Medicare Advantage Program Standards Tightening

The most significant change on tap to the ratings system is expected to be an increase in the star threshold for bonus payments to health plans, based on a wide array of quality standards.

In addition to a widely anticipated cut to the Medicare Advantage payment rate in 2015, the Centers for Medicare & Medicaid Services are expected to announce Monday several changes to the MA five-star ratings program.

The most significant ratings change on tap to the ratings system is expected to be an increase in the star threshold for bonus payments to health plans, based on a wide array of quality standards.

When the star ratings program's three-year demonstration period comes to a close at the end of this year, three-star ratings will no longer make the bonus payment cut; four-star ratings will become the new gold standard.

The bonus payments are  a "the big driver" of the MA star ratings program, according to Michael Kavouras, VP of star ratings at the Connecticut-based insurer, Aetna. "There are revenue opportunities for health plans," he said in a phone interview.

The pay-for-performance program can earn insurers a five percent bonus on top of the benchmark payment rate in the particular county or counties where an MA health plan is offered. The benchmarks set the maximum amount Medicare will pay a health plan in an area.

"There's a huge financial and competitive advantage to companies that can sustain four stars," Kavouras said of the anticipated 2015 program, noting Aetna has been investing bonus payment dollars back into its MA health plans to help achieve quality standards and lower costs.

The six percent payment rate cut to MA health plans in 2014 and the anticipated six percent cut in 2015 heightens the importance of the bonus payments for insurers, he says.

"Medicare Advantage payment cuts are hitting a level now where health plans are going to have to make choices," Kavouras says. "Plans will have to make choices if they are not getting those bonus payments."

In the proposed 2015 MA payment rate and rules document released in February, the star ratings program was described by CMS as an essential element to achieving quality. The agency noted that it is striving to optimize the program.

"One of CMS's most important strategic goals is to improve quality of care and general health status for Medicare beneficiaries," the document states. "For the 2015 Star Ratings…Our priorities include enhancing the measures and methodology to reflect the true performance of organizations and sponsors, maintaining stability due to the link to payment, and providing advance notice of future changes."

Health Plans Face Termination
In addition to the new four-star threshold for bonus payments, CMS's final 2015 MA rules are expected to reaffirm the agency's determination to oust health plans from the program if they score at the two-star level for three consecutive years.

"From CMS's view, you're talking about low performers," Kavouras says, noting Aetna does not have any MA health plans with less than 3-star ratings. "It should be rare. It's probably the right thing to do… so beneficiaries have high-quality plans."

For 2014, only 1.1 percent of MA health plans posted a two-star or 2.5-star rating, according to a Barclays analysis.

While Aetna does not have any low-performing MA health plans, it does have "some 3.5 star plans" that will pose a risk for the company when the new four-star bonus payment threshold starts in 2015, Kavouras says, noting that market forces are at play in some areas of the country that make it hard for MA insurers to reach the star-star mark.

"We think CMS should look closely at that," he said. "In one market, Aetna is the top performer in the state but only has 3.5 stars."

While acknowledging that setting a star threshold for bonus payments is "a challenge for CMS," Kavouras says the quality measurement difference between an Aetna MA health plan earning a 3.5-star rating versus a four-star rating has been as little as 0.003 of a point. "You're talking about minute differences," he says.

Big Ratings Star Ratings Changes to Come in 2016
In seeking a better way to finesse the "minute differences" in quality assessment grading, CMS is poised to make a controversial change to the MA star ratings program, Kavouras says.

The 2015 rules could include the removal of a suite of set standards used to help determine four-star quality ratings. The current set standards include quality measures such as the percentage of a MA health plan's beneficiaries who get annual breast cancer screening.

"A key concern is the potential for generating Star Ratings that do not reflect a contract's 'true' performance, otherwise referred to as the risk of 'misclassifying' a contract's performance (e.g., scoring a 'true' four-star contract as a three-star contract, or vice versa)," CMS states in the proposed 2015 rules.

"Misclassification," it reads, "occurs in any measurement system because all performance measurement is a mixture of signal (true performance) and noise (random measurement error due to rounding, variation due to who is sampled, and similar factors)."

The proposed 2016 star measurement change is designed to strike a better balance between transparency for consumers and the wealth of data at regulators' disposal to set star ratings, according to the proposed rules:

"Over the years several features have been implemented in the quality rating system to simplify the information for consumers, as well as to make the ratings process and methodology more transparent for organization/sponsors. For example, we group the measure scores into star categories and round the data to make it easier for consumers to understand what a particular score means."

"We have also implemented pre-determined four-star thresholds for some measures since the 2011 Star Ratings to increase transparency for organizations/sponsors and set a priori expectations for high performance. However, all of these features create more 'noise' or measurement error in the system."

Removing the suite of set standards for four-star quality will pose a daunting challenge for MA insurers and their provider networks, Kavouras says, calling the proposed change "switching to grading on a curve… We won't know the rules we're being graded on until after the fact. It really confuses providers about the standards they are being graded on."

Having set standards for some four-star quality measures has allowed insurers and providers to work in tandem to achieve clearly understood and measurable quality goals. "It allowed us to work with our providers," Kavouras says. "Providers need and want to know what the benchmarks are."

In the proposed rules CMS acknowledges insurers' concerns, but contends the star ratings system needs restructuring:

"Whole stars contain less information than the corresponding measure data because there is information loss associated with converting a numeric scale to a 1- to 5-star rating. While we understand sponsors' perceptions that pre-determined four-star thresholds provide stability in setting performance expectations, in reality the use of pre-determined thresholds violates our principle of assigning stars that maximize the difference between star categories."