Medicare’s star rating system for private plans is questioned

Posted May 20, 2012, at 7:04 p.m.

As the federal government pumps billions of bonus dollars into private Medicare health plans to encourage better care, the quality rating system used to award the bonuses is coming under increasing fire.

Critics, including the Government Accountability Office and the Medicare Payment Advisory Commission, question whether the $8 billion-plus program is mostly rewarding mediocre patient quality.

The latest attack came in a report last week from the American Action Forum, a conservative think tank, which argued that some standards are difficult to measure and that it’s hard to score well when plans don’t always know the criteria in advance.

Supporters defend the program as part of a broad initiative to boost the quality of patient care and point to demonstrable improvements — for instance, a San Diego physicians group that discovered 700 Medicare patients with diabetes who were not getting annual eye exams, even though failure to get early treatment can result in blindness.

“Change a compensation system, and priorities shift,” said Dan Mendelson, chief executive of Avalere Health, a consulting firm. “You can see the numbers going up.”

The federal government created the star rating system in 2007 as a guide to help seniors compare the quality of private health plans in the Medicare Advantage program.

One quarter of older and disabled people now opt out of the traditional, government-run Medicare program in favor of private plans that often have lower premiums and extra benefits, such as coverage of hearing aids.

Until recently, health plans and their enrollees all but ignored the ratings. But insurance executives made them a priority after the 2010 health-care law attached large financial rewards to them.

The first round of ratings in the fall showed that most plans have a way to go. Only 12 earned a perfect score of five, on a scale of one to five, and about 9 percent were below average. The majority received scores of three or three and a half stars — enough to get them bonus money this year.

After 2014, plans will need four or five stars to get bonuses. And if they have fewer than three stars, they won’t be allowed to enroll beneficiaries through Medicare’s Web site and risk being booted from Medicare altogether, according to HHS spokesman Tony Salters.

Already, five-star plans don’t have to wait until open season to enroll new customers. Poor performers are branded with an icon on Medicare’s Web site.

“You basically can’t operate a profitable Medicare Advantage plan without strong star ratings,” Mendelson said. “For some health plans, the bonus money accounts for as much as 7 percent of revenues, which can translate into a couple of billion dollars for a large health plan.”

The money is particularly attractive to Medicare Advantage plans as the health-care law cuts their payments this year by $6 billion. This year’s bonus money is estimated to offset about half of that reduction. (The bonus program runs over 10 years, but most of its awards will be made in the first three years.)

Douglas Holtz-Eakin, president of the American Action Forum, argues that the larger bonuses were a political calculation by the Obama administration to head off an exodus of health plans — and a backlash from angry senior citizens — before the November election.

The GAO and MedPAC don’t take issue with rewarding high-quality plans but question giving large bonuses to plans with average ratings. Bonuses are now going to plans that cover 93 percent of enrollees “at a time when Medicare already faces serious problems with cost control and long-term financing,” according to a March MedPAC report.

Jonathan Blum, deputy administrator for Medicare, says the incentives were made available to average-rated plans to spur rapid improvements. “The higher the plan rates, the larger the payment it can get, and that is turned back to providing a more generous package of benefits,” he said.

The ratings drove significant changes in care by one large San Diego physicians group.

Jorge Pelayo-Garcia, director of innovations at the Sharp Rees-Stealy Medical Group, found 700 Medicare patients with diabetes who were not getting annual eye exams. Most diabetics have retinopathy, a blood vessel weakness in the eye, but early treatment halves the risk of vision loss.

Pelayo-Garcia quickly organized staff calls, and within two months in the fall, the screening rate jumped from 30 to 73 percent.

The doctors found 163 eye problems that had never been diagnosed, and 21 were severe. “I’m proud of what we did,” he said, noting that diabetic patients must now also slip off their shoes for foot exams every time they come in, even if it’s for a flu shot.

Another complaint of the rating system is that the government sometimes scores plans on measures they don’t know about.

The Centers for Medicare and Medicaid Services “published criteria in October 2011 to be applied to plan performance between January 2010 and June 2011,” according to Holtz-Eakin’s report.

“They had a measurement for flu vaccines but didn’t do it in flu season,” he said. “It’s like checking for sunscreen in the winter.”

Some health plans also complain that certain measures, such as customer satisfaction, are hard to evaluate.

Gale Arden, a consultant who used to run the Medicare Advantage program for BlueCross BlueShield of Tennessee, worries the pressure to please customers “forces health plans into a situation where they can never say no.”

“If a customer doesn’t pay his premiums and we dis-enroll him and he calls CMS to complain,” Arden said, “then we’ve got a problem.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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