Medicare Advantage 101: The Rise of Quality Bonuses

Medicare Rights recently released Medicare Advantage 101, a series of explainers and videos covering the rise and potential downfalls of the Medicare Advantage (MA) program. The series delves into MA history and the current system of overpayment that is burdening Medicare and taxpayers.

One factor driving increased MA payment is the quality bonus program. This program was intended to reward MA plans for increasing the quality of care they provide but, in practice, the payments appear simply to drive up costs and reward mediocre plan offerings.

A new report from KFF shows that this problem is only escalating. Quality bonus payments have risen every year since 2015, more than quadrupling in total dollars. In 2023, plans will be paid at least $12.8 billion, a 30% increase over 2022.

Importantly, this increase does not appear to be aligned with any discernible quality improvement. In its annual report to Congress in March, the Medicare Payment Advisory Commission (MedPAC) stated outright that “The current state of quality reporting is such that the Commission’s yearly updates can no longer provide an accurate description of the quality of care across MA plans.”

As KFF flags, 85% of MA enrollees are in plans that are receiving bonus payments, showing that these payments do not reward extraordinary quality. And the outcomes for MA enrollees do not appear to show marked improvement over those in Original Medicare.

A KFF review of dozens of studies found that “Medicare Advantage outperformed traditional Medicare on some measures, such as use of preventive services, having a usual source of care, and lower hospital readmission rates. However, traditional Medicare outperformed Medicare Advantage on other measures, such as receiving care in the highest-rated hospitals for cancer care or in the highest-quality skilled nursing facilities and home health agencies. Additionally, a somewhat smaller share of traditional Medicare beneficiaries than Medicare Advantage enrollees experienced a cost-related problem, mainly due to lower rates of cost-related problems among traditional Medicare beneficiaries with supplemental coverage. Several studies found lower use of post-acute care among Medicare Advantage enrollees but were inconclusive as to whether that was associated with better or worse outcomes.”

These inconclusive data, especially when coupled with high profits, inappropriate coverage denials, and rising burdens on people with Medicare, make it essential to investigate the utility of the quality bonus program.

At Medicare Rights, we support an overhaul, or even elimination, of the program as well as heightened scrutiny of MA more generally. Without vigorous reforms, the rise of MA threatens access to care, financial stability, and taxpayer pocketbooks.

Explore Medicare Advantage 101.

Read more about the quality bonus program.