Spending on Medicare Advantage Quality Bonus Payments Will Reach at Least $12.8 Billion in 2023

To inspire Medicare Benefit plans to compete for enrollees according to high quality, the Reasonably priced Care Act (ACA) established a high quality bonus program that will increase bills to plans according to a five-star score machine. Plans might, however don’t seem to be required to, use the extra bills to hide the price of supplemental advantages, together with diminished charge sharing, services and products no longer coated via conventional Medicare (e.g., imaginative and prescient, listening to and dental), and rebates in opposition to the Phase B and/or Phase D premiums. This research examines developments in bonus bills to Medicare Benefit plans, enrollment in plans in bonus standing, and the way those measures range throughout plan sorts and corporations, the usage of publicly to be had knowledge on Medicare Benefit enrollment, fee charges, and high quality rankings.

Key takeaways:

  • Federal spending on Medicare Benefit bonus bills has larger yearly since 2015 and can succeed in a minimum of $12.8 billion in 2023, an build up of just about 30% ($2.8 billion) since 2022.
  • Maximum Medicare Benefit enrollees (85%) are in plans which are receiving bonus bills in 2023.
  • The common bonus fee in step with enrollee is perfect for employer- or union-sponsored Medicare Benefit plans ($460) and lowest for particular wishes plans ($374).
  • Bonus bills range considerably throughout companies, with UnitedHealthcare receiving the most important general bills ($3.9 billion) and Kaiser Permanente receiving the perfect fee in step with enrollee ($523).

Background at the Medicare Benefit High quality Bonus Program

A key characteristic of the standard bonus program is the star rating system. Famous person rankings are used to resolve two portions of a Medicare Benefit plan’s fee: (1) whether or not the plan is eligible for an advantage, and (2) the portion of the adaptation between the benchmark and the plan’s bid this is paid to the plan. The benchmark is the utmost quantity the government can pay for a Medicare Benefit enrollee and is a share of estimated spending in conventional Medicare in the similar county, starting from 95 % in high-cost counties to 115 % is low cost counties. The bid is the plan’s estimated charge for offering services and products coated below Medicare Portions A and B.

Since 2015, plans that obtain a minimum of 4 (out of 5) stars have their benchmark larger. For many plans in bonus standing, the benchmark is larger via 5 share issues. Plans in “double bonus” counties – outlined as city counties with low conventional Medicare spending and traditionally excessive Medicare Benefit enrollment—have their benchmark larger via 10 share issues. As well as, the benchmarks for plans with out rankings because of low enrollment or being too new are larger via 3.5 share issues. The benchmarks are capped and can’t be upper than they might had been previous to the ACA. This may end up in plans which are eligible below the standard bonus program receiving a smaller build up to their benchmark, or in some circumstances, no build up in any respect.

The High quality Bonus Program in 2023

Medicare Benefit plans will obtain a minimum of $12.8 billion in bonus bills in 2023.

Estimated bonus bills to Medicare Benefit plans have larger sharply, greater than quadrupling from $3.0 billion in 2015 to $12.8 billion in 2023 (Determine 1). Since 2022, bills have risen $2.8 billion, or 28%, rising quicker than enrollment over the similar duration, which rose 8%. Those estimates are a decrease sure as a result of bonus bills are chance adjusted, which we predict to extend bonus bills. Moreover, the estimates don’t come with further spending that effects if plans build up their bids when their benchmark is upper on account of being in bonus standing. As an example, a plan may build up its bid to extend bills to suppliers, upload dearer suppliers to its community, or retain a bigger quantity as benefit, equipped they meet scientific loss ratio necessities.

The distribution of bonus spending throughout plan sorts is very similar to the distribution of enrollment in 2023. Person plans account for 64% ($8.2 billion), employer plans account for 19% ($2.5 billion), and particular wishes plans account for 17% ($2.1 billion) of bonus spending in 2023 (Appendix Table 1). (Employers contract with Medicare Benefit plans to offer well being protection to their retirees.)

Maximum Medicare Benefit enrollees (85%) are in plans that obtain bonus bills.

In 2023, 26 million folks, or 85% of Medicare Benefit enrollees, are in plans that obtain bonuses. That compares to simply below 9 million folks (55%) in 2015 (Determine 2). The proportion of enrollees in plans that obtain bonus bills in 2023 is greater than the former yr (75%), and the perfect because the present iteration of this system has been in position. Because the have an effect on of big name rankings on fee lags a yr (i.e., 2023 bills are according to 2022 big name rankings), the expiration of a number of insurance policies in position all over the COVID-19 Public Well being Emergency, which diminished 2023 big name rankings relative to 2022, will most likely result in a smaller proportion of enrollees in plans that obtain bonuses within the 2024 plan yr.

Reasonable annual bonus bills are perfect for enrollees in employer- and union-sponsored plans.

The common annual bonus in step with Medicare Benefit enrollee has additionally larger through the years, emerging from $184 in 2015 to $417 in 2023 (Appendix Table 2). Reasonable bonuses in staff employer- and union- subsidized plans have persistently been upper than for different plans because of upper moderate big name rankings. The common bonus in step with enrollee in a gaggle employer- or union-sponsored Medicare Benefit plan is $460 in 2023, in comparison to $417 for particular person plans and $374 for particular wishes plans (SNPs) (Determine 3).

Bonus bills via company in large part tracks the distribution of Medicare Benefit enrollment.

UnitedHealthcare and Humana, which in combination account for 47% of Medicare Advantage enrollment, are anticipated to obtain 49% of general bonus bills in 2023, or $3.9 billion greenbacks for UnitedHealth and $2.3 billion greenbacks for Humana. (Determine 4). BCBS associates (together with Anthem BCBS) and CVS Well being will obtain $1.7 and $1.3 billion in bonus bills, respectively, adopted via Kaiser Permanente ($966.8 million), Centene ($321.6 million) and Cigna ($247.3 million).

The common bonus in step with enrollee levels from $251 for folks in Centene plans to $523 for the ones in Kaiser Permanente plans. The adaptation in general bonus bills throughout companies corresponds to variations within the proportion of enrollees in plans that obtain bonuses. Just about all enrollees in a Kaiser Permanente plan (99%) are in a plan that receives bonus bills as it has a high quality score of a minimum of 4 stars, whilst simply 55% of Centene enrollees are in a plan that receives bonus bills in 2023.


Annual bonus bills from the government to Medicare Benefit insurers have larger yearly since 2015 and can succeed in a minimum of $12.8 billion in 2023. Spending on bonus bills has grown quicker than enrollment in Medicare Benefit plans. The expansion is pushed via an expanding proportion of Medicare Benefit enrollment in plans with a minimum of a 4-star high quality score, defined partially via a larger number of plans receiving rankings at or above this threshold. This spending comes at a time when the Medicare program is facing growing fiscal pressures, that are exacerbated via expansion in high quality bonus program spending. Expansion within the high quality bonus program is projected to result in quicker expansion in Medicare Benefit benchmarks (and corresponding spending) in comparison to conventional Medicare spending in upcoming years.

The common bonus in step with enrollee varies throughout varieties of plans and has traditionally been lowest for particular wishes plans and perfect for staff employer- and union- subsidized plans. Reasonably low bonus bills for particular wishes plans, which join upper want and extra inclined beneficiaries, and better bonus bills for employer plans that have a tendency to offer retiree well being advantages to better source of revenue beneficiaries, elevate possible considerations concerning the implications of the standard bonus program for fairness.

High quality signs for Medicare Benefit have been established to lend a hand shoppers make knowledgeable choices when opting for amongst Medicare Benefit plans and inspire plans to compete according to high quality. Then again, the Medicare Payment Advisory Commission (MedPAC) and others have argued that the big name rankings  incorporate too many measures, don’t adequately account for social chance elements, and is probably not an invaluable indicator of high quality as a result of big name rankings are reported on the contract fairly than the plan stage.

As of 2023, more than half of eligible Medicare beneficiaries are enrolled in a Medicare Benefit plan and enrollment is projected to keep growing all the way through the following decade. Figuring out the results of the standard score machine and related bonus bills, together with the consequences for Medicare spending and beneficiary premiums, will likely be more and more vital as Medicare Benefit enrollment continues to climb.

This paintings was once supported partially via Arnold Ventures. KFF maintains complete editorial regulate over all of its coverage research, polling, and journalism actions.

Jeannie Fuglesten Biniek and Tricia Neuman are with KFF. Anthony Damico is an impartial advisor.

This research makes use of information from the Facilities for Medicare & Medicaid Products and services (CMS) Medicare Benefit Enrollment, Crosswalk and Panorama information for the respective yr.

This research comprises HMO, POS, native PPO, regional PPO, and PFFS plans. Enrollment counts in publications via companies working within the Medicare Benefit marketplace, comparable to corporate monetary statements, may fluctuate from KFF estimates because of inclusion or exclusion of positive plan sorts, comparable to SNPs or employer plans.

To calculate federal spending on high quality bonus program bills we first bought knowledge on big name rankings from the Phase C and Phase D Efficiency Knowledge, Famous person Scores Knowledge Desk for the former plan yr. Those are the rankings on which a plan’s benchmark is primarily based. We then made up our minds each and every plan’s benchmark the usage of those information and knowledge from the Medicare Benefit Price Ebook, Price Calculation Knowledge, which gives the benchmark via county for plans with a 5%, 3.5% and nil% bonus. A plan’s bonus fee in step with enrollee is the same as the adaptation between its high quality adjusted benchmark (both the 5% or 3.5% bonus price) and the benchmark if the plan was once no longer in bonus (0% bonus price), multiplied via the related share according to its big name score and yr (as an example, 65% for plans with 4 stars and 70% for plans with a minimum of 4.5 stars in 2023). The bonus in step with enrollee is multiplied via enrollees in March of each and every yr to get general spending. Precise bonus bills depends on the danger rankings of Medicare Benefit enrollees. In line with the plan payment information unlock via CMS, the typical chance rating of MA enrollees was once above 1 for yearly from 2015 via 2021 (the newest yr for which information are to be had), that means our estimates most likely understate exact spending.

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