	MA Quality Bonus Payment Demonstration

CMS’s quality bonus payment demonstration includes several key  changes from the quality bonus system established by PPACA. In contrast, the demonstration significantly increases  the number of plans eligible for a bonus, enlarges the size of payments  for some plans, and accelerates payment phase-in. In announcing the  demonstration, CMS stated that the demonstration’s research goal is to  test whether scaling bonus payments to the number of stars MA plans  receive under the quality rating system leads to larger and faster annual  quality improvement for plans at various star rating levels compared with  what would have occurred under PPACA. In March 2012, we reported that CMS’s Office of the Actuary (OACT)  estimated that the demonstration would cost $8.35 billion over 10 years— an amount that is at least seven times larger than that of any other  Medicare demonstration conducted since 1995 and greater than the  combined budgetary effect of all those demonstrations. Plans are required to use these payments to provide their  enrollees enhanced benefits, lower premiums, or reduced cost-sharing.We also found that the additional Medicare spending will mainly benefit  average-performing plans—those receiving 3 and 3.5-star ratings—and  that about 90 percent of MA enrollees in 2012 and 2013 would be in plans  eligible for a bonus payment. Our March 2012 report also identified several shortcomings of the  demonstration’s design that preclude a credible evaluation of its  effectiveness in achieving CMS’s stated research goal. Given the findings from our program review of the demonstration’s  features, we recommended in our March 2012 report that the Secretary of  Health and Human Services (HHS), who heads the agency of which CMS  is a part, cancel the demonstration and allow the MA quality bonus  payment system authorized by PPACA to take effect. HHS did not agree. In addition to our March 2012 report, we sent a letter on July 11, 2012, to  HHS regarding CMS’s authority to conduct the demonstration. In our  letter, we stated that CMS had not established that the demonstration met  the criteria set forth in the Social Security Amendments of 1967, as  amended—the statute under which CMS is conducting the demonstration. The approximately 9 million dual-eligible beneficiaries are particularly  costly to both Medicare and Medicaid in part because they are more likely  than other Medicare beneficiaries to be disabled, report poor health  status, and have limitations in activities of daily living. In September 2012, we reported that the 2012 D-SNP contracts with state  Medicaid agencies that we reviewed varied considerably in their  provisions for integration of benefits. Two-thirds of the 124 contracts  between D-SNPs and state Medicaid agencies that were submitted to  CMS for 2012 did not expressly provide for the integration of any benefits. Like other MA plans, D-SNPs must cover all the benefits of fee-for- service, with the exception of hospice, and may offer supplemental  benefits, such as vision and dental care. In our September 2012 report, we examined the supplemental benefits  offered by D-SNPs and found that D-SNPs provided fewer supplemental  benefits than other MA plans. We could not report on the extent to which benefits specific to D-SNPs  and described in the model of care were actually provided to beneficiaries  because CMS did not collect the information. We found that plans do not use standardized performance measures in  their models of care, limiting the amount of comparable information  available to CMS. HHS agreed with our recommendations and in its comments on a draft of  our report, said that it plans to obtain more information from D-SNPs. Medicare Cost Plans

In contrast to MA plans, which have a financial incentive to control their  costs, a small number of Medicare private health plans—called cost  plans—are paid on the basis of their reasonable costs incurred delivering  Medicare-covered services. For example, cost plans, unlike MA plans,  allow beneficiaries to disenroll at any time. As part of our 2009 report on cost plans we also described the concerns  of officials from Medicare cost plans about converting to MA plans.
Why GAO Did This Study

As of August 2012, approximately 13.6 million Medicare beneficiaries were enrolled in MA plans or Medicare cost planstwo private health plan alternatives to the original Medicare fee-for-service program. This testimony discusses work GAO has done that may help inform the Congress as it examines the status of the MA program and the private health plans that serve Medicare beneficiaries. It is based on key background and findings from three previously issued GAO reports on (1) the MA quality bonus payment demonstration, (2) D-SNPs, and (3) Medicare cost plans. This information on cost plans was updated, based on information supplied by CMS, to reflect the status of cost plans in March 2012.

What GAO Found

In March 2012, GAO issued a report on the Centers for Medicare & Medicaid Services (CMS) Medicare Advantage (MA) quality bonus payment demonstrationa demonstration CMS initiated rather than implementing the quality bonus program established under the Patient Protection and Affordable Care Act (PPACA). Compared to the PPACA quality bonus program, CMSs demonstration increases the number of plans eligible for a bonus, enlarges the size of payments for some plans, and accelerates payment phase-in. CMS stated that the demonstrations research goal is to test whether scaling bonus payments to quality scores MA plans receive increases the speed and degree of annual quality improvements for plans compared with what would have occurred under PPACA. GAO reported that CMSs Office of the Actuary estimated that the demonstration would cost $8.35 billion over 10 yearsan amount greater than the combined budgetary impact of all Medicare demonstrations conducted since 1995. In addition, GAO also found several shortcomings of the demonstration design that preclude a credible evaluation of its effectiveness in achieving CMSs stated research goal. In July 2012, GAO sent a letter to the Secretary of Health and Human Services (HHS), the head of the agency of which CMS is a part, stating that CMS had not established that its demonstration met the criteria in the Social Security Act of 1967, as amended, under which the demonstration is being performed.
In September 2012, GAO issued a report on Medicare dual-eligible special needs plans (D-SNP), a type of MA plan exclusively for beneficiaries that are eligible for Medicare and Medicaid. Dual-eligible beneficiaries are costly to Medicare and Medicaid in part because they are more likely than other beneficiaries to be disabled, report poor health status, and have limitations in activities of daily living. GAO found that two-thirds of 2012 D-SNP contracts with state Medicaid agencies that it reviewed did not expressly provide for the integration of Medicare and Medicaid benefits. Additionally, GAO found that compared to other MA plans, D-SNPs provided fewer, but more comprehensive supplemental benefits, such as vision, and were less likely to use rebatesadditional Medicare payments received by many MA plansfor reducing beneficiary cost-sharing. GAO could not report on the extent to which benefits specific to D-SNPs were actually provided to beneficiaries because CMS did not collect the information. GAO also found that plans did not use standardized performance measures, limiting the amount of comparable information available to CMS.
In December 2009, GAO issued a report on Medicare cost plans, which, unlike MA plans, are paid based on their reasonable costs incurred delivering Medicare-covered services and allow beneficiaries to disenroll at any time. GAO found that the approximately 288,000 Medicare beneficiaries enrolled in cost plans as of June 2009 had multiple MA options available to them. GAO updated this work using March 2012 data and found that enrollment in cost plans had increased to approximately 392,000 and that 99 percent of Medicare beneficiaries enrolled in cost plans had at least one MA option available to them, although generally fewer options than in 2009.

What GAO Recommends

In a March 2012 report on the MA quality bonus payment demonstration, GAO recommended that HHS cancel the MA quality bonus demonstration. HHS did not concur with this recommendation. In a September 2012 report on D-SNPs, GAO recommended that D-SNPs improve their reporting of services provided to beneficiaries and that this information be made public. HHS agreed with these recommendations.