In her farewell memo to her staff, the Obama administration's top Medicare official, Marilyn Tavenner, says health insurance companies have built momentum in the star-rating program created under the Affordable Care Act to reward "Advantage Plans" that provide benefits to the elderly.
Though she didn't mention specific insurers, showing improved quality is good for health plans and their stocks because a rating of four stars or higher on a five-star scale can provide for bonus payments and marketing advantages to the plans that score well.
"We ... continue to see quality improvements in the Medicare Advantage program," Tavenner, administrator of the Centers for Medicare & Medicaid Services, said in her memo last week to her staff.
In the memo, which disclosed that she would step down next month after holding the top Medicare post since 2010, Tavenner discussed several accomplishments under her watch, including progress improving health plan quality under the health law.
A rating of four is considered above average and a rating of five is excellent and the highest rankings give health plans a bonus payment and the ability of the insurers to tout their improvement. Three in five seniors enrolled in Advantage plans are now enrolled in plans with ratings of four stars or more on a five-star scale, a ranking system created under the health law to guide seniors to cost-effective and higher quality benefits.
"In 2015, we project that 40 percent of our Medicare Advantage contracts will achieve 4 stars or more in our star rating system, and more importantly we project that 60 percent of Medicare Advantage enrollees will be in plans with 4 stars or more," she said in her memo to Centers for Medicare & Medicaid Services staffers. "Those figures represent a steady trend of our work to focus on quality in our MA programs; in 2014, 52 percent of MA enrollees were in plans with 4 stars or more; in 2013, it was just 38 percent."
Advantage Plans are rated on a variety of measures to improve the quality of care as well as customer service for seniors in five categories: "outcomes, intermediate outcomes, patient experience, access and process." For example, plans are rated on whether they are cutting call wait times and whether they encourage preventive medical care, asking whether seniors are receiving tests for diabetes or other conditions.
Major insurance companies with large Medicare businesses include Aetna, Cigna, Humana, UnitedHealth Group, and Anthem, the former Wellpoint, which owns several Blue Cross and Blue Shield branded plans across the country.
These advantage plans provide the same coverage as the traditional fee-for-service program but also provide extra benefits and services to seniors such as disease management, nurse help hotlines, as well as some plans providing vision and dental care and wellness programs.
The improvement has come a long way from 2011 when just 24% of seniors enrolled in Advantage plans with four or more stars, according to the Centers for Medicare & Medicaid Services figures.
Tavenner's resignation memo is good news for health insurance company stocks given it shows a bright spot heading into the new year for a key business line as baby boomers age and look to private health plans to administer their Medicare coverage.
Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends Anthem and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.