$8 Billion Wasted on Medicare Bonus Program
Life + Money

$8 Billion Wasted on Medicare Bonus Program

iStockphoto/The Fiscal Times

In Garrison Keillor's Lake Wobegon Days, all the children are above average. In Washington, the same impossible math is being applied to Medicare's managed-care insurance plans.

The Affordable Care Act (ACA) includes funds to pay special bonuses to Medicare Advantage plans offering above-average quality of care. Instead, the Obama Administration is paying the bonuses to nearly all Advantage plans, including a majority that are rated just average.

The U.S. Government Accountability Office (GAO) issued a report this week castigating the administration for wasting more than $8 billion over ten years on the bonus program, and recommends that it be canceled. The bonus program also has been criticized by another non-partisan Congressional watchdog, the Medicare Payment Advisory Commission (MedPAC).

Advantage is a fast-growing privatized insurance option that seniors can select instead of traditional fee-for-service Medicare. Most are health maintenance organizations or preferred provider organizations, and they have grown rapidly in recent years by bundling all-in-one medical and prescription drug services.

The plans get higher reimbursements from Medicare than fee-for-service providers - 14 cents on every dollar before the ACA was passed. The plans are required to use the higher reimbursements to offer lower premiums and extra benefits to seniors.

RELATED: Health Plans Undergo Major Changes to Cut Costs

The ACA is funded, in part, through savings from the phasing out of those extra payments. But the blow to insurance companies is cushioned by a new system of bonus payments rewarding plans that achieve better than average quality.

The quality bonuses were to be paid only to above-average plans starting this year, and ramped up over time. Instead, the U.S. Department of Health and Human Services put in place a huge quality demonstration program that has resulted in quality bonus payments to 91 percent of plans. In comparison, just 25 percent of plans would have received bonuses under the statutory provisions of the ACA, according to MedPAC.

Previous GAO and MedPAC reports have criticized the program for poor quality care, and for retaining more profit, and spending less on patients, than they had promised in their bids to Centers for Medicare & Medicaid Services, the federal agency that administers Medicare.

CMS uses a rigorous system of quantitative measures to evaluate key areas of plan quality, including preventive care, chronic disease management, prescription drug plan management and responsiveness to patients.

Plans can receive up to five stars from CMS, and the ratings are available to seniors shopping for coverage. This year, the Kaiser Family Foundation reports that only 26 percent of the Advantage plans are rated above average or excellent; 59 percent are rated average, and nine percent receive less-than-average scores.

RELATED: The Plot to Keep Health Care Prices from Consumers

Most of the above-average plans are found on the west and east coasts, according to Kaiser. Not-for-profit Advantage plans tend to get higher ratings than for-profits. "The large firms are focused much more on quality, now that it's tied to bonus payments," says Gretchen Jacobson, policy analyst at Kaiser. "It's made them pay attention."

Seniors who enroll in four or five-star plans likely will see more extra benefits in the years ahead. And, while an Advantage plan will save money for some seniors, it's important to review the plan's network of doctors to make sure yours are in the plan.

Also pay close attention to the plan's co-pays, co-insurance, and deductibles for in-network and out-of-network care.

Pay particular attention to the drug coverage offered by Advantage plans. Because Advantage plans are responsible for all aspects of a patient's care, some offer enhanced drug coverage that might help save them money elsewhere. But make sure your drugs would be covered by a particular plan, and whether any restrictions are placed on that coverage. Also pay attention to prices for your particular medications across the entire year of coverage, and delivery costs.

(The writer is a Reuters columnist. The opinions expressed are his own.)