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 (MedPAC), question whether the $8 billion-plus program is mostly rewarding mediocre patient care. 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, CEO of Avalere Health, a consulting and research 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, mostly managed care plans, that often have lower premiums and extra benefits such as coverage of hearing aids and eye glasses.

Ratings Ignored In Past

Until recently, though, health plans and their enrollees all but ignored the ratings. Only about a third of Medicare beneficiaries knew about the star ratings, and only half of that group considered the scores when choosing a health plan, according to a survey that Harris Interactive conducted last September for insurer Kaiser Permanente. (Kaiser Health News is not affiliated with Kaiser Permanente.).

But insurance executives made them a priority after the 2010 healthcare law attached large financial rewards to them. The first round of ratings last fall showed that most have a long 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 website, 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 website.

“You basically can’t operate a profitable Medicare Advantage plan without strong star ratings,” said Mendelson. “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 in a large state. Compensation of senior managers in Medicare Advantage has now been oriented around achieving star ratings.

Bonuses Offset Health Law Cuts

The money is particularly attractive to Medicare Advantage plans as the health law gradually reduces payment rates to bring them in line with what the government spends on beneficiaries in the traditional government-run program. This year, they will lose $6 billion in federal payments, and the bonus money is estimated to offset that reduction by about half.

Douglas Holtz-Eakin, president of the American Action Forum, and Tom Miller, resident fellow at the American Enterprise Institute, argue the larger bonuses were a political calculation by the Obama administration to head off an exodus of health plans — and a backlash from angry seniors — before the November election.

The GAO and MedPAC, meanwhile, question the strategy of rewarding 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.

Ratings Drove Change In San Diego

The ratings drove significant changes in care by one large San Diego physicians group which contracts with a Medicare Advantage plan run by UnitedHealthcare.

Jorge Pelayo-Garcia, director of innovations at 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 detection and treatment cuts in half the risk of vision loss, according to the American Diabetes Association.

Pelayo-Garcia quickly organized staff calls, and within two months last 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. Five patients, for example, had vitreous hemorrhage, where blood from damaged vessels leaks into the eye, and two had severe non-proliferative diabetic retinopathy, where the creation of weak blood vessels can destroy the retina.

“I’m proud of what we did and the outcome,” he says, noting that diabetic patients now also must slip off their shoes for foot exams every time they walk through the door, even if they’re only there for a flu shot.

Scores for diabetic eye exams and osteoporosis screenings are now fives, and Pelayo-Garcia attributes the improvement to aggressive data collection. “I thought I was a good physician, but the data showed me I wasn’t properly following patients with retinopathy,” he said.

But others point out what they see as flaws in the system.

Wells Shoemaker, medical director of the California Association of Physician Groups, suggested the ratings are a better indicator of a plan’s ability to collect data than of performance. He said that health plans in California generally rely on the same physicians, so their scores should be similar. But they aren’t – and Shoemaker contends that’s because some plans are more aggressive about capturing data. “Plans have close to zilch influence on the actual delivery system dynamics, as those duties have been delegated to locally organized …medical groups,” he said.

Pelayo-Garcia says that his group was able to collect and analyze data because it is a large physician practice, but that smaller groups might be at a disadvantage. “To have proper data, you need proper investment in computers, analysts. A lot of groups, especially solo practices, don’t have enough money to pay for it.”

‘Like Checking For Sunscreen In Winter’

Another complaint about the rating system is that the government sometimes scores plans on measures they learn about too late to change what they do – in some cases, months after care has been delivered.

“None of us is able to time travel,” said Rhonda Medows, chief medical officer for UnitedHealthcare’s programs.

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. “There is simply no way that [a Medicare Advantage] plan can adjust its plan offerings, plan design, or performance in any way to improve its performance in the dimensions CMS chooses to evaluate,” the report concluded.

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

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

When patients respond to surveys about their mental health status, for example, “if you’re one of the sickest beneficiaries, if you’re an individual who has very low income, if you have had problems with housing, there may be a range of socioeconomic factors that affect how you might answer that question,” said Karen Ignagni, president of America’s Health Insurance Plans, the industry trade group.

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 to any treatment or to any customer because it impacts the rating. They’re afraid to ever say no to an MRI.”

Such complaint calls are counted toward star results even if they are unjustified, she said. “If a customer doesn’t pay his premiums and we dis-enroll him and he calls CMS to complain, then we’ve got a problem because it shows up as a complaint. Do we leave people enrolled? Do we pay their claims?”

This article was produced by Kaiser Health News with support from The SCAN Foundation.