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How important are a Medicare Advantage plan's quality ratings?

Each year since 2012, Medicare Advantage plans have been paid bonuses based on the ratings they receive for overall quality. The ratings are shown as stars, with 5 stars the highest possible score. It’s a familiar format that helps shoppers quickly assess a plan’s worthiness.

You assume when planning a vacation that a 5-star hotel is superior to one with 3 stars. But are you willing to pay $300 a day more for those additional 2 stars? With Advantage plans, the question might be whether you’re willing to pay another $400 a year in premiums to enroll in a higher-rated plan. Would you choose a 3-star plan that has all of your doctors in its network or a 5-star plan whose network does not include your dermatologist?

Most seniors don’t consider the quality ratings when they choose an Advantage plan. That’s what the Kaiser Family Foundation found last year when it conducted focus groups of people 65 and older to determine how they select their Medicare coverage. But ignoring an Advantage plan’s quality rating can be a mistake. That’s true even though there are flaws in the current ratings system and questions about whether the ratings accurately reflect a plan’s quality.

Roughly one-fourth of Medicare’s more than 50 Advantage plan quality measures are based on feedback from plan members. A high rating indicates that a plan is well liked by its enrollees. And a poor quality rating indicates that an Advantage plan has more than its share of dissatisfied members. According to a study by HealthPocket, plans with 2-star and 2.5-star ratings in 2012 had average disenrollment rates of 21.5% and 17.5%, respectively.

By comparison, 5-star plans had an average disenrollment rate of only 1.91%, 4.5-star plans had an average disenrollment rate of 4.89% and 4-star plans were at 6.92%. The average disenrollment rate for all Advantage plans is just under 10%, based on recent government data.

There’s an inverse correlation, then – the higher the quality rating, the lower the disenrollment rate. The HealthPocket study also found that number of complaints per 1,000 members was greatest for the Advantage plans with low quality ratings. So if you select a lower-rated plan, your odds of being disappointed increase. Added evidence comes from a Kaiser Family Foundation review of the 2015 Advantage plans, which found that most of the plans that have closed their doors in the past year were ones with average or inferior quality ratings. Some of that is because plans with ratings lower than 3 stars for 3 straight years must either shut down or merge with a higher-rated plan.

Besides the quality rating, there are other things to consider when you choose an Advantage plan. You should take into account its premiums and deductibles, determine whether it is a low-cost option for the prescription drugs you take and find out whether your doctors are in its network.

It’s also smart to choose a plan with a low out-of-pocket limit and a large network of providers, since small networks may restrict your access to specialists. With so many factors to consider, no plan may satisfy all of them, e.g., the only plan that has all your doctors in its network may also have high costs for your prescription drugs.

While an Advantage plan’s quality rating is a good proxy for how its members feel about the plan, it may not be a valid indicator of medical quality. People who give high marks to doctors and plans for their responsiveness may not know whether they are receiving good medical care. Nor is it always clear about how best to measure this kind of quality, which is different from customer satisfaction. In a New York Times article last July, Dr. Aaron Carroll wrote about how tricky it is to measure medical quality, especially for large populations. The most accurate measure, he said, is improved patient outcomes. And by that standard, he said that paying for quality has not been very successful. That’s because when even small improvements have occurred, they have often been temporary ones.

About the same time that Carroll’s article appeared, the Medicare Payment Advisory Commission (MedPAC) issued a report which said that the way Medicare measures quality is problematic. MedPAC has long supported the concept of paying more for better quality. But in recent years the Commission has also said that current measures are too focused on clinical processes, encouraging doctors in traditional Medicare to provide more of those processes and drive up costs.

The MedPAC report summarized by saying that “some of the process measures are often not well correlated to better health outcomes, there are too many measures overall, and reporting the data needed for the measures places a heavy burden on providers.” The report added that a better set of measures will focus on population-based outcomes and will penalize the overuse of medical services. And concluding with a note of realism, the report said the new measures may take years to develop.

What does that mean for Advantage plans? The government has paid giant quality bonuses to the plans based on what MedPAC says are often the wrong measures. The bonuses have helped plans boost their enrollments by more than 25% since 2012, but there’s no way to know whether the money, which was for improved quality, was wisely spent or was wasted. The answer is probably somewhere in between. While we know that the ratings are tied to customer satisfaction, we do not know if medical quality has improved and if it has, by how much.

Everyone agrees, however, that quality ratings and the related bonuses have given a huge financial stimulus to the plans. Shortly before the bonus program started, Medicare decided to add another $8.3 billion to the amounts authorized by Congress. At the same time, Medicare also watered down the rules for getting a bonus, enough so that 91% of Advantage plans received bonuses in 2012.

For larger plans, the amounts were sizable. In 2012, for instance, Kaiser Permanente Advantage plans were awarded an extra $380 million because of their high quality ratings, which averaged 4.5 stars. The only silver lining for for taxpayers was that the bonuses did not go directly to the bottom lines of insurance companies. Instead plans were required use the additional money to reduce premiums and improve benefits — a good thing even if medical quality was not much improved. That money is one reason that Advantage plan enrollment has surged as plans have redeployed their bonuses in ways that keep seniors’ out-of-pocket costs low and attract new members.

The year before the bonuses started, only 3 out of 550 Advantage plan contracts earned the highest 5-star rating, according to a study by the Kaiser Family Foundation (one contract may include several Advantage plans). In comparison, 13 Advantage plans will have 5-star ratings this year. What’s been more impressive is the rising percentage of Advantage plans rated 4 stars or higher. It has more than doubled since 2011 – from 14% then to 33% now. It seems clear that in their quest for larger bonuses, plans have made substantial progress on the current quality measures.

It will take years for experts to analyze the data and know whether the quality of care in Advantage plans has improved as a result of the bonuses. Still, there are fairly good benchmarks that show the levels of quality that existed before the bonuses began. A recent Kaiser Family Foundation analysis looked at 45 studies dealing with the quality of care.

Forty of the studies compared medical quality in traditional Medicare to that of Advantage plans. The authors were unable to draw many conclusions because 1) most of the studies relied on older data that may no longer be relevant; 2) the studies dealt primarily with HMO’s and not with other kinds of Advantage plans, and 3) the studies focused on groups that are not representative of the overall Medicare population.

The authors were, however, able to draw limited conclusions – HMO plans are better at providing preventive services than is traditional Medicare, people continue to rate traditional Medicare more highly than they do Advantage plans, and those in poor health strongly prefer traditional Medicare. The studies did not include data from 2012, when the quality bonuses began, or later.

This year the bonuses will be smaller and also more difficult to earn, with 4 stars the new minimum qualifying level for a bonus. And Medicare will trim its payments to the plan. That may encourage plans to redirect their attention back toward cost control. ◊◊

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