Time to roll up our sleeves: the Medicare quality bonus

UBTs can make the difference in quality bonuses

If you haven’t heard already, you will be hearing a great deal about “Quality Ratings of Medicare Advantage Plans.”

The most significant feature of these quality ratings is the potential for bonuses to be paid to health plans that meet high quality standards. Medicare Advantage accounts for 10% of all Kaiser Permanente business. So what is this all about? Why should frontline Kaiser Permanente union members, physicians, and managers care about this?

And, as always, there is a lot more to this story.

The Big Picture

Our nation’s new health care reform law has two major areas. One is to finally insure the uninsured. The second is to make health care in the US more affordable and of higher quality.

It is this second stream of change that we are talking about today.

Medicare represents one of the largest expenditures of health care dollars in the U.S. About 20% of the $2.3 trillion annual health care revenues comes from Medicare, and Medicare spending will be cut. The new law’s emphasis on reform of the delivery system will be applied to Medicare, to both reduce cost and improve quality. But the law goes a step further. It is designed to provide incentives for better outcomes for Medicare patients. By so doing, the federal government will drive positive change in health care delivery overall.

Ratings and bonuses

That’s where bonuses and quality ratings come in. Most Medicare Advantage Plans are rated on four categories of outcomes:

1.)    Administrative data

2.)    CAHPS (Consumer Assessment of Health Plans Study)

3.)    HEDIS (Healthcare Effectiveness Data and Information Set)

4.)    HOS (Health Outcomes Survey)

Each of these categories of measures has a variety of quality, patient experience and other measures of effectiveness built in, more than 30 altogether. CMS, the government agency that oversees Medicare then assigns numerical ratings to health plans.

If a health plan is rated “4 stars or higher,” it will receive bonuses in the amount of:

• 1.5%in 2011
• 3% in 2012
• 5% in 2013 and subsequent years

These bonuses can mean hundreds of millions of dollars that will offset the Medicare cuts that are being applied at the same time.

What does this mean for us?

Kaiser Permanente’s six Medicare Advantage Plans (NCAL, SCAL, Hawaii, NW, CO, and GA) are the highest rated plans in the US and currently qualify for the four-star rating.  This is wonderful news that everyone in the organization should take pride in.

The 2011 bonus will be based on 2010 performance. So, our work on service, quality and affordability this year will directly impact Kaiser Permanente’s bottom line next year.

However, these outcomes must continue. As the years go by, and as the bonus increases, this additional revenue will be critical for the organization’s success. We know that in this economy and with the rising cost of health care, per member payments from most sources will be reduced, including standard Medicare payments.

And even more importantly, as Kaiser Permanente continues to lead on these quality ratings, we can show the nation that our model, our people, our electronic medical records, and our partnership are critical factors in the success. These measures will be closely watched.  They are exactly what the work of our unit-based teams is about. So when you make a small test of change that leads to better patient care, you are also improving KP’s quality rating.

The whole idea is to create positive incentives for improved patient care. Health care reform cannot succeed unless health care is delivered more affordably, and one of the best paths to affordability is through getting health care right, without duplication, without error, without waste.

We stand on the threshold of leading the nation in a whole new direction.