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What is in the Stars: Medicare Advantage Star Ratings Take Leading Role, Part 1

Congress and CMS have taken steps recently to reward high-quality Medicare Advantage Plans. CMS utilizes a five-star rating system to grade Medicare Advantage (MA) Plans on the level of quality they provide to members, and then publicly reports the results on its website. Healthcare reform goes a step further, creating a quality bonus system using the CMS ratings whereby high-performing plans would receive additional payments and be allowed to maintain a greater percentage of “rebate” dollars for added member benefits.
In this two part series, we will take a look at a number of these quality bonuses and what they mean for healthcare providers.

Premium Reductions and Quality Bonuses

Under healthcare reform, MA plan rates were frozen at 2010 levels, with the phase-in of a reduction in premiums slated to begin in 2012. The purpose of the decrease is to more closely tie MA payments to fee-for-service (FFS) rates in each county. The lower rates will be phased in over the next two to six years by blending old and new benchmarks. This will result in a blended benchmark each year during the transition. To partially off-set these reductions, Congress included a quality bonus providing four and five star plans with additional funding. Depending on the rating, plans would receive 5-10 percent bonuses.

In 2012, CMS will launch a three-year demonstration project that temporarily trumps the PPACA. Because of the small number of high-scoring plans, the demonstration will award bonus payments of up to 5 percent to plans with average or three star ratings and provide larger bonuses to plans with higher quality ratings. It will also calculate bonus payments off the overall score, which includes a combination of MA and Part D data, rather than the MA summary score as required by the legislation.

Bonuses awarded to five star plans would be applied to the blended benchmark rather than the new benchmark, which means these plans would receive their full bonus even if the new benchmark is not phased in completely. Beginning in 2015, PPACA would govern again unless CMS extends the demonstration program.

Rebates and Quality Ratings

Previously under the MA program, health plans whose bids for required services were below the benchmark could keep 75 percent of the difference for reducing cost-sharing for members, adding extra benefits to the plan or buying down the amount a member paid toward their Part B premium. The remaining 25 percent effectively was rebated back to CMS.

The health reform law reduced the amount of money plans are allowed to keep for either lowering cost-sharing or providing additional benefits for members. The new percentage is now tied to a plan’s star rating. While the reduction in how much is retained by plans for the benefit of members is phased in over three years, ultimately plans with three or fewer stars will be allowed to maintain only 50 percent of the difference between their base bid and benchmark, while plans with three and a half or four stars will be allowed to keep 60 percent and those with four and a half and five stars allowed to utilize 70 percent.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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