It's no coincidence that the only carriers who have won Medicare's coveted five-star quality ranking for their Medicare Advantage plans are vertically integrated health plans chief among them Kaiser Permanente, which has four out of the nine plans nationwide earning five stars.

The five-star designation means maximum (5 percent of premiums) bonuses from HHS on about 865,000 MA members in Kaiser's five-star plans millions of dollars which by law must be spent on enhancing benefits or lowering customer cost. The result creates additional competitive advantage for Kaiser in terms of pricing, benefits, or both.

It also means higher reimbursement rates for those plans, money that can flow straight to the bottom line. This helps soften the blow of MA plan reimbursement cuts mandated by the Accountable Care Act. In addition, the five-star plans get to market themselves to consumers all year long, rather than only during the open enrollment period. From a competitive standpoint, that's a trifecta for Kaiser that almost makes me feel sorry for the other guys trying to sell MA plans in California, Colorado, Hawaii, Oregon and Washington.

Of course, Kaiser's exclusive network limits its appeal to seniors: those who aren't in a Kaiser plan and seeing Kaiser docs are unlikely to jettison their physician relationships to move to a Kaiser plan for their senior years. But if Kaiser is able to invest in its products substantially, it may be able to raise benefits and lower cost enough to get seniors over that initial Sure-They're-Cheaper-But-Do-I-Really-Want-To-Go-With-Kaiser hurdle.

The fact is that Kaiser and its fellow integrated health plans have a substantial leg up on meeting HHS quality measures for patient care because their structure allows them to track and follow up on members medical needs more easily than the separate (by varying degrees) collaborative systems of providers and payers.

It's a lot easier to make sure each patient has a BMI measurement, picks up his COPD script, or has post-surgery care when the health plan and the physician and the hospital (and in Kaiser's case, even the pharmacy) are part of the same entity. It's worth noting that Kaiser's plans in Ohio, the Mid-Atlantic and Georgia, states where Kaiser has no hospitals and an incomplete physician network, didn't win five-star status (they came in at 4.5). As Medicare's drive toward rewarding quality continues, the gap between these top-quality, high-bonus plans and their competitors will continue to increase.

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