The Medicare Advantage (MA) quality bonus program (QBP) was designed to incentivize MA plans to improve quality and to help beneficiaries select high-quality plans. The program has failed to achieve either of those goals, yet spending on bonuses to “high-quality” MA plans now exceeds $10 billion per year. There is a growing consensus that MA is overpaid, and the QBP is ripe for reform.

In a prior report, we explored the operational problems with the QBP, including poorly constructed and targeted measures. This report explores the conceptual underpinnings of the QBP, which are shared with Medicare pay-for-performance (P4P) and public reporting programs more generally. Overall, we find little evidence that P4P and public reporting have driven improvement in clinical or administrative performance despite the high costs of these programs. In fact, we find that P4P has serious operational flaws and produces adverse effects. Therefore, we call for “new ideas and new conversations” around the QBP and P4P more generally.

Based on a review of the literature and interviews with six prominent experts in quality measurement and Medicare performance, we suggest a revised structure for ensuring adequate administrative performance and quality in MA. We recommend the following policies be implemented to replace the QBP:

1. Implement enhanced, more stringent Centers for Medicare & Medicaid Services oversight of MA plans to ensure adherence to their contractual obligations on various administrative responsibilities, concentrating on areas of demonstrated substandard performance, like prior authorization and claims denials.
2. Use a limited number of validated quality measures to identify exceptional and poor MA plan performance in areas of interest. These measures would be focused on prevention activities and, where possible, patient-reported outcomes and patient experiences with their health plan. Measurement would be limited to identifying exceptionally strong and poor performance, not broadly rating or ranking MA plans, and need not be made public.
3. Replace the current regime of external performance measurement that provides overly generous rewards without penalties with a program that encourages or requires MA plans to implement quality improvement projects or adopt continuous quality improvement methods.

We present these preliminary ideas and recommendations to stimulate conversations. We also recommend convening a task force, committee, or Blue-Ribbon Panel to develop specific policy recommendations for Congress and the Centers for Medicare & Medicaid Services. Those around the table should include quality experts, committed clinical leadership from MA plans, and consumer/beneficiary representatives.