Medicare Advantage Double Bonus Payments Boost Racial Disparities

Black beneficiaries are less likely to live in counties with a high enough Medicare Advantage quality performance to be eligible for Medicare Advantage double bonus payments, a Health Affairs report uncovered.

“Our findings suggest that double bonuses not only fail to improve quality and enrollment but also foster a racially inequitable distribution of Medicare funds that disfavors Black beneficiaries,” the researchers explained.

Medicare Advantage plans that receive four stars or more according to the Medicare Advantage Star Ratings system receive a bonus payment. The double bonus payment program offers twice as much of a bonus payment to urban counties with high Medicare Advantage enrollment and high star ratings.

Although only seven percent of the counties in the US qualify to receive double bonus payments, these counties’ beneficiaries make up 27 percent of the Medicare Advantage population due to their high enrollment levels, the researchers found.

Using Medicare data from the period 2008 to 2018, the report determined that policymakers could save the Medicare program approximately $1.8 billion if they ended the double bonus payments program.

The double bonus payment program typically impacted counties that had fewer Black Medicare Advantage beneficiaries. Black beneficiaries were 9.9 percentage points—a relative of 35 percent—less likely to live in counties that qualified for double bonus payments.

“Because publicly available CMS data on individual MA plans do not include beneficiaries’ race, estimates of the impact of double bonus eligibility on racial disparities in payments assumed that Black and White beneficiaries were similarly distributed across higher- and lower-quality plans,” the researchers stated. “However, because quality performance is lower for Black beneficiaries than for White beneficiaries in Medicare Advantage, the true impact on racial disparities in payment is likely larger than our estimate."

Assuming this distribution of Black beneficiaries across low- and high-quality Medicare Advantage plans, double-bonus payments to cover White beneficiaries were $91 per member per year on average, while double-bonus payments to cover Black beneficiaries amounted to an average of $60 per member per year.

Overall, counties that achieved double bonus payments received, on average, $85 more per beneficiary per year than counties that did not receive double bonus payments.

The researchers acknowledged that the current report does not reflect where health plans applied their double bonus payments. However, they pointed to other research which suggested that most of the funds from benchmark changes went directly to beneficiaries, driving the impact of racial disparities even deeper.

The report also found that Medicare Advantage double bonus payments did not accomplish the intended goal: counties that received double payments did not see significant quality improvements or greater enrollment in Medicare Advantage.

Quality did not improve significantly between the period before the double bonus payment system went into effect compared to after it had been implemented under the Affordable Care Act.

Likewise, double bonus counties did not see significant benefits in Medicare Advantage enrollment after the law went into effect and the trends were similar between double bonus counties and non-double bonus counties.

Given these results, the researchers advocated for the complete eradication of the double bonus payment system.

However, they indicated that any changes to the double bonus payment program will have to happen through Congress, since this program is a part of the Affordable Care Act. The researchers noted that if Congress were to eliminate the program entirely it would have minimal impact on quality of care in Medicare Advantage.

These findings confirm what MedPAC reported in 2019. The report warned that both Medicare Advantage benchmarks and double bonus payments did not indicate quality-related cost changes and may lead to geographic disparities.