Good news for Medicare Advantage plans in Arizona!   In what Kaiser Health News called a “surprising move”, the Obama administration “will extend special bonus payments meant to reward top-performing Medicare Advantage plans to those that score only average ratings”.

With most Advantage plans in Arizona rated as average (3 stars), our plans will get additional money even as Medicare reduces payments to the insurance companies that run the plans.

Part of the health care reform law requires Medicare to reduce payments to all Medicare Advantage plans by about 15% over three years starting in 2012. At the same time, the law provides for bonus payments to Advantage plans that are highly rated, or earning 4 or 5 stars based on a range of quality measures.

In Arizona, only Cigna in Maricopa County gets 4 stars or more.  In Tucson, the major Advantage plans (Secure Horizons, Health Net and Humana) get 3 stars.

I have written previously that the three-star ratings of Advantage plans in southern Arizona would not bode well for the 45% of Medicare beneficiaries in Pima County who are enrolled in these plans. With payment cuts to Medicare Advantage looming, would all plans have to start charging premiums in 2012?  Would co-pays for doctor visits and hospital stays be increased? Would free gym memberships be dropped?

The Kaiser Health News article says the move to reward 3 star-rated Advantage plans is a way to prevent areas like southern Arizona from having a market shock in 2012 where Advantage plans drop out of the market and large numbers of seniors are forced to change plans or return to Medicare.  This happened in the late-90′s when payments to private Medicare plans were cut drastically from one year to the next and companies like Blue Cross Blue Shield dropped out of the the Medicare HMO business.

So, while Medicare is going to cut payments to Medicare Advantage plans, the plans are being encouraged to improve their ratings so they will get bonus payments.  One of my clients, who is enrolled with Humana, said she was surprised to get a phone call from Humana asking her why she hadn’t gotten her annual physical.  The Humana representative encouraged her to use the preventive screening benefits provided in her Medicare Advantage plan. This is a sign that Humana is trying to improve its rating.

The summary rating gives an overall score on the health plan’s quality and performance on 33 different topics in 5 categories:

• Staying healthy: screenings, tests, and vaccines. Includes how often members got various screening tests, vaccines, and other check-ups that help them stay healthy.
• Managing chronic (long-term) conditions. Includes how often members with different conditions got certain tests and treatments that help them manage their condition.
• Ratings of health plan responsiveness and care. Includes ratings of member satisfaction with the plan.
• Health plan member complaints, appeals, and choosing to leave the health plan. Includes how often members have made complaints against the plan and how often members choose to leave the plan.
• Health plan telephone customer service. Includes how well the plan handles calls from members.

The seven largest American health insurance companies totaled over $265 billion in revenues in 2009.  If 20% of these revenues are spent on things other than paying medical bills for people insured by these companies, that amounts to approximately $53 billion.

Administrative costs for these companies should be around 5% of revenues, leaving 15% for marketing, sales commissions, and really big executive salaries.  That results is a $40 billion expense that Americans must add to their health insurance costs – a cost that no other country imposes on its citizens.  This is one reason our health care system is so expensive.

Correction: In my recent post on health insurance companies becoming more like utility companies, I wrote (incorrectly) that two insurance companies together would have two trillion dollars in revenue in 2010.  The correct amount is two hundred billion dollars (projected for 2010).  Sorry about that mistake.

According to Fortune 500‘s 2010 list, the top seven health insurance companies in terms of overall revenues for 2009 were:

1. UnitedHealth Group – $87 billion
2. WellPoint – $65 billion
3. Aetna – $34.7 billion
4. Humana – $30.9 billion
5. Cigna – $18.4 billion
6. Health Net – $15.7 billion
7. Coventry Health Care – $13.9 billion

CEO COMPENSATION:

Stephen Hemsley – UnitedHealth Group

Total 2009 Compensation: $8,901,916

Compensation breakdown:

• Base salary of $1,300,000
• Stock awards of $4,122,694
• Option awards of $1,442,306
• Non-equity incentive plan compensation worth $1,950,000
• “Other compensation” including company matching contributions for a 401(k) plan and company matching contributions under an executive savings plan valued at $86,916

The Health Care Reform Law will be cutting payments to Medicare Advantage plans, but some plans may actually get more money – if they are highly-rated, meaning they are the best of the best when it comes to patient care, illness prevention, and customer satisfaction.

Unfortunately, the Medicare Advantage plans we have in Tucson are not highly-rated.

If you go to Medicare.gov and click on “compare health plans”, you will be asked to enter a zip code.  Put in any Tucson zip code and you will get a list of  all the Medicare Advantage plans offered in Pima County (or any county in the country based on the zip code you use). The rating system is based on five stars:

5 = excellent
4 =  very good
3 = good
2 = fair
1 = poor

No Tucson Medicare Advantage plan is rated higher than 3 stars, meaning our plans are okay but not great.  Health Net and Secure Horizon plans get 3  stars, while Humana and Evercare get 2.5.

In Phoenix, the Cigna Medicare Advantage Plan gets 4.5 stars. This is better than Kaiser in California, which gets 4 stars.  I mention Kaiser because their plans, where doctors are employed by Kaiser, are supposed to be the standard bearer for managed care plans.

CareMore in California gets  4.5  stars for all  its Advantage plans, most of which are for people with chronic illnesses such as heart disease, diabetes, and breathing disorders. The CareMore plans in Tucson are too new to be rated as this is their first year in operation here.

I read somewhere that long-running Medicare Advantage plans tend to be the better plans, so I don’t know why our Tucson plans are merely “good”. Tucson has had Medicare HMO plans since the early 1990′s and in a March, 1996 article, The New York Times said Tucson’s Medicare HMO plans would be the model for saving Medicare.  I wonder what happened in Tucson?  Getting 2.5 and 3 stars is not going to gain our Medicare Advantage plans any favors from Medicare when it comes time for payment cuts.

The Medicare.gov website explains the ratings:

This summary rating gives an overall score on the health plan’s quality and performance on 33 different topics in 5 categories:

• Staying healthy: screenings, tests, and vaccines. Includes how often members got various screening tests, vaccines, and other check-ups that help them stay healthy.
• Managing chronic (long-term) conditions. Includes how often members with different conditions got certain tests and treatments that help them manage their condition.
• Ratings of health plan responsiveness and care. Includes ratings of member satisfaction with the plan.
• Health plan member complaints, appeals, and choosing to leave the health plan. Includes how often members have made complaints against the plan and how often members choose to leave the plan.
• Health plan telephone customer service. Includes how well the plan handles calls from members.

The information described above is gathered from several different sources. In some cases it is based on member surveys, information from clinicians, or information from plans. In other cases it is based on results from Medicare’s regular monitoring activities.

FOR MORE INFORMATION ON MEDICARE CHOICES IN ARIZONA check out my website.