The debate on whether to repair or replace the flawed bonus payment program for Medicare managed care plans has been reignited by a pair of health insurer lawsuits. Private Medicare Advantage insurers received an estimated $16 billion in quality bonus payments in 2023, a fivefold increase from the $3 billion paid in 2015. The bonus payments are given to MA insurers that earn at least four out of five stars on a list of quality measures. However, recent changes to the 2024 star ratings methodology by the Biden administration are expected to result in lower quality scores and program payouts in the upcoming year.
Two Medicare Advantage insurers, Elevance Health and SCAN Health, have filed lawsuits against the Department of Health and Human Services over their 2024 star ratings. Both companies claim that the lower ratings calculated by the Centers for Medicare & Medicaid Services are unlawful, arbitrary, and capricious, and are seeking to have them vacated. The lawsuits will test the ability of the HHS and the CMS to control a growing cost driver in the Medicare Advantage program.
The lack of penalties in the quality bonus program has raised concerns, with some claiming that the program is ineffective and costly. Senators Elizabeth Warren (D-Mass.) and Pramila Jayapal (D-Wash.) have criticized the program, stating that there is no evidence that quality bonus payments actually improve plan quality.
The bonus payments have increased significantly since 2022, outpacing Medicare Advantage enrollment growth over the same period. MedPAC has recommended that Congress replace the MA bonus program with a budget-neutral incentive program. The lawsuits filed by Elevance and SCAN allege unfair influence and disputed results from CMS “secret shopper” phone calls, resulting in reduced star ratings. The star ratings have been criticized for being watered down by easy-to-achieve process measures, with most plans receiving four or five stars. The Alliance of Community Health Plans has called for an overhaul of the program and the elimination of “outdated” quality measures, as well as limiting the number of MA plans that earn a four-star rating or higher.