Medicare Advantage rebates to hit new highs in 2020

Medicare Advantage (MA) rebates are expected to be $122 per enrollee next year, reaching a historic high, according to a new report.

The Medicare Payment Advisory Commission’s (MedPAC's) analysis, released Friday, comes as the open enrollment for Medicare ends Saturday. The analysis also dinged the MA Quality Bonus Program as not a good basis for judging the quality of MA plans.

Overall, MedPAC found MA is healthy, with enrollment growing rapidly. This year, 22.5 million Medicare beneficiaries have an MA plan, a 10% increase from 20.5 million in 2018 and an 86% increase from 12.1 million in 2011.

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Plan choices are also increasing, with the average beneficiary able to choose from 27 plans next year, up from 23 in 2019.

But the analysis cast doubt on how MA plans are reimbursed by the Centers for Medicare & Medicaid Services.

Medicare pays plans through bids, where plans submit bids that are compared to a benchmark amount. If a bid is lower than the benchmark, the plan gets a rebate. The benchmark is based on a formula that looks at traditional Medicare costs for the geographic area where the plan is based.

Rebates have been steadily increasing for MA plans from 2016 to 2020.

In 2016, MA plans got an average monthly rebate per enrollee of $81, but that is expected to increase to a record high of $122 per enrollee in 2020. Average monthly rebates were $107 this year and $95 last year.

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Benchmarks are increased for plans based on their overall quality scores, as the rebate percentage ranges from 50% to 70% based on quality scores.

But the analysis found problems with how quality is meaningfully evaluated in MA plans.

“Using the MA contract as the reporting unit is the source of many flaws in the current system,” said MedPAC staff member Andy Johnson during the commission’s meeting Friday.

The quality bonus program generates about $6 billion in payments to highly rated contract plans.

But MA plans can consolidate contracts that stretch across large geographic areas, so the contract isn’t a good indicator of coverage quality in a certain area, Johnson said.

Another problem is that the bonus program “uses a large number of measures, including administrative measures, to judge quality,” he added. “Some have sample sizes too small to provide a valid representation of quality in MA.”

MedPAC has called for a redesign of the quality bonus program previously.

The commission’s June 2019 report to Congress calls for creating a value incentive program that would use a small set of “population-based outcome and patient experience measures to evaluate MA quality.”