Under new federal regulations, Medicare Advantage (MA) providers that earn a 4- or 5-star ranking from the Centers For Medicare and Medicaid Services will receive cash bonuses from the federal government. Star ratings are based on 33 independent criteria for health care plans and an additional 19 criteria for prescription drug plans (PDP).
This approach is likely to have an impact on all MA plans. Currently, the government pays MA providers about $8,800 per beneficiary, about $1,150 more per person, than it spends on traditional Medicare coverage. Although they are not required to, MA providers often use the extra funds to offer additional covered services, reduce premiums, co-pays or deductibles. These extras tend to make the MA plans more attractive to some seniors.
Beginning in 2011, however, this payment disparity will be eliminated. Instead, the extra cash will be used to fund the cash bonuses for MA plan providers. This will likely translate into some significant changes in the services provided under MA plans, and may also increase beneficiaries’ out-of-pocket expenses. MA plan providers will likely have to raise monthly premiums, co-pays and deductibles, or eliminate services currently being provided.
Initially, the star rating was designed to help seniors find high-quality plans from among potentially dozens of MA plan choices. Studies conducted by the Kaiser Family Foundation, however, indicate that about three-fourths of seniors choose a MA plan that is rated at 3.5 stars or less; and that only about 15 percent of MA enrollees live in a service area where a plan awarded four or more stars is available. The Kaiser Family Foundation’s analysis showed that the cost of a Medicare Advantage plan is a beneficiary’s primary consideration rather than a plan’s overall service rating.
The new rules will grant MA plans that receive four or five stars a bonus of 1.5% on top of their regular Medicare payments, beginning in 2012. The bonus amount will rise to 5% by 2014. Bonuses tied to a provider’s star rating have raised a few questions, since many plans currently approved by Medicare, including new plans and small plans, have no star ratings.