The feds are overpaying Medicare Advantage plans over $12.8 billion in bonuses.
The feds will hand over $12.8 billion in bonus payments to private insurance companies that offer Medicare Advantage plans in 2023.
This is according to a new KFF analysis.
It is an increase of 30% over 2022, and more than quadruple the spending in 2015.
It’s a booming economy if you’re in the private health insurance business.
Medicare Advantage program provide health insurance coverage to nearly 31 million of us.
The bonus payments, which were established by the Obama Affordable Care Act, are based on a five-star rating system and are supposed to encourage Medicare Advantage plans to compete for enrollees based on quality.
The payments vary substantially across firms, with UnitedHealthcare receiving the largest total payments ($3.9 billion) and Kaiser Permanente the highest payment per enrollee ($523).
But many experts in the field are very critical about the quality rating system and about whether the bonus payments are actually earned.
According to a study by the Urban Institute, the MA star rating system does not appear to be achieving the goals of informing beneficiaries or getting MA insurers to actually improve quality. Instead it is a significant source of overpayment to the private insurance industry.
More than half of contracts receive bonuses for “high quality,” and these contracts represented over 75 percent of MA enrollment in 2023.
Meanwhile, the rating system has not identified persistently low-performing plans.
In short, says the Urban Institute study, bonuses are a windfall for insurers that does nothing to provide valuable information to beneficiaries or protect them from poor performance.
There is widespread agreement among healthcare researchers that MA insurers are overpaid.
And I’m with them.