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Early Evidence Suggests Medicare Advantage Pay For Performance May Be Getting Results

October 29th, 2012

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.

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