The bonuses were meant to incentivize quality improvements, but some experts said that had not happened.
Bonuses paid to Medicare Advantage insurers will hit a record high in 2026, surpassing $13 billion, but the administration has proposed an overhaul of the system, while some policymakers say it should be disbanded.
Centers for Medicare and Medicaid Services evaluates Medicare Advantage insurers based on quality, outcomes, improvement, and patient experience.
The system, which awards up to five stars, is supposed to help consumers make informed choices on health plans while spurring providers to improve service.
Insurers who get four or more stars receive additional federal funds.
This year’s projected $13.4 billion in bonuses is four times the amount paid in 2015, according to a July 1 report from KFF, a healthcare research institution.
However, the increased cash awards coincide with a multi-year decline in enrollment in the plans receiving the bonuses.
Last year, 75 percent of Medicare Advantage enrollees were in four- or five-star plans.
That’s down to 68 percent this year, the lowest percentage since 2018, according to the report.
Bonus Payments Across Insurers
UnitedHealth Group received the largest bonus payment of $3.9 billion, followed by CVS Health Corporation with $2 billion, and Humana at $1.5 billion.
The majority of enrollees at UnitedHealth (78 percent) and CVS Health (86 percent) were in bonus-funded plans. But fewer than half (40 percent) of Humana enrollees chose its four- or five-star plans.
Insurers receive higher payments when a higher share of enrollees choose bonus-funded plans.
Kaiser Foundation Health Plans, which had 100 percent of its Medicare Advantage enrollees in bonus-earning plans, received an extra $577 per person.
Centene, which had just 6 percent of its enrollees in bonus-earning plans, received an additional $23 per person.
Questionable Results
Some observers say the star ratings have not translated into meaningful improvement.
Jackson Hammond, a senior policy analyst at Paragon Institute, said in a January report that policymakers should end quality benefits and reform the quality measures to be more indicative and meaningful to enrollees.
The average star rating in 2023 was 4.15 stars. Bonus payments are given for 4 stars or above, meaning half of all plans receive extra money for being average, according to research organization the Urban Institute.
“As numerous others have pointed out, there is a questionable correlation between Star Ratings and actual quality,” Hammond wrote.
Despite massive incentives, the quality bonus program did not improve overall quality performance of Medicare Advantage plans as intended, according to a 2021 study from Health Affairs.
Of the nine quality measures evaluated, performance declined for four of them, the study found.
One reason is that plans may have prioritized nonclinical administrative measures over which they have more control, such as customer service, rather than clinical quality, according to the study.
By Sylvia Xu
