California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

GAO Report: U.S. Should Abandon Bonus Program for Medicare Advantage

A demonstration program that provides quality bonus payments to Medicare Advantage plans is unlikely to "produce meaningful results" and should be canceled, according to a Government Accountability Office report released on Monday, the New York Times reports.


The federal health reform law reduced payments to MA plans, but it also authorized bonus payments to plans that provide high-quality care (Pear, New York Times, 4/22).

In November 2010, the Obama administration expanded those bonus payments to MA plans that receive three out of five stars for care quality. Previously, MA insurers were required to receive four stars to receive the extra payments. Federal officials estimated that the change would mean 62% of all Medicare Advantage insurers would qualify for a bonus, compared with just 14% prior to the alteration, at a cost of $1.3 billion over three years (California Healthline, 11/18/11).

Report Details

The report found that most of the bonuses paid in the demonstration project went to "average-performing plans." The report notes that researchers were unable to tell whether the increased payments led to improved care (New York Times, 4/22).

"The design of the demonstration precludes a credible evaluation of its effectiveness in achieving (the administration's) stated research goal," the report states (Alonso-Zaldivar, AP/San Francisco Chronicle, 4/22).

GAO said the program is expected to cost $8.3 billion over 10 years, with 80% of that cost occurring in the first three years.

MedPAC Also Criticizes Program

Meanwhile, officials from the Medicare Payment Advisory Commission also criticized the bonus payment program, saying that it increases "spending at a time when Medicare already faces serious problems with cost control and long-term financing."

MedPAC officials also condemned Medicare's "overly broad use of demonstration authority," adding that "limited Medicare dollars should go to truly high-performing plans." Further, by providing bonuses to average-scoring plans, "the demonstration lessens the incentive to achieve the highest level of performance," MedPAC officials said (New York Times, 4/22).

Report Raises 'Serious Questions' About Motive for Program

GAO's report also questions federal officials' motives for the program, National Journal reports. The findings raise "serious questions about whether the purpose of this demonstration was to mask the [federal health reform law's] cuts to seniors' Medicare benefits for political purposes," the report states (National Journal, 4/23).

Sen. Orrin Hatch (R-Utah) and Rep. Dave Camp (R-Mich.) said the report suggests that Medicare officials abused their authority. Hatch and Camp in a statement said they were concerned that the government could be "using taxpayer dollars for political purposes, to mask the impact of cuts in the MA program" under the overhaul (New York Times, 4/22).

Obama Administration Disputes Report

The Obama administration disputed the GAO report and said the bonus program will help Medicare improve care quality, the AP/San Francisco Chronicle reports. HHS in a statement said the project "supports our national strategy to improve the delivery of health care services, patient health outcomes and population health" (AP/San Francisco Chronicle, 4/22).

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