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GAO Recommends Ending Demonstration On Medicare Advantage Bonus Payments

Wednesday, April 25, 2012

The Centers for Medicare & Medicaid Services should discontinue a Medicare Advantage demonstration program focused on quality bonus payments due to the budgetary impact and a lack of data needed to assess the program's effectiveness, according to a report from the Government Accountability Office released April 23.

The report, Quality Bonus Payment Demonstration Undermined by High Estimated Costs and Design Shortcomings (GAO-12-409R), said CMS should instead defer to the MA bonus payment system authorized by the Patient Protection and Affordable Care.

“The MA Quality Bonus Payment Demonstration dwarfs all other Medicare demonstrations--both mandatory and discretionary--conducted since 1995 in its estimated budgetary impact and is larger in size and scope than many of them,” the GAO report said.

GAO said the demonstration would cost $8.35 billion over the next 10 years, due to larger bonus payments than those mandated by PPACA, and would not have to be budget neutral.

The estimated budgetary impact for the demonstration would be at least seven times larger than any Medicare demonstration since 1995, and would be greater than the combined estimated budgetary impact of all Medicare demonstrations since 1995, according to the report.

The report was prepared at the request of Sen. Orrin G. Hatch (R-Utah), ranking member of the Senate Finance Committee. Hatch April 23 said the MA demonstration would not produce credible data for CMS to evaluate, and he also questioned whether CMS had the legal authority to create the demonstration program.

MA Bonus Payments.

The nationwide demonstration program was created in November 2010 as an alternative to the MA bonus payment structure set forth by PPACA, and is scheduled to run from 2012 to 2014, the GAO said.

Under the demonstration, MA plans with CMS quality ratings of three or more stars would receive bonus payments, and overall bonus payments would increase in 2012 and 2013.

The PPACA bonus system, on the other hand, would award bonus payments only to plans with ratings of four or more stars. It is scheduled to begin once the demonstration is finished in 2014.

CMS rates all MA plan sponsors for quality on a one-to-five scale, with five representing the highest-quality plan.

GAO said that under the PPACA bonus system, roughly one-third of all MA beneficiaries would be covered by plan sponsors eligible for a bonus payment in 2012 and 2013. Under the demonstration bonus system, 90 percent of MA beneficiaries would be covered by plan sponsors eligible for bonus payments.


   

In addition to the demonstration program's high cost, GAO said the program design was flawed and did not provide sufficient data to assess the program's impact on quality improvement.  

 

 


Out of the $8.35 billion cost for the demonstration program, $5.3 billion would go toward higher bonuses for four- and five-star plans, as well as new bonuses for three- and three-and-a-half-star plans, GAO said, referring to an estimate from the CMS Office of the Actuary. The remaining $3 billion would go toward the net cost of higher enrollment in MA plans, both during the demonstration and afterward, due to beneficiaries switching from Medicare fee-for-service to MA plans.

The higher bonuses would allow MA plans to offer more services or lower premiums, which would explain the higher enrollment, GAO said.

Program Design.

In addition to the demonstration program's high cost, GAO said the program design was flawed and did not provide sufficient data to assess the program's impact on quality improvement.

The report said that in 2012 and 2013, bonus payments would be based on data collected before the final specifications of the demonstration program were released in April 2011.

As a result, 2014 would be the only year in which CMS could evaluate whether the bonus payments improved quality, the report said.

GAO also said the rollout out of the demonstration to all MA plans precluded having a comparison group that could isolate the effects of the demonstration and allow for an unbiased evaluation.

CMS Response.

CMS disagreed with GAO's recommendation that it end the demonstration, saying that the program's design elements were “consistent with the overall goal of improving quality in the Medicare Advantage program and do not, as suggested by the GAO, preclude a credible evaluation of the demonstration.”

“Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to MA enrollees,” CMS said.

CMS also said it would look outside of the MA program to find a comparison group for evaluating the demonstration, potentially using either managed care plans contracting with Medicare under Section 1876 cost contracts or managed care plans participating in commercial and Medicaid Consumer Assessment of Healthcare Providers and Systems (CAHPS) and Healthcare Effectiveness and Data Information Set (HEDIS) programs.

Section 1876 contracts are based solely on costs, as opposed to risk-based capitation.

“Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to MA enrollees,” CMS said.

White House Press Secretary Jay Carney April 23 also defended the MA demonstration program, saying the program was an important step in identifying ways to improve the quality of Medicare Advantage. Carney said the demonstration program would ensure that Medicare Advantage was as cost-efficient as possible.


The GAO report is available in HealthDocs™.


 

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