The Obama administration will extend special bonus payments meant to reward top-performing Medicare Advantage insurers to those that score only average ratings.One provision of the Affordable Care Act (ACA) sets out to fund the expansion of health care in two ways: by capping Medicare payments incrementally and by creating performance incentives for Medicare Advantage (MA) insurers to deliver higher-quality services at a lower cost. Some of those performance incentives include bonuses. Now, these bonuses will reward MA insurers to deliver not top-performing results, but mediocre results, irrespective of any cost-cutting measures.
The three-year plan goes beyond what the health law called for in creating the bonuses. The law says bonuses, which start in 2012, would go to insurers that scored at least four out of five "stars" on a set of quality measurements.
Instead, a "demonstration project" authorized by Medicare officials will extend bonus payments to plans that score at least three stars. Based on this year's star ratings, the change means 62 percent of all Medicare Advantage insurers — representing 84 percent of enrollees — will qualify for the quality bonuses, compared with only 14 percent of plans under the health law provisions. [...]
The total cost over the three years is $1.3 billion. Wall Street likes it: Barclays Capital analyst Joshua Raskin, in a report, called the decision a "clear and unexpected positive" for managed care stocks. But some consumer advocates expressed skepticism, wryly noting that lowering the bar for bonuses reminded them of the fictional Lake Wobegon, where all the children are above average. [...]
"It's only been eight days since the election," Raskin wrote in his report, "but the rollback of Medicare Advantage cuts got its first step forward."
The Incidental Economist, an expert in health care policy and a long-time advocate for the ACA, is not surprised:
[I]t's just another piece of evidence that administrative pricing doesn't work. Give administrators the authority to fiddle with payments and they're too heavily influenced by those getting paid. This has been a problem in Medicare for decades and, by the way, is a problem for Rep. Paul Ryan's plan too. [...]This is what opponents of the ACA have been saying all along. Medicare savings are illusory. And as the Incidental Economist himself admits, administratively-set prices and compensation are ripe for political machinations, which this story illustrates perfectly. But yet, he refuses to see the real problem in the ACA:
[T]he American health system has three problems: (1) the cost is too high, (2) the quality is too low, (3) and many people lack sufficient access to care. The ACA addresses the last of these most thoroughly, though not completely. But it does so in a way that at least sets the stage to address the first two as well. There are lots of other provisions in the law, beyond those pertaining to MA, that target costs and quality, some simultaneously. Will those be weakened too?Really? So for him, the problem with the ACA is that we haven't started to get serious about it? Oh, brother.
When will we get serious about this stuff? It really matters and we're blowing it!
No, the real question is: how is anyone surprised by this?
