Julie Appleby at Kaiser Health News alerts us that the Medicare Payment Advisory Commission (MedPAC) has just released a letter criticizing the Quality Bonus Program for Medicare Advantage plans announced by CMS a few days after the November election. MedPAC’s comments focus on the fact that PPACA directed CMS to pay quality bonuses to high performing plans, but CMS’ proposed program would reward mediocre plans as well, including some who have been identified as poor performers. MedPAC also expresses concern about the cost of the bonus program, an issue I have discussed at some length in prior posts. MedPAC chairman Glenn Hackbarth writes,
We believe that the demonstration sends the wrong message about what is important to the program and how improved quality can best be achieved . . . The extension of quality bonuses to the vast majority of plans is likely to result in far greater program costs than the reward system enacted in PPACA . . . As compared to the design of the bonus system in PPACA, in which the incentive was for plans to try to achieve the highest possible star ratings, and there was consequently a disincentive for poor performance, the demonstration lessens the incentive to achieve the highest level of performance.
My calculations indicate that CMS substantially understated the likely costs of the program at $1.3 billion over three years. My ten-year estimate was $16 billion, which would give back quite a chunk of the $136 billion in Medicare Advantage savings meant to finance coverage for the uninsured under PPACA.