Key MA quality bonus payment program outcomes, concerns

How does CMS calculate quality bonus payments? 

Quality bonus payments rely on the results of the Medicare Advantage star rating system. CMS assigns health plans 1 to 5 stars based on their performance on certain quality measures. The exact number of metrics fluctuates from year-to-year as the agency updates its policies. In 2024, plans were evaluated on 30 measures (40 for Medicare Advantage-Part D plans). 

Each measure falls into one of several categories. Performance in administration, member experience, and preventive care can affect payers’ scores and, ultimately, their star ratings. High-quality results will receive a 4- or 5-star rating, while poor results will receive a lower score. 

In general, CMS awards a 5% quality bonus payment to health plans that achieve 4 stars or higher. However, some payers receive extra bonuses due to their location and certain market factors. These extra payments are called “double bonuses.”  

Health plans are eligible for a double bonus if they are in an urban area where traditional Medicare spending is low, Medicare Advantage penetration is high, and they achieved a high Medicare Advantage star rating. When all of these factors are present, CMS pays a 10% bonus, instead of 5%, hence the name “double bonus.” 

“The intent of double bonuses is to generate savings for Medicare by increasing MA enrollment in areas with high Medicare Advantage penetration and low FFS spending,” a study on double bonus payments explained.  

Additionally, plans that do not have high enough enrollment levels to achieve a star rating and plans that are new to the market may receive a payment boost. CMS adds 3.5 percentage points to the amount per enrollee that the agency will pay for these plans. 

Setting the quality bonus payment is part of establishing a standard benchmark. CMS uses traditional Medicare data on historic fee-for-service Medicare spending in the county to set the benchmark. The agency then adjusts that benchmark based on the level of risk and a plan’s quality of care as established in the star ratings. 

Outcomes of the quality bonus payment program 

The adoption of value-based care by Medicare Advantage plans is a distinguishing factor between the privatized program and fee-for-service Medicare. In this sense, the quality bonus payment program aligns with policymakers’ overarching goals for Medicare Advantage. 

In its design, the quality bonus payment program aims to uphold a value-based care approach to payment by assigning financial incentives to high-quality performance. The 5% bonus payment motivates payers to focus on the categories that CMS has established and can be used to further improve care. Health insurers may elect to re-invest the bonus payment in their Medicare beneficiaries’ quality of care, however this is not a requirement of the program. 

Bonus payments rose 28% from 2022 to 2023, according to a KFF analysis. In 2023, 26 million Medicare Advantage beneficiaries (representing 85% of the Medicare Advantage population) were in plans that received bonus payments. This was a big leap from only 9 million Medicare beneficiaries in these types of plans in 2015 (55% of the Medicare population at the time). 

In 2023, the average bonus payment per enrollee reached $417. Employer-sponsored health plans and union plans received the highest bonus payments, with an average of $460 per enrollee. In contrast, individual plans and special needs plans (SNPs) received lower bonus payments, $417 and $374, respectively. 

Payers with the highest Medicare Advantage enrollment tended to receive higher bonus payments, the KFF analysis noted. Together, the two insurers with the largest share of Medicare Advantage beneficiaries accounted for almost half of all the bonus payments CMS distributed in 2023 (47%). 

UnitedHealthcare, Humana, and Blue Cross Blue Shield (BCBS) plans held the highest enrollment shares in 2023 and they also received the largest amounts of bonus payments. UnitedHealthcare received $3.9 billion, Humana got $2.3 billion, and BCBS was awarded $1.7 billion in bonus payments. 

Concerns about quality bonus payments 

Various regulatory and research groups have voiced concerns about the quality bonus payment program. The complaints range from critiquing whether double bonuses have a positive influence to whether the program accurately assesses quality at all. 

A study of the Medicare Advantage program’s quality of care from 2009 through 2018 concluded that the quality bonus payments program had no significant impact. 

In 2022, researchers from the University of Michigan compared plans’ quality of care before and after the bonus payments went into effect. Although enrollees in plans that received bonus payments saw significant improvements on four quality measures, they also experienced a significant decline in quality on four other measures.  

Overall, the results canceled each other out, and the researchers declared the program ineffective. They recommended either overhauling or erasing it. Even transitioning the program to a budget-neutral structure would be unlikely to improve results, they argued. 

A separate study, spearheaded by the same researchers who examined the quality bonus payments program’s impact on quality of care, found that double bonuses drive healthcare inequities between Black and White Medicare beneficiaries. 

Black Medicare beneficiaries were 22% less likely to live in areas with below-average fee-for-service Medicare spending. As a result, this population of Medicare beneficiaries was 9.9 percentage points less likely than their White counterparts to live in double bonus counties. The downstream effects of this program’s design meant that White Medicare beneficiaries may have received $446 million more in Medicare spending than Black beneficiaries due to double bonuses. 

Other researchers have pointed out that the quality bonus payment program has failed to prevent major quality pitfalls in the Medicare Advantage system, such as excessive denials, insufficient mental healthcare access, high disenrollment rates in beneficiaries’ final years, and more. 

Even some payer leaders have urged policymakers to re-evaluate the quality payment system in Medicare Advantage and come up with more innovative solutions. 

Multiple solutions have been proposed. MedPAC advocated for a value incentive program to replace the quality bonus payment system. The new program would assess plans using well-tested population-based outcomes and patient experience measures and account for social risk factors. MedPAC also recommended that this new system be budget-neutral. 

Alternatively, policymakers could overhaul Medicare Advantage instead of replacing it, researchers from the Urban Institute have suggested. The revised system would include stronger CMS oversight of administrative quality, quality measures that only highlight the highest- and lowest-performing plans in a non-public manner, and requirements for continuously improving the quality of care that align with traditional Medicare. 

Regardless of what comes next, many experts in the field agree that Medicare Advantage’s status quo is not satisfactory and that addressing the quality bonus payment program is key to reforming it.