The Patient Protection and Affordable Care Act of 2010 (ACA) established a Medicare Advantage (MA) pay-for-performance program that, early evidence suggests, may be yielding results. Data from plans shows significant improvement from 2010 to 2011 on measures that for many years had stagnated. These include controlling high blood pressure, colorectal cancer screening, assessing adult Body Mass Index, and advising smokers to quit. There also is improvement on avoiding use of high-risk medications in the elderly and persistence of beta-blocker therapy after heart attacks. Given the substantial advantages that pay-for-performance bonuses and other benefits provide, these early results may portend even greater future improvement.

Background. Medicare pays Medicare Advantage plans a per-member-per-month fee, based largely on risk-adjusted local per capita historical fee-for-service payments, to provide all Medicare-covered services. More than one in four Medicare beneficiaries is in an MA plan. Before the ACA, the Medicare Modernization Act of 2003 required Medicare to pay all plans more than the cost of caring for similar enrollees in traditional, fee-for-service Medicare, regardless of performance. In 2010, the Medicare Payment Advisory Commission estimated that these additional payments were 13 percent, or $14 billion dollars, more than what Medicare would have paid for similar beneficiaries in traditional Medicare.

The ACA phases out higher payments previously given to all MA plans. Instead, Medicare in 2012 began paying bonuses only to plans with strong performance on clinical quality, service measures and patient experience of care measures. Medicare bases the 2012 bonus payments on 2011 plan performance, as rated by a five-star system. This system incorporates Health Effectiveness Data Information Set (HEDIS®) and other quality measures, Consumer Assessment of Health Plans (CAHPS®) patient experience results (See Note 1 below.), and results of the Health Outcomes Survey (HOS) that tracks patient-reported outcomes over time. It also includes metrics such as complaints Medicare received about the plan, customer service for drug benefit plans, and beneficiary access and performance problems identified in audits by Medicare.

Medicare initiated the five-star rating system in 2007 to inform beneficiaries about MA plan quality. However, because these bonus payments are critical to remaining competitive by offering greater benefits or lower costs, we are seeing substantial interest among MA plans in improving their scores to get higher star ratings.

As a permanent policy, Medicare now pays sliding-scale bonuses to plans with a 4-star or better rating. Those with a 5-star rating also may enroll new members all year long, instead of just during the annual fall open enrollment period. In addition, Medicare is flagging “poor performing” plans that have less than three stars on the plan finder, advising beneficiaries not to enroll and requiring those who wish to enroll to contact the plans directly. Medicare has used demonstration authority to provide smaller bonuses to 3-to-3.5-star plans (which have the most MA beneficiaries) through 2014. Medicare officials said they did this to test “whether providing scaled bonuses will lead to more rapid and larger year-to-year quality improvements in Medicare Advantage program quality scores.”

Findings. Performance on HEDIS measures for Medicare Advantage plans in 2011, reported to NCQA, shows significant improvement from 2010 in several key measures for both HMOs and PPOs. These include advising smokers to quit, assessing adult body mass index, colorectal cancer screening, and controlling high blood pressure. (See Figure 1, click to enlarge.). These improvements were larger than in previous years, and larger this year compared to non-Medicare Advantage plans.
Figure 1. Key Medicare Advantage Performance Improvements 2010-2011

Performance also improved on measures where progress had essentially stalled until initiation of the pay-for-performance program. For example, the share of Medicare HMO enrollees age 65 and over who use two or more medications that experts agree should usually be avoided in the elderly dropped by a third (lower rates of use are better)—from about 6 percent to 3.6 percent. (See Figure 2, click to enlarge.). Other changes of note include persistence of beta-blocker treatment following heart attacks, where Medicare Advantage had greater improvement than other types of plans.



Discussion. Some caveats are in order. Not all Medicare Advantage HEDIS scores improved. For example, Medicare Advantage scores for Initiation and Engagement of Alcohol and Other Drug Dependence Treatment declined. This HEDIS measure is not included in the star ratings. It will be important in the future to track whether there is greater improvement on measures included versus not included in star ratings. Also, many non-MA plans improved HEDIS results. It may well be that some MA improvement reflects an industry-wide emphasis on improving performance to compete on quality.

That said, these early results hold great promise when considered along with other changes in MA plan performance. For example, the number of 5-star plans has increased from three in 2011 to nine in 2012, and Medicare officials project a greater number of 5-star plans for next year. Medicare surveyed 5-star plans to identify best practices that they have shared with all plans to promote further improvement. Anecdotally, we are seeing that several plans that before paid minimal attention to their star scores are now aggressively working to improve. There has been great interest in several conferences and presentations on how to improve MA star ratings. Also, adding stick to the carrot, Medicare is actively discouraging enrollment in poor performing plans and authorized to exclude them from the program.

It will require further research to confirm that pay-for-performance is in fact obtaining needed performance improvements. However, these initial findings suggest that, at the least, we may be heading in the right direction.

Note 1. HEDIS is a registered trademark of the National Committee for Quality Assurance (NCQA). NCQA collected HEDIS measures for Medicare. CAHPS is a registered trademark of the Agency for Healthcare Research and Quality (AHRQ).