Insurers will make $11.8 billion in Medicare Advantage quality bonus payments
This is an 8% decline following the expiration of pandemic-era policies that temporarily increased star ratings for some plans.
Photo: Martin Barraud/Getty Images
After increasing by more than 400% between 2015 and 2023, federal spending on Medicare Advantage bonus payments will decline by $1 billion to $11.8 billion in 2024 鈥� an 8% decline 鈥� following the expiration of pandemic-era policies that temporarily increased star ratings for some plans, according to a new KFF analysis.
Despite the decline, total spending on Medicare Advantage plan bonuses is higher in 2024 than in every year between 2015 and 2022.
Seventy-two percent of Medicare Advantage enrollees are in plans that are receiving bonus payments in 2024. Though the share declined from 2023 (85%), it is similar to the 75% share seen in 2022.
The average bonus payment per enrollee is highest for employer- and union-sponsored Medicare Advantage plans ($456) and lowest for special needs plans ($330), which authors said raises questions about the implications of the quality bonus program for equity.
Bonus payments vary substantially across firms, with UnitedHealthcare receiving the largest total payments ($3.4 billion) and Kaiser Permanente receiving the highest payment per enrollee ($516).
WHAT'S THE IMPACT
The quality bonus program, established by the Affordable Care Act, increases Medicare payments to Medicare Advantage plans based on a five-star rating system. While not a requirement, plans can use the additional payments to cover the cost of supplemental benefits, including reduced cost sharing, extra benefits not covered by traditional Medicare (such as vision, hearing and dental), and lowering Part B and/or Part D premiums.
The quality bonus program is intended to help consumers make informed decisions when choosing among Medicare Advantage plans and encourage plans to compete based on quality, but the Medicare Payment Advisory Committee (MedPAC) has the star ratings incorporate too many measures, do not adequately account for social risk factors, and may not be a useful indicator of quality because star ratings are reported at the contract rather than the plan level.
The decrease in estimated bonus payments in 2024 follows a decline in star ratings after the expiration of COVID-19 pandemic-era policies. Those policies prevented individual measures that go into calculating the star ratings from declining between 2021 and 2022 and temporarily increased star ratings for certain plans.
Medicare spending on bonus payments has grown faster than enrollment in Medicare Advantage, which doubled between 2015 and 2024, rising from 16 million people to 33 million. This spending comes at a time when the Medicare program is facing growing fiscal pressures, with MA benchmarks and corresponding spending growing faster than traditional Medicare spending, which is in part because of the increase in bonus payments, the report found.
The distribution of bonus spending across plan types is similar to the distribution of enrollment in 2024, though employer plans comprise a slightly larger share of bonus spending than enrollment. Individual plans account for 60% ($7.1 billion) of bonus spending and 62% of enrollment; employer plans account for 22% ($2.6 billion) of bonus spending and 17% of enrollment; and special needs plans account for 18% ($2.2 billion) of bonus spending and 20% of enrollment.
THE LARGER TREND
This year, 24 million people, or 72% of Medicare Advantage enrollees, are in plans that receive bonuses. That compares to just under 9 million people (55%) in 2015, data showed.
The average annual bonus per Medicare Advantage enrollee has also increased over time, rising from $184 in 2015 to $417 in 2023, before declining to $361 in 2024.
UnitedHealthcare and Humana, which together account for , are expected to receive 50% of total bonus payments in 2024 鈥� $3.4 billion for UnitedHealth and $2.5 billion for Humana.听
BCBS affiliates (including Anthem BCBS) and CVS Health will receive $1.7 billion and $1.1 billion in bonus payments, respectively, followed by Kaiser Permanente ($976.4 million) and Centene ($34.8 million).
Jeff Lagasse听is听editor of Healthcare Finance听News.
Email:听jlagasse@himss.org
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