Dive Brief:
- Medicare is set to shell out more than $13 billion in quality bonus payments to Medicare Advantage plans this year, as the program’s spending continues to tick up despite a slumping percentage of enrollees in plans eligible for bonuses.
- The federal government will spend at least $13.4 billion on the MA quality bonus program in 2026, up from $12.7 billion last year and more than four times higher than the $3 billion spent in 2015, according to a new analysis from health policy research group KFF.
- At the same time, the number of enrollees in plans that qualify for a bonus fell from 26 million in 2025 to 24 million in 2026, or from 75% to 68% of Medicare beneficiaries, KFF found. It’s the lowest share of seniors in eligible plans since 2018.
Dive Insight:
The quality bonus program, which was established by the Affordable Care Act in 2010, offers extra payments to MA plans with ratings of four stars or above, along with competitive advantages in the annual bidding process.
Insurers argue the program incentivizes them to improve customer engagement, education and outcomes, while giving seniors a helpful tool to compare between plans during Medicare’s sign-up period.
But the quality bonus program has faced sticky criticism from budget hawks and health policy researchers worried that the U.S. isn’t getting enough bang for its buck.
MedPAC, a group of experts that advises Congress on Medicare policy, and other researchers have found that the star ratings system is overly complex and isn’t a useful indicator of plan quality. The research has spurred calls to reform the bonus schema or throw it out entirely.
Ending the program would save the federal government almost $100 billion over a decade, the Congressional Budget Office estimated in 2018 — almost certainly an undercount of actual savings given skyrocketing MA enrollment since that estimate was made, KFF said.
The quality bonus program accounts for just about 2% of the $574 billion in payments that are expected to go to MA plans this year.
But spending in the program has skyrocketed since it started more than a decade ago, as more seniors opted into MA, attracted by the broader array of benefits and cheaper monthly premiums, according to KFF.
MA quality bonus spending will exceed $13B this year
Currently, more than half of all Medicare enrollees, or some 35 million seniors, are enrolled in the privatized program, in which the government pays insurers a per-member, per-month fee for overseeing beneficiaries’ care.
Growth in underlying Medicare spending, which underpins payments to MA plans, has also driven up quality bonus payments, according to KFF.
That’s despite fewer seniors enrolling in plans actually eligible for bonuses, after years of declines in average star ratings following the coronavirus pandemic — and largely no change this year after regulators made it more difficult to reach the highest scores.
Cutting costs in the quality bonus program is an area of consideration for policymakers as Medicare’s finances become increasingly precarious. A key trust fund underpinning the program, which provides insurance to about 70 million senior and disabled Americans, is set to run out of money in 2033 without congressional action.
However, the CMS this spring finalized changes to the star ratings system that are actually set to send another $18 billion to insurers over the next decade. And after losing a court case with MA insurer Clover Health, regulators were forced to recalculate 2026 star ratings (which affect bonuses in 2027) in a way that resulted in higher scores for some participants.
Meanwhile insurers, which are laser-focused on improving MA margins after a difficult few years in the program, are likely to lobby heavily against any changes to quality bonuses.
Companies that secure high stars are raking in the dough from the program, which — unlike other value-based initiatives in traditional Medicare designed to be budget-neutral or lower spending — actually sets aside additional funding for payers.
More than one-fourth of the $13.4 billion expected to flow to plans this year will go to MA behemoth UnitedHealth, which enrolls 26% of all seniors in MA, KFF found.
UnitedHealth is expected to receive 29% of total Medicare spending in the quality bonus program, or $3.9 billion.
Humana, which has the second-largest share of MA enrollment at 20%, is only expected to get 11% of quality bonus spending, or $1.5 billion, after the star rating of one of its largest contracts plummeted for 2025, affecting payments this year.
Humana sued the CMS to try and reverse the change, but the courts have so far sided with the government.
UnitedHealth scoops up more than one-fourth of quality bonuses
Centene is also hustling to improve its star ratings, after seeing a drastic slide coming out of the coronavirus pandemic. Just 6% of the company’s MA members are in plans qualifying for bonus payments this year.
KFF, which based its analysis on CMS data of plan enrollment and performance, said that its estimates of quality bonus spending are likely lower than the government’s actual tab.
That’s due to a practice called upcoding, in which insurers exaggerate the sickness of their members to inflate their reimbursement from the federal government.
“These estimates are a lower bound because they assume that, on average, Medicare beneficiaries enrolled in each plan that qualifies for additional payments under the quality bonus program are of average health status as measured by their risk score,” researchers wrote in the brief published Wednesday. “However, increased coding intensity in Medicare Advantage suggests the risk scores are likely higher, which would increase the additional payments.”
