The Medicare Advantage (MA) quality bonus program (QBP) was established by the Affordable Care Act as part of a package of MA reforms that were expected to reduce payments to MA organizations. However, policymakers have expressed growing concern that the QBP, along with the MA risk adjustment program, overpays MA organizations and does not achieve its goal of quality improvement and helping beneficiaries select plans. In this report, we provide an overview of the QBP and its role in the MA payment system, describe the star ratings measures and how they are scored, and explore the shortcomings of the QBP.

WHY THIS MATTERS

Over half of Medicare beneficiaries are now enrolled in MA, and the QBP has become a significant source of revenue for MA insurers, totaling over $10 billion in payments in 2022. Major changes to the MA QBP are needed to create a program more aligned with the goals of helping beneficiaries make informed choices and encouraging MA organizations to improve performance. Reforming the QBP could also help reduce Medicare spending, extending the life of the Medicare Hospital Insurance trust fund.

KEY TAKEAWAYS

• While clinical quality measures account for over half of the measures used in the star rating system, after weighting, about two-thirds of a contract’s star rating is determined by beneficiary experience with care and MA administrative effectiveness. On review, however, we find that:
  • measures of beneficiary experience do not permit meaningful distinctions across MA contracts and
  • administrative effectiveness measures do not target important deficiencies regulators have identified within MA organizations.
• The star rating system and the QBP suffer from many problems, including the following:
  • score inflation, which results in overly generous bonuses
  • limitations in underlying data sets, which lead to measures focused on the needs of younger and healthier beneficiaries rather than beneficiaries facing serious illnesses
  • performance is not measured at the plan or local level, limiting the usefulness of star ratings for beneficiaries’ choice
• Contrary to the QBP’s goals, beneficiaries typically do not use star ratings when selecting plans.
• Despite the 10-year commitment to paying MA plans substantial bonuses to support successful quality improvement, the preponderance of research does not demonstrate that beneficiaries, on average, receive higher quality care in MA than they would in the traditional Medicare program.
• MedPAC’s suggested replacement for the QBP would rely on a small set of population health measures to determine MA plan quality at the local level. It would also assess rewards and penalties to make the program budget neutral.
• MedPAC’s suggested replacement has merit, but we would prefer focusing accountability on protecting beneficiaries from poor plan administration rather than attempting to measure MA contracts’ effects on clinical quality, which largely reflect provider performance rather than MA organizations’ contributions. While MA plans can choose providers for their networks, many plans are broad-network PPOs and HMOs that do not narrowly tailor their networks to include higher-performing providers.

HOW WE DID IT

We reviewed the literature and conducted an analysis of the 2023 MA star ratings data and related MA enrollment data to explore the QBP and its role in the MA payment system, described the star ratings measures and how they are scored, and identified the shortcomings of the QBP.