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If All Plans are Above Average, None of Them Are

If All Plans are Above Average, None of Them Are
By Aditya Singh • Issue #19 • View online
Healthcare insurance companies do not have the best reputation in the eye of the public. They’re directly tied to the pain-points that Americans face each day related to increased healthcare costs and limited choices for where to seek treatment.
However, according to the Centers for Medicare and Medicaid Services (CMS), 83% of Americans on Medicare Advantage had health plans that were considered “above average”. Medicare Advantage (MA) plans, in short, are private health plans that give Medicare benefits. These MA plans are rated on a scale of 5 stars, and plans scoring 4 or more stars receive financial bonuses from CMS.
By late August, spending on the bonus payments reached $10 billion. Clearly, Americans haven’t noticed much of an improvement in the quality of health insurance plans, and experts are growing increasingly skeptical of the CMS stars ratings.

What is the Quality Bonus Program
MA plans, once again, administer benefits of the Traditional Medicare program through private insurers. Many of these MA plans have additional offerings and may even specialize in specific geographies. Because the federal government is essentially contracting Medicare out to these private actors, there’s a need to ensure that MA plans are providing a level of quality consistent with expectations of the Medicare program.
The Affordable Care Act (ACA), passed in 2010, established the Quality Bonus Program (QBP), which would use a five-star rating system to determine whether an MA plan qualifies for a bonus payment. Plans receiving more than 4 stars receive the bonus.
The stars rating as of June 2020 was determined according to 45 measures of clinical quality, patient experience, and administrative performance across which CMS takes a weighted average. The number of measures accounted for has generally increased over the years. CMS then takes these scores and ranks health plans relative to each other, with the idea that there is a direct financial incentive to outperforming relative to the general body of MA plans.
Poor Design Enabling Poor Quality
The Medicare Payment Advisory Commission (MedPAC) is an independent congressional agency that advises Congress on Medicare. Their June 2020 report highlights a number of concerns with the program that lead to overspending without certainty of better health plan quality.
For one, because stars ratings are determined by how a plan does compared to other MA plans, performance for quality measures become moving targets, which are harder for health plans to make specific strategies around, and the abundance of quality measures water-down the quality of scoring results. For example, if many health plans are largely the same across various measures for reasons related to market or industry conditions, but a few have exceptional outcomes in a few specific outcomes, those exceptional players don’t stick out as much because of there being so many other measures that are averaged in.
Another big area as of concern is the lack of accounting for social risk factors that may be present in certain health plans. Factors like “timeliness of care” are consistently scored lower for plans that cover members in rural and other medically underserved areas. Meanwhile, employer health plans tend to perform the best, which leaves more in bonus payments to health plans covering already higher-income members of the Medicare program. This, as a result, skews the financial support away from MA plans that are treating members who are simply more expensive to care for.
More egregiously, MedPAC estimates 37% of beneficiaries were “upcoded” – wherein lower-rated plans are merged and consolidated into higher-rated plans to get bonus payments for members who otherwise were not receiving health plan quality deserving of such bonus.
Another side effect of this consolidation of local health plans into larger contracts is how it impacts consumer education. A JAMA Network article voicing concerns over QBP mentioned that when using the CMS Medicare Plan Finder, consumers may be given contract quality measures that account for data across various geographies that may not apply to their own specific geography. As a result, information about local health plans are skewed simply by being part of a larger contract.
Paying More for... More of the Same
The Medicare Advantage program is prone to being taken advantage of. For example, a March 2022 report found that QBP spent $12 billion in overpayments to MA plans. Remember, the alternative to MA is Traditional Medicare, administered through CMS directly. Risk scores for members, determined by diagnoses documented, were on average 9.5% for MA plans, which makes it clear that private health insurers clearly pushing for a higher intensity of documenting certain high-risk diagnoses. After all, CMS pays more when an MA plan’s members appear “sicker” through risk scores.
60% of Americans on Medicare may be on MA plans by 2030, which probably means that the American taxpayer will be paying even more for private insurers misleading CMS and giving mediocre health plan coverage in exchange for ever-growing financial incentives, all on the back of America’s seniors.
Whether it be revising the terms of QBP to more accurately reward health plans that are truly innovating to make healthcare easier to afford and receive or strategies like that outlined by the proposed Save Medicare Act to better distinguish MA plans from the Traditional Medicare program, it’s imperative that all options are pursued to figure out how to truly improve the system for Americans rather than forcing them to keep up with an increasingly expensive and fraudulent system.
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Aditya Singh

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