Skip to main content
Research Highlights

Three studies assess Medicare Advantage quality incentives and spending

Notebook, pencils, and compass on a table, the notebook is titled: Medicare Advantage Plans

Three recent studies, funded in part by NIA, analyzed aspects of the Medicare Advantage program, including quality incentives and the use of hospitalization services and spending. According to a study published in JAMA Health Forum, the Medicare Advantage program reduces the use of hospitalization services and spending for beneficiaries as compared to traditional Medicare. Two other studies published in Health Affairs found that the Medicare Advantage quality bonus program has not improved plan quality or enrollment. Moreover, one of the studies found that the Medicare Advantage double bonus payments create a racial disparity in the distribution of Medicare funds, largely affecting Black Medicare beneficiaries.

Medicare Advantage and the quality bonus program

Medicare Advantage is a federally funded health insurance program in the United States that provides Medicare benefits through private insurance company plans. Different Medicare Advantage plans, sometimes called “Part C” or “MA Plans,” have their own health care networks, including doctors and care facilities.

In 2012, Medicare introduced the quality bonus program to award financial incentives to Medicare Advantage plans that achieve high-quality ratings. The plans are rated from one to five stars based on more than 40 factors that evaluate how well the plan delivers care, such as preventive services, chronic disease management, and customer service. For highly rated Medicare Advantage plans, Medicare pays a bonus equal to 5% of the amount the plan receives for benefits administration. This bonus doubles to 10% for plans in counties that have a history of high enrollment and low fee-for-service Medicare spending — when the doctor or clinic is paid separately for each service provided to a patient.

Health care use and spending in Medicare Advantage versus traditional Medicare

To compare the effects of enrolling in a Medicare Advantage plan versus traditional Medicare, a research team from Harvard University and the University of Pennsylvania analyzed insurance claims data from a single private insurance company. This allowed researchers to evaluate health care use and spending by older adults as they moved from group or individual health insurance plans to Medicare.

During the first year of Medicare coverage, Medicare Advantage beneficiaries had lower hospital use and spending estimated at $95 per beneficiary per month, relative to traditional Medicare. This resulted in 63 fewer stays in the hospital or a nursing facility per 1,000 beneficiaries per year. No significant changes in the use or spending for professional services, such as doctor visits, were found. In comparison to traditional Medicare, Medicare Advantage was associated with a 36% overall reduction in total health care spending in the first year of coverage. These findings were published in JAMA Health Forum.

Medicare Advantage quality bonus program

A national study led by a team from the University of Michigan used health insurance claims data to evaluate the effectiveness of the Medicare Advantage quality bonus program on improving plan performance. Claims information from 2009 to 2018 was collected for adults, age 50 to 74 years, enrolled in either a Medicare Advantage plan or a commercial health insurance plan without a quality bonus incentive. The researchers evaluated the data for changes in nine indicators of Medicare health care plan quality in both groups, before and after the start of the bonus program.

Although the bonus program was associated with significant quality improvement for Medicare Advantage beneficiaries on four measures, there were significant declines on four other measures and no significant change in the overall quality performance of the Medicare Advantage plans. These findings, published in Health Affairs, suggest that in contrast to the program’s goal, the quality bonus did not improve the overall quality of the Medicare Advantage plans.

Medicare Advantage double bonus payments

In another study, the University of Michigan team analyzed the effects of the Medicare Advantage double bonuses on plan quality and other factors. Using Medicare data from 2008 to 2018, the team compared trends in plan quality and enrollment before and after the introduction of the bonuses in double bonus counties and ineligible counties. Remarkably, they found that the double bonuses were not associated with either improvements in plan quality or increases in plan enrollment.

Examining the impact of the double bonuses on payments to Medicare Advantage plans overall, the researchers found that from 2012 to 2018, the plans in double bonus counties received an estimated $10.2 billion more than plans in ineligible counties. Moreover, the study showed that Black beneficiaries were 35% less likely to live in double bonus-eligible counties compared to white beneficiaries. As a result, the distribution of Medicare double bonus payments to Medicare Advantage plans was smaller, on average, to care for Black beneficiaries compared to white beneficiaries. Using the average difference of $31 per Black beneficiary per year, the researchers estimated that plans serving white beneficiaries gained $446 million more for care than plans serving Black beneficiaries during the 2012-18 period due to double bonuses. These findings were published in Health Affairs.

Looking ahead

The findings from these studies provide important insights for policymakers to consider when making decisions about future Medicare payment policies. Additional research is needed to help understand quality differences for beneficiaries in Medicare Advantage plans and the potential impact of the double bonus payments on racial health disparities in Black beneficiaries.

This research was supported in part by NIA grants P01AG032952 and 2P01AG032952-11.

References

Schwartz AL, et al. Health care utilization and spending in Medicare Advantage vs traditional Medicare: A difference-in-differences analysis. JAMA Health Forum. 2021;2(12):e214001. doi: 10.1001/jamahealthforum.2021.4001.

Markovitz AA, et al. The Medicare Advantage quality bonus program has not improved plan quality. Health Affairs. 2021;40(12):1918-1925. doi: 10.1377/hlthaff.2021.00606.

Markovitz AA, et al. Medicare Advantage plan double bonuses drive racial disparity in payments, yield no quality or enrollment improvements. Health Affairs. 2021;40(9):1411-1419. doi: 10.1377/hlthaff.2021.00349.