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Panel Criticizes Plan To Reward Poorly Performing Health Insurers

All the children are above average in Lake Wobegon. And that’s fine and dandy according to Garrison Keillor, who speaks fondly of that fictional place on A Prairie Home Companion.

But in a recent letter, a key congressional advisory panel is urging the agency that oversees Medicare not to treat all health insurers like they are above average.

Now that panel -- MedPac -- doesn’t mention Lake Wobegon by name, of course. But in a strongly-worded letter, it says that not every insurer running a Medicare Advantage plan deserves a bonus.

The effort by the Centers for Medicare and Medicaid Services (CMS) will likely result in “far greater program costs,” and reduce insurers’ incentive to perform well, says a letter signed by MedPac Chairman Glenn Hackbarth.

Plus, MedPac says that the agency’s new proposal goes beyond what Congress envisioned in the new health law.

The letter criticizes a move to extend quality bonus payments meant for top-performing health insurers to those with lower scores. In fact, the new bonus program will even reward some plans highlighted on Medicare's own website as being poor performers over three consecutive years, according to MedPac.

Medicare Advantage plans are those offered by private insurers as an alternative to traditional Medicare. About 11 million people – or 24 percent of all Medicare beneficiaries – are enrolled in Medicare Advantage plans nationwide.

The MedPac comments are included in a letter about a separate change in Medicare. They come in response to a CMS proposal late last year to adjust the standard that Medicare Advantage insurers must meet in order to qualify for a bonus payment.

The change “increases program spending at a time when Medicare already faces serious problems with cost control and long-term financing,” says the MedPac letter.

The health care law cut $136 billion over 10 years from the Medicare Advantage program, following years of concern that the private sector plans cost the government more than traditional Medicare.

But the new law also called for bonuses starting next year for insurers who score at least four out of five “stars” on a key set of quality measurements.

However, Medicare wants to extend those bonus payments to plans that score just OK --  three stars.

The change means 62 percent of all Medicare Advantage insurers -- representing 84 percent of enrollees -- will qualify for the quality bonuses, compared with only 14 percent of plans under the health law provisions.

Medicare officials have said that extending the quality bonuses to more plans is one way to spur managed-care plans to move more quickly to improve quality.

But the way the program is designed, nine plans that have been rated as poor performers over three consecutive years would quality for the quality bonuses, the MedPac letter says.

MedPac says the agency is employing an “overly broad” use of its authority to create demonstration programs, which are generally small and test innovations in how health care is delivered.

“Demonstrations should not be used as a mechanism to increase payments,” says the MedPac letter, which concludes by urging CMS to reconsider its decision.

CMS spokesman Peter Ashkenaz said the agency will respond to MedPac when it issues final regulations.

Copyright 2023 Kaiser Health News. To see more, visit Kaiser Health News.

Julie Appleby