The latest report to Congress from the Medicare Payment Advisory Commission (MedPAC), issued March 15, includes several recommendations that could lead to payment adjustments for Medicare Advantage plans, including a possible 1% bump on average if CMS were to exclude Part A-only beneficiaries from its benchmark formula. But what’s caught the attention of some industry experts is the commission’s advice on star quality ratings that would essentially even the playing field among plan sponsors and further CMS’s goal of helping seniors make informed choices.

In the 455-page report, MedPAC revisits several MA-related issues from prior reports, including the potential for contract consolidation and “cross-walking” to “erode the validity of the star rating system as a measure of plan performance in a given area.”

CMS for years has been encouraging companies offering MA plans to consolidate contracts for the purposes of streamlining contract administration, but since the advent of bonus payments in 2012, the cross-walking of beneficiaries from a closed contract to another contract has created a two-fold problem, the commission suggests. One is that enrollees end up being moved from a contract for which the organization would not have received bonus payments for their enrollees to a contract that qualifies for bonuses. The second is that the cross-walking process leads to beneficiaries receiving “inaccurate information” about the quality of care in MA plans available in their area because of the manner in which quality data are reported, asserts MedPAC. This year alone, contract consolidation resulting in a bonus-level star rating impacted more than 700,000 enrollees, observes the report.

“The issue has been happening for years, generally only in the larger payers where they have a portfolio of contract numbers to work with and the strategic leadership and infrastructure needed to support doing this cross-walking and these carefully crafted consolidations,” observes Melissa Smith, vice president of star ratings with Gorman Health Group. “So if you’re a plan and you want to reduce the number of contracts, which CMS has encouraged over time, it would be a natural motivation to close down contracts that are below 4 stars and move those members into a contract that is at or above 4 stars. And you can actually see that play out inside the bell curve, where the contracts on the lowest performing end just disappear from one year to the next. And a lot of that is purposeful where the plan is working to retire contract numbers.”

MedPAC Proposes ‘Averaging Method’

UnitedHealth Group, for example, merged two regional plans operating in the southern United States — with enrollment of 380,000 members and a star rating below 4 stars — into the company’s northeastern regional plan that serves about 20,000 enrollees and has a 4-star rating, observes the report.

One potential solution offered by MedPAC is to use an “averaging method” to calculate the rating for the surviving contract, where the members in the old contract essentially bring forward their star ratings — the 380,000 members going into the 20,000-member UnitedHealth plan — to result in a proportionate recalculation of the surviving contract’s star rating. This solution, Smith contends, would be “reasonable, manageable and doable” with “very little noise” and presents a “high-value way to help beneficiaries.” Another alternative presented by MedPAC is to award bonus payments as though the cross-walking hadn’t occurred (e.g., the Northeast plan receives bonus payments for just the 20,000 enrollees).

MedPAC also pointed out that consolidation has continued so much that, as of 2016, about one-third of MA enrollees were in contracts with substantial enrollment in noncontiguous states across the country, and in many states, statewide contracts serve market areas within a state that have “very different characteristics and can have differing levels of quality,” the commission pointed out. And one suggestion that has come up before is the implementation of market-specific quality reporting.

“MedPAC has talked about this on and off for some time, but I think what they’re concerned about now is that these organizations are grouping like service areas into contracts simply to kind of game the system and get a star rating bonus,” suggests Eric Goetsch, a principal and consulting actuary in the Milwaukee office of Milliman. Under the current system, plans with noncontiguous service areas can receive an overall star quality rating that might have differed for one market had the measures been reported separately for each market. Reporting quality at the market-area level would “bring more fairness to the MA world,” which is likely to gain some traction with CMS, observes Goetsch.

MedPAC also recommended displaying a comparison of MA and fee-for-service (FFS) quality in the same small market areas. “It’s burdensome and a new hassle factor to deal with from a reporting perspective, but again, that presents very high value for the beneficiaries…and would add a new nuance of relativity into the star ratings,” adds Smith.

With any of these star rating recommendations, Smith says the timing is right because HHS Secretary Tom Price, M.D., is likely to make changes to the star ratings program. “Price has made no secret that he is a physician advocate and that the current system, not just MA but everything, has made it too challenging for physicians. So MedPAC has specifically called out increasing the focus on outcomes measures, which is a great way to keep the focus where it needs to be and could be the launching pad to really start doing things like removing the longstanding HEDIS measures that are not changing quality performance or clinical practice patterns,” she adds.

Altering Benchmark Math Could Boost Pay

Aside from suggesting changes to quality measurements, the report also finalizes a draft recommendation from January that CMS include FFS spending data for only beneficiaries with Medicare Parts A and B in the calculation of benchmarks used to determine MA plan payments. Under the current system, CMS uses spending data for all FFS beneficiaries (who have either Part A or Part B or both) to determine the average FFS spending amount in a county. MedPAC observed that with a rising share of Medicare beneficiaries enrolled in the MA program, a larger percentage of those remaining in traditional Medicare do not enroll in Part B, and the average risk-adjusted beneficiary spending is higher for individuals enrolled in both Part A and Part B than the average for those enrolled just in Part A. Removing the portion of low cost, Part A-only beneficiaries from the calculation would result in a higher average cost in a given county and raise the benchmark accordingly. The commission estimated this could increase benchmark payments by about 1% nationally, although that will vary anywhere from 0% to 3% depending on the county.

“As this idea gets traction and organizations are looking to lobby for this or not, they’re going to be looking at their own counties and what the impact would be in their service areas,” suggests Goetsch. “And those that are going to get the 2% or 3% increase are going to clearly be a lot more vocal in trying to get this as part of the MA program.” Moreover, it’s logical to use the FFS data for a population that matches it in MA, he adds, and the only reason that idea might not have made sense until now is because of the mix of people in MA vs. Part A vs. Parts A and B, etc.

The report also stressed a prior recommendation to use two years of FFS and MA diagnostic data in MA risk adjustment, which would address the wide variation in coding intensity among MA plans and the “inequity” of the across-the-board intensity adjustment CMS makes on a yearly basis. And while that idea appeared as an option for the HHS secretary in the 21st Century Cures Act (MAN 12/15/16, p. 1), Goetsch says he doesn’t think CMS is likely to adopt it soon given the significant changes it made this year to the risk adjustment methodology.

View the report at