Bloomberg News

Humana Gains as Obama Health-Law Bonuses Spur Improvement

October 16, 2012

Humana Inc. (HUM:US) will get 5 percent more in Medicare payments and a “five-star” rating for one of its health plans under a U.S. program that may be helping to improve care for the elderly, according to an analysis that quickly spurred Republican criticism.

The program provides bonuses to health insurers who beef up Medicare Advantage plans by limiting how many members are re- admitted to the hospital after a discharge, increasing the amount of preventative care and getting acceptable ratings on patient satisfaction surveys, among other criteria. Insurers are rated from one star, the lowest, to five stars, the highest.

Julia Lawless, a spokeswoman for Senator Orrin Hatch, a Utah Republican, dismissed the program as “doling out money conveniently during an election year.” Separate reports to be released today by the consulting firm Avalere Health LLC and the nonprofit Commonwealth Fund conclude that the bonus system put in place in 2011 is working.

“More people have access to four- and five-star plans,” said Avalere Chief Executive Officer Dan Mendelson, whose Washington-based firm consults for insurers. “On average the ratings are coming up, and some of the lower-rated plans are going out of business because they can’t sustain being active in the market without the bonus program.”

In Medicare Advantage, insurers provide health benefits in place of the government’s program for the elderly and disabled. The bonus system, originally created by the 2010 Affordable Care Act, was modified by the Obama administration to allow bigger payments to more plans. The U.S. Government Accountability Office, the investigative arm of Congress, has said the administration’s changes weren’t authorized by the law.

Five-Star Plans

Avalere, which used Medicare data to produce its report, identified Louisville, Kentucky-based Humana as the first publicly traded insurer among 11 given the top five-star rating. The other plans were nonprofit.

Humana’s plan, located in Wisconsin, has 8,300 members this year. The rating “shows our company’s ability to carry out our commitment to provide a perfect service experience for our Medicare members,” said Tom Noland, a Humana spokesman.

Humana rose less than 1 percent to close at $75.11. The shares have declined 14 percent this year.

Enrollment for the 2013 Medicare and Medicare Advantage plans began yesterday. Avalere’s analysis “shows the quality bonus program is working, as more plans are improving and performing at a high-quality level,” said Brian Cook, a spokesman for the U.S. Centers for Medicare and Medicaid Services, in an e-mail.

Average Ratings

The average rating for a Medicare Advantage plan with drug coverage next year will be 3.66 stars, up from 3.44 a year earlier and 3.18 in 2011, Avalere’s report found.

Advantage plans have focused on improving their scores in medical areas “that plans can invest in and control to get better results” such as colon cancer screenings, body mass index measurement and hypertension screening, said Bonnie Washington, a senior vice president at Avalere. The plans urge their members to get those screenings, which are aimed at identifying health concerns at the earliest stages, then offer doctors bonuses to perform the procedures.

Six of the 11 five-star plans are owned by Kaiser Permanente, the nonprofit health-care company based in Oakland, California. Its largest five-star plan had about 864,000 members this year, according to Avalere.

Competitive Advantage

“We are proud to earn the highest ratings for quality because it reflects Kaiser Permanente’s commitment to achieving the best health outcomes for our members,” Jed Weissberg, Kaiser’s senior vice president for hospitals, quality and care delivery excellence, said in a statement.

Gaining five stars confers an additional competitive advantage: plans with the top rating can sign up Medicare beneficiaries year-round, not just during the program’s open enrollment period that ends Dec. 7.

Medicare gives five-star plans extra prominence on its consumer websites, and encourages beneficiaries to leave lower- rated plans for higher-rated ones.

“It gives a convenient excuse for round-the-year marketing,” Mendelson said. “That, I think, helps the plans develop brand visibility.”

A Commonwealth Fund’s report released today also predicts improvement in plan quality because of the Affordable Care Act.

Advantage plans “are likely to place greater emphasis on tracking and improving their performance as they strive to qualify for the bonus payments,” researchers led by Brian Biles, a health policy professor at George Washington University in Washington, said in the study.

The Commonwealth Fund is an independent foundation that supports expanded health insurance coverage.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • HUM
    (Humana Inc)
    • $127.4 USD
    • 0.32
    • 0.25%
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