GAO Says Stars Bonus Demo is an $8 Billion Waste
The Government Accountability Office released a report yesterday recommending that CMS cancel the Star Ratings Bonus Demonstration, saying it would spend over $8 billion rewarding plans with only average quality improvement. That $8.3 billion — to be awarded to plans with at least a 3-Star rating — would offset “a significant portion” of the MA payment cuts in the Affordable Care Act (ACA).
Congressional Republicans who requested the study said the demo was an expensive political ploy designed to pump money to mediocre Medicare plans and shield beneficiaries from the effects of the ACA cuts. Sen. Orrin Hatch (R-UT) said the GAO report suggests that the administration abused its authority in implementing the program. GAO, the investigative arm of Congress, didn’t speak to GOP charges that the bonuses are politically motivated — but it did note that the Stars demo “dwarfs” all other Medicare pilot projects in nearly 20 years.
Most of the bonus money, of course, goes to plans in the middle of the bell curve with 3-3.5 stars on Medicare’s five-star rating scale. Available through 2014, the bonuses do soften much of the impact of the ACA cuts to Medicare Advantage — in 2012, the bonus program offset more than two-thirds of the hit from ACA, and has clearly helped MA enrollment growth and declining average premiums the last two years.
The GAO recommended that CMS should implement the bonus structure as outlined in the ACA, which costs less and rewards only the highest rated plans. Under the original ACA bonus structure, only MA plans with four or more stars would qualify for the bonus. CMS in late 2010 said it would instead move to a three-year demonstration program, which increased the amount paid and would make three-star plans eligible for the bonuses. The demo costs $5.3 billion more than the original ACA version, making it one of the biggest demonstration programs Medicare has undertaken.
Hatch, the ranking Republican on the Senate Finance Committee, which oversees Medicare, is questioning whether the administration had the legal authority to create the program in the first place. “The Obama administration seems to be using a technicality to sidestep Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections,” Hatch said in a statement. “The White House does not have the authority to green-light spending on whatever program it wants,” he added. “This report is just the beginning — I will be demanding answers.”
The Medicare Payment Advisory Commission (MedPAC), the expert panel that advises lawmakers on Medicare, also criticized the bonus plan as the administration was pursuing it. MedPAC said the Stars Demo amounts to “a mechanism to increase payments” and its design “sends the wrong message about what is important to the program and how improved quality can best be achieved.” MedPAC Chairman Glenn Hackbarth added that the Stars bonus demo “lessens the incentive to achieve the highest level of performance.”
The administration says it disagrees with the GAO findings and believes the bonuses will improve the quality of care. Medicare “believes the demonstration supports our national strategy to improve the delivery of health care services, patient health outcomes, and population health,” CMS said in its formal response to the GAO report. “Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to (Medicare Advantage) enrollees.”
I get it and I don’t get it. Everybody in Washington — Republicans and Democrats alike — knew that this demonstration had little to do with quality improvement and everything to do with lessening the ACA’s cuts on plans and beneficiaries alike. The ACA’s cuts were the remedy to the excessive subsidies to MA plans in the Medicare Modernization Act of 2003, and the Stars demo was the “glide path” that bridged the two. Hatch is one of the strongest advocates of Medicare Advantage in Congress, and he fought valiantly against the ACA’s $137 billion hit to the program over 10 years. With this GAO report he seems to have decided that it’s worth calling in friendly fire on the program to score political points against the President in an election year.
I can see alot of noise on this report, especially with the Medicare Trustees’ Report also out yesterday. After all, the furor over the GSA’s Las Vegas conference scandal was over a tiny fraction of the pile of money in play here, literally. But I think the recommendation of terminating the demo is dead on arrival. Rewarding high quality, and squeezing out low quality plans as CMS has promised for those below 3 stars, is so clearly a good idea that we don’t expect the Star bonus demo to go anywhere…though CMS officials may want to arrange their own parking space on the Senate side for all the hearings they’ll get called into for this.