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Insurers cash in on Medicare Advantage quality incentives

But sanctions against Cigna lead some to question star ratings' validity

Private insurers that offer Medicare Advantage (MA) plans are increasingly investing in quality initiatives that provide a boost to the plan's star rating tied to millions of dollars in government incentives, according to an article by Kaiser Health News, published by USA Today.

More plans than ever earned high star ratings for 2016, as roughly half of MA plans with Part D coverage earned four stars or higher, which was a 25 percent increase from the year before. Experts tell KHN more than $3 billion in federal bonus payments are incentivizing insurers to invest in new approaches to manage conditions like blood pressure and osteoporosis.

Major insurance companies like UnitedHealthcare could earn as much as $1.4 billion in bonus payments in 2016, a $532 million increase from the year before, analysts told KHN. Vantage increased its plan's rating from 3.5 stars to 4 after purchasing a $10,000 ultrasound machine to screen women for osteoporosis after a fracture; the rating bump led to an extra $8 million.

"Getting to 4 stars is really, really critical," Michael Kavouras, vice president of star ratings at Aetna, told KHN.

Although insurers must use the funding for additional benefits, a more comprehensive plan can draw in more members, which translates to higher profits and the potential for bigger bonuses. MA enrollment has skyrocketed over the last several years even amid funding cuts from the Affordable Care Act. In 2015, more than 17 million seniors enrolled in MA plans, accounting for nearly one-third the Medicare population.

But the ratings system isn't flawless. In January, the Centers for Medicare & Medicaid Services (CMS) banned Cigna from selling new Medicare plans for operating MA and Part D plans that violated federal regulations. As KHN points out, Cigna earned a 4- or 4.5-star rating on 14 contracts, and even notched one 5-star rating, when CMS released its ratings in October. Days prior, CMS launched an audit into Cigna's practices following numerous warnings and corrective action plans, and by the time the audit was complete, open enrollment was just getting started. However, the sanctions weren't released publically until January.

The timeline has raised concerns about whether or not CMS should have let consumers know about the sanctions earlier, and it led some to question the validity of the ratings worth millions of dollars.

"When you have a high-rated plan that is given enrollment sanctions, that could have the effect of undermining the trust the public has in the ratings system," David Lipschutz, managing attorney for the Center for Medicare Advocacy, told KHN.

To learn more:
- read the KHN article

Related Articles:
More plans earn high marks in 2016 Medicare Advantage Star Ratings
Little change in Medicare Advantage premiums as enrollment keeps climbing
Medicare Advantage enrollment surges despite payment cuts
3 revelations about this year's Medicare Advantage Star Ratings
CMS sanctions Cigna over 'substantial failures' in Medicare plans