Budget deal will dampen Medicare Advantage bonus payments

U.S. Capitol Building
Congress' latest budget deal has implications for Medicare Advantage plans. (Image: Leslie Small)

Buried in the budget deal that Congress passed Friday morning is a provision that will save the government money at the expense of Medicare Advantage plans’ bonus payments.

The provision—titled “preventing the artificial inflation of star ratings after the consolidation of Medicare Advantage plans offered by the same organization”—is projected to reduce spending by $520 million over 10 years, according to the Congressional Budget Office.

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The upshot of the new policy change is that when a Medicare Advantage organization consolidates two separate plans, the Centers for Medicare & Medicaid Services will adjust the new plan’s star rating “to reflect an enrollment-weighted average of scores or ratings for the continuing and closed contracts.”

The way the rules work now, insurers can consolidate two plans and have the star rating of the better-quality plan apply to the new entity, according to Politico PULSE. That practice effectively gives insurers a way to boost the quality bonus payments associated with lower-rated plans, hence the provision’s use of the phrase “artificial inflation of star ratings.”

A similar policy change appeared in the Medicare Advantage and Part D proposed rule issued in November, Politico noted. 

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In response to that proposal, America’s Health Insurance Plans wrote in a January comment letter that it wants CMS to confirm whether the change will take effect in the 2019 measurement period. The trade group also requested more details about how the new star ratings calculations for consolidated plans would work and what impact it might have. 

Star ratings are a big deal to Medicare Advantage insurers, as they are tied to millions of dollars in bonus payments and can help attract and attain enrollees. CMS reported in October that 44% of Medicare Advantage plans with prescription drug coverage that will be offered in 2018 earned four stars or higher on the five-star rating scale.