No, I was not surprised

I’m not sure why Brad DeLong was surprised by the weakening of criteria for Medicare Advantage (MA) quality bonus payments announced last week. I really wasn’t. I expected it, though I could not have predicted when.

You see, the Senate health reform bill called for setting MA payment rates via competitive bidding. It wasn’t a perfect scheme but it was far better than the administrative pricing system MA had been under. The competitive bidding structure was law for one glorious week and then was replaced by yet another administrative pricing system in the budget reconciliation process last March. Why the switcheroo?

I speculated that it had to do, in part, with some holdouts in the House. Nobody could say for sure how money would flow in a competitive bidding system–not how much or to whose districts. But with an administrative pricing system, the flow could be tweaked a little here and there to make people happy, the right people.

How would this new system be tweaked in a way that didn’t look, well, crass? It’s got these quality bonuses whereas the old system didn’t.  What’s the point of those? Ostensibly it’s to pay for quality, mixing good politics and justifiable policy. But the devil is in the details. I figured the definitions of the quality measures would be adjusted so many more plans qualified than CBO might have scored. I figured that would be so below the radar that most people would be willing to believe that plans actually improved in quality. Why should we not pay them more if they’re actually better?

So, I was not surprised to learn that changes were made so that the MA program would cost more and that some plans would be paid more than expected even for mediocre quality. Now we’ll pay quality bonus for three-star (nearly average quality) plans. I expected a redefinition of stars that amounted to the same thing. Instead we just got a straight-forward, shockingly honest, lowering of the bar. I suppose the only mystery is that it was implemented so crudely, so obviously. Why?

At least it’s easy to understand. But the effect is not surprising. I think it was part of the point of jettisoning the competitive bidding system of the Senate bill. What else are MA administrative prices good for? Not health care cost control.

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