GAO Report Criticizes Star Ratings Reimbursements

  • Originally published May 1, 2012 , last updated January 12, 2016
  • Medicare
GAO Report Criticizes Star Ratings Reimbursements

According to a report from the Government Accountability Office (GAO), Medicare is wasting $8.35 billion on its quality bonus demonstration project, which bases plan reimbursements on CMS Star Ratings data. This was in the news quite a bit last week, so it wouldn’t hurt to brush up on your knowledge of star ratings in case you get questions from clients.

The quality reimbursement program came under fire because most of the bonuses are being paid to plans with average (3-star) ratings. Originally the PPACA called for reimbursements tied to star ratings, but it was limited to plans with 4 or more stars. CMS’s Office of the Actuary (OACT) estimated that PPACA’s payment reforms would reduce Medicare payments to MA plans by $145 billion over nine years and would cause plans to offer less generous benefit packages. OACT also projected that MA enrollment in 2017 would be half as much as it would have been in PPACA’s absence.

Rather than implement PPACA’s bonus structure, CMS announced in November 2010 that it would conduct a nationwide demonstration from 2012 through 2014 to test an alternative method for calculating and awarding bonuses. The CMS method extended quality bonus payments to plans with three or more stars and increased bonus percentages across the board. According to the GAO report, the CMS demonstration has increased bonus payments by $5.35 billion.

Download the GAO report here

Here’s a breakdown of how quality bonus payments are structured under PPACA vs. the CMS demonstration.

The GAO has called on the administration to cancel the project because there is no evidence that the increased payments will do anything to improve care. CMS has defended the program, saying it will improve quality of care in Medicare Advantage and reduce costs in the long run.

"CMS believes the demonstration supports our national strategy to improve the delivery of health care services," the health department wrote. "Absent this demonstration, we believe many plans would not have an immediate incentive to improve the quality of care to [Medicare Advantage] enrollees."

For now it doesn’t look like anything is going to change.