare Advantage. United Healthcare is due for $1.4 billion, up $532 million from the prior year, Wedbush Securities analyst Sarah James estimates. Humana could get $1.5 billion, a $244 million drop because it has fewer plans eligible for bonuses, she said.
The figures are estimates because the plans’ 2017 enrollments will determine actual payments.
Cigna’s bonus — $252 million, according to James — is at risk because CMS sanctioned it in January, suspending all its Medicare plans from doing enrollment and marketing, after finding the insurer failed to provide members with services and benefits that CMS requires.
“The quality bonus has given companies a pathway to success,” said Sean Cavanaugh, CMS deputy administrator and director for the Center for Medicare.
The star ratings bonuses have helped Medicare Advantage plans weather cuts in federal funding mandated by the Affordable Care Act in 2010. Some analysts then predicted insurers would have to reduce benefits, diminishing plans’ popularity compared with traditional Medicare.
Instead, the opposite has occurred. Enrollment in Medicare Advantage has soared from 11 million in 2010 to 17 million last year.
At the same time, the government pushed insurers to get better by toughening its standards for bonus eligibility. Starting with the 2015 ratings, it stopped paying bonuses to plans with 3- and 3.5-star ratings, forcing insurers to shoot for 4 stars. Here’s how it adds up. Plans are paid about $10,000 per member annually on average, although the precise amount varies.
For plans with 4, 4.5 or 5 stars, bonuses bring in an extra 5% a year per member — about $500 each, said Monisha Machado-Pereira, a partner at consulting firm McKinsey & Co. A 4-star plan with 1 million members would earn $500 million in bonuses.
“Getting to 4 stars is really, really critical,” said Michael Kavouras, vice president of star ratings at Aetna.
Past bonuses helped Aetna retain zero premium plans in many markets and offer options such as dental and vision coverage, he said. Those benefits help attract more enrollees.
Star ratings are available for all to see on Medicare’s website when comparing costs and benefits, but they don’t reveal everything a consumer might want to know, as a recent CMS audit of a major insurer shows. For example, star ratings do take into account how health plans handle consumer appeals and grievances — a problem area uncovered in CMS’ audit of Cigna, Lipschutz pointed out.
For all the attention paid to star ratings by insurers and the government, their influence on consumers may not be great.
Most advocates say seniors still choose plans based on cost and whether their doctor or hospital is in the network.
A McKinsey & Co. study in 2015 found that only 21% of those who had enrolled in a Medicare Advantage plan knew their plan’s star rating.