Ratings of Medicare Advantage Plans Take Fire

Do government ratings of private Medicare insurance plans help consumers? Are they even fair?

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Using stars to rate health plans isn't as simple as using them to rate restaurants or movies. Just ask the agency that governs Medicare, which is now facing renewed criticism over the one- to five-star ratings it uses to evaluate Medicare Advantage plans.

That agency, the Centers for Medicare and Medicaid Services, began posting its ratings in 2007 to help seniors covered by Medicare shop for private-sector alternatives. Advantage plans, offered to seniors 65 and older by private insurance companies, provide a different mix of costs and benefits than standard Medicare. The ratings are based on about 50 measures of clinical quality, patient experience and customer service. In theory, at least, the ratings give Medicare a way to nudge people toward plans that are higher performers and to steer them away from those that do a poorer job. This year Medicare has begun using the star ratings to peg payment to performance, by awarding billions of dollars in bonus money to insurers whose plans earned enough stars.

With the federal budget so tight and the stakes so high—roughly $3 billion in bonuses, according to a Kaiser Family Foundation analysis—critics were bound to surface. A paper released last week by the conservative think tank American Action Forum asserts, among other things, that health plans aren’t given critical details about how they’re being judged until after the judging’s completed. In March, the U.S. Government Accountability Office and the congressional Medicare Payment Advisory Commission, or MedPac, separately raised an even more sweeping concern: that Medicare is giving billions in bonuses to average plans. It takes only three stars for a plan to qualify for a taxpayer-funded bonus.

Under federal law, Medicare is authorized to reward bonuses to plans with four stars or more. MedPac reported that Medicare used its statutory authority to launch a national demonstration project that allowed it to boost the number of bonus checks it writes and to lower the qualifying bar. As a result, 91 percent of Medicare Advantage plans will receive bonuses in 2012. Jonathan Blum, deputy administrator for Medicare, told Kaiser Health News that the payments were made available to average plans to motivate them to improve, which would bring bigger bonuses.

At the core of the debate, says Medicare analyst Gretchen Jacobson of the Kaiser Family Foundation, are two critical questions: Does the star rating system really live up to its goal of measuring the quality of health plans? And, if it does, how should plans be rewarded for providing higher quality?

Medicare’s demonstration project is unlikely to provide definitive answers. That’s because there’s no way to compare the star ratings now in use with any other rating system. It’s also difficult, if not impossible, to measure how plans have fared over time because Medicare has changed the rating system’s methodology. A cursory reading of the current methodology highlights why there’s room for debate. It doesn’t take an expert to question whether one plan necessarily should be judged more favorably because a greater number of its members discussed exercise with their doctors. Or to question the statistical weights the government assigned to such factors as the availability of interpreters and the percentage of people with rheumatoid arthritis who received treatment.

Dr. Brian Biles, a physician and health policy expert at George Washington University, says that these quality measures matter far less to consumers than more immediate concerns, such as the plan’s cost and whether they’ll have access to specific doctors.

“The star stuff is well down their list,” Biles says.

Two years ago, Marsha Gold, a Medicare expert at the consulting firm Mathematica Policy Research, looked to see how well the information available on Medicare’s website served the broader needs of people seeking to enroll in Medicare Advantage plans.

In her paper, Gold examined the plans available to people living in President Obama’s former neighborhood, the Hyde Park section of Chicago, ZIP code 60637. She found plenty of information on the site, but her analysis found that far too much of the information was difficult to interpret or misleading.

A search of plans available in the same ZIP code this week turned up similarly confusing information. It identified 14 Medicare Advantage plans that were available to neighborhood residents, 11 with drug coverage, three without. All of the plans were given three or 3.5 stars, except for two that were “too new” to be rated and a third—labelled Aetna Medicare Value Plan (HMO) (H1419-001-0)1—that had no stars, only a warning that it merited “low ratings from Medicare three years in a row.” The near-uniformity of the star ratings on the plans that were rated made it virtually impossible to detect any qualitative differences that might simplify the selection process for someone trying to buy coverage.

Biles says that picking a plan on Medicare’s website is so challenging that each year he assigns the task to graduate students, who must then write a paper on what they’ve found. Only a fourth of his budding health services researchers get A’s on the assignment, Biles says. Two-thirds get B’s or below.

And they’re relatively healthy youngsters with a deep interest in health policy—not seniors facing real-world health concerns without any special knowledge of health insurance.