More on Medicare & Medicaid

MedPAC suggests making Medicare Advantage bonuses budget neutral

UnitedHealthcare reported its strongest enrollment ever for Medicare Advantage plans in 2020.

Susan Morse, Managing Editor

Medicare Advantage plans are lucrative for insurers, as shown from UnitedHealth Group's earnings report.

UnitedHealthcare Group reported strong enrollment in individual Medicare Advantage plans for 2020. In fact, the company's 2020 individual Medicare Advantage annual enrollment results are its strongest ever, UnitedHealth Group CEO David Wichmann said. Within the company's Medicare Advantage offerings including dual eligible growth, UnitedHealth expects to serve nearly 700,000 more people in 2020, the upper end of the range of projected performance.

Other insurers are expected to report similar strong MA results when they release their earnings.

At least a third of seniors are in MA plans over traditional fee-for-service Medicare and that percentage is expected to grow. The Centers for Medicare and Medicaid Services has allowed the plans to offer more supplement health benefits.


What is lucrative for insurers costs Medicare an estimated $6 billion annually due to the bonus tied to MA, according to Medicare Payment Advisory Commission. The bonus program adds $6 billion a year to program costs. This is $94 billion over 10 years, about $24 per enrollee per month.

Reform of the Medicare Advantage quality bonus program is in urgent need, MedPAC said this month.

The current bonus system has too many measures and is not focused on outcomes or patient experience, MedPAC said.

MedPAC suggests a value-incentive program to transition to a budget neutral system, as is the case with FFS Medicare. The value-incentive program would score a small set of population based measures; distribute rewards and penalties at the local market level; use a peer group mechanism to account for differences in enrollees' social risk factors; and transfer from rewards-only to a budget neutral system.

MedPAC commissioners have made no formal recommendation for budget neutral bonus payments. If a recommendation is made, that would likely happen in April.


The Centers for Medicare and Medicaid Services pays Medicare Advantage plans a capitated payment based on a benchmark bid. Payments are further adjusted to reflect differences in expected healthcare spending that are associated with beneficiaries' health conditions. The sicker the patient, the higher the payment.

CMS recently released risk adjustment payment changes.

Beyond the capitated payments MA plans receive for providing benefits, insurers get quality bonuses that are tied to the average quality score. The scores are determined on the basis of a weighted average of ratings that reflect consumer satisfaction and the performance of plans' providers on a range of measures related to clinical processes and health outcomes, according to the Congressional Budget Office.

The Centers for Medicare and Medicaid Services pays higher-rated plans in two ways. First, plans that have composite quality scores with at least 4 out of 5 stars are paid on the basis of a benchmark that is 5% higher than the standard benchmark. Certain urban counties with both low FFS spending and historically high Medicare Advantage enrollment are designated as "double-bonus counties."

The second way that quality scores impact plan payments is through the size of the rebate that a plan receives when it bids below the benchmark. Plans with 4.5 stars or more retain 70% of the difference between the bid and the quality-adjusted benchmark; plans with 3.5 to 4.0 stars retain 65% of that difference and plans with 3 stars or less retain 50% of that difference.

Evidence by MedPAC in 2018 suggested that quality bonuses increased Medicare's payments to plans by 3%.

But this month, MedPAC put that figure at 6%.

Twitter: @SusanJMorse
Email the writer:


Healthcare in 2020: Progress continues, but challenges remain

Healthcare costs will continue to be a major focus in a year that will also see health systems struggle with adequate staffing and security threats.