GOP Piling-on Begins on the Medicare Advantage Star Ratings Demo

July 26, 2012
|In Performance Optimization, Policy & Health Reform, Star Ratings, Strategy
|By GHG Advisors

House Republican Committee chairmen began to pile onto rising controversy around the $8.3 billion Medicare Advantage Star Ratings Demonstration this week, first brought to attention by the Government Accountability Office’s study of the program commissioned by Senator Orrin Hatch (R-UT) in April.

In May, the American Action Forum — an influential conservative think tank here in DC — released a report authored by former Congressional Budget Office Chief Douglas Holtz-Eakin blasting the Stars Demo. “The system rewards beneficiaries for choosing those plans favored by the selected CMS criteria, rather than the plans that best meet their needs,” said the report. It went on to say the program will actually serve to limit choice — and since counties with higher incomes will end up having higher-rated plans, it will have an adverse effect on low-income beneficiaries. “The goal of incentivizing quality health plans is legitimate and admirable; that goal will not be achieved by the rating structure currently being put into place,” Holtz-Eakin wrote.

Last Friday House Ways and Means Committee Chairman Dave Camp (R-MI) weighed in with a nasty-gram to HHS Secretary Kathleen Sebelius demanding extensive additional information on the development of the Stars Demo.  Camp wrote, “With its most recent report, GAO has determined HHS exceeded its legal authority to implement this demonstration, which calls into question all activities surrounding the development of the (Stars Demo)”.   Camp requested that Secretary Sebelius detail all communications with the “CMS Actuaries’ office, the Office of Management and Budget, the White House, the Democratic National Committee, the Democratic Congressional Campaign Committee, the Democratic Senatorial Campaign Committee and” — wait for it —  “Obama for America, which led the agency to take action related to the (Stars Demo)”. Wait, wait — did he just say that? The Obama campaign directed CMS to launch this demo?  Having worked in the agency I can tell you these guys are smoking something excluded from Part D coverage.

Yesterday Rep. Darrell Issa (R-CA), chairman of the House Oversight and Government Reform Committee held a hearing on the Stars Demo and accused the Obama administration of trying to “buy an election” by plowing that $8.3 billion into plans to blunt the impact of the Affordable Care Act’s Medicare Advantage cuts until after the elections.  He pointed out that Medicare Advantage serves 13 million seniors, and as another Republican on the committee — Rep. Scott DesJarlais of Tennessee — pointed out, 13 million voters. They then proceeded to crucify CMS Deputy Administrator Jonathan Blum with statements from GAO  officials who testified that CMS had failed to prove the Stars Demo was established legally and whether it can produce meaningful results. Blum rejected all claims of politics or lack of authorization for the program, saying the Demo’s sole purpose is to encourage MA plans to restructure and bring their costs in line with traditional fee-for-service Medicare. “We see very positive signs that this overall strategy is working,” he testified.
There is ample evidence that Blum is right and that the Stars Demo is having the desired effect. The number of 5-Star MA-PDs year-over-year increased to 9 from 3; 4-Star plans grew from 74 to 95.  According to Barclays, Medicare Advantage titan Humana earned $210 million in additional Stars bonuses with its improvement from 2.4 Stars to 3.1 — that’s real money that management teams pay attention to.  So the carrot is working, and so is the stick: around 25 plans slid off the curve, falling from 3 stars to 2.  CMS has made clear that plans with ratings below 3 stars for 3 consecutive years are subject to contract termination, and already more than a dozen of those underperforming plans have been taken to the woodshed for a warning on just how serious the agency is.  We’ve been getting many of those plans’ calls for help as a barometer of the severity of the threat.  We’re inundated with Stars work from high performers too, seeking to build on their quality and member experience improvement success to date with new clinical interventions and service innovations.  The Stars Demo has forced a fundamental change in the management culture of health plans in Medicare and it’s a change for the much better.  We hear the GOP talk alot about the strength of the private sector in entitlement programs — and Stars is an imperfect but critical incentive and weapon to ensure private plans perform the way we need them to.
Let’s remember that 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. There is a legitimate point to be made here that CMS overstepped its demonstration authority, which is limited to budget-neutral changes in payment to plans and providers — the Stars Demo came with that hefty $8.3 billion price tag.  So to be clear, the Administration has some vulnerability here and the GOP could go to the mat to exploit it and tear down this important experiment.  What’s baffling to me is that Hatch, Camp, and other critics of the Demo are among the strongest advocates of Medicare Advantage in Congress, but instead they’re calling in friendly fire to score political points against the President.