The Real Cost of CMS Star Ratings
The NCQA’s HEDIS®1 health plan performance measures can have a notable financial impact on payers. Member steerage is just the tip of the iceberg. Bonuses, or the lack thereof, paid in “per member” denominations can be significant. In 2023, payers who administer Medicare Advantage (MA) plans are dealing with some notable setbacks and losses in projected earnings per share because of falling Star Ratings. For the 2023 plan year, more than 140 MA contracts with ratings of four stars or more experienced a drop. The average rating for 2023 is 4.15, compared to 2022’s record-high rating of 4.37.
Lower ratings for 2023 should not come as much of a shock. The COVID-19 public health emergency (PHE) resulted in certain beneficial allowances for payers. The Centers for Medicare and Medicaid (CMS) modified data submission requirements in April 2020 to offset disruption caused by the PHE. All Part C and D contracts qualified for the “extreme and uncontrollable circumstances policy” in 2022. On several measures, payers were able to revert to their 2021 rating if their 2022 rating showed a loss. For 2023 ratings, the only PHE impact is measure-level adjustments for three HEDIS measures derived from the 2021 Health Outcomes Survey (HOS).
Although the 2023 changes weren’t altogether unexpected, their effects have nonetheless negatively impacted several insurers, including some of the largest. CVS and Centene, for example, saw greater than 40% losses in their number of members who were enrolled in a four-star-or-higher plan. United Health saw losses of 17%. More notably, a dip in stars means a dip in CMS bonus payments to insurers, as well as lower rebates for payers. When you consider that large insurers received hundreds of millions to billions of dollars in MA bonuses in 2022, there’s a lot riding on those stars.
How are Star Ratings determined?
Drawing data from different sources, CMS considers six categories: improvement measures, outcome measures, intermediate outcome measures, patient experience measures, access measures, and process measures. The measures are weighted differently, and overall ratings are averages of the weighted measures. Both the measures used and the weight they are given are subject to fluctuation year to year. For 2023 Star Ratings, CMS assigns the highest weight to the improvement measures, followed by patient experience/complaints and access measures, then by outcome and intermediate outcome measures, and finally process measures. New measures included in the Star Ratings are given a weight of 1 for their first year of inclusion in the ratings; in subsequent years the weight associated with the measure weighting category is used.
In 2023, Star Ratings for MA-PD contracts depended on 36 measures, ratings for MA-only contracts used 26 measures, and Part D contracts used 10.
HEDIS measures play a significant role in calculating Star Ratings for Medicare Advantage (MA) plans (Part C) and Medicare Advantage plans with prescription drug coverage (MA-PD, or Parts C and D). Other key Star Rating data sources are the Consumer Assessment of Healthcare Providers and Systems (CAHPS®2) survey and the HOS. HEDIS measures are also critical for NCQA Health Plan ratings, which cover commercial, Medicare, and Medicaid health plans.
In 2022, MA quality bonus program (QBP) payments, eligible to plans rated four stars or higher, reached $10 billion. Bonuses per enrollee ranged from $278 for SNP plans, to $358 for individual plans, to $396 for employer-sponsored MA plans. In 2024, QBP-eligible plans will receive a five-percentage-point increase above their service area benchmark. Benchmarks are the maximum amount the federal government will pay an MA plan. QBP-eligible plans located in a “qualifying county” will receive a 10% increase. Qualifying counties need to meet specific criteria based on population, percentage of eligible beneficiaries with an MA plan, and per capita fee-for-service spending.
Most MA plan bids come in below the benchmark. Plans are then entitled to a portion of the difference between the benchmark and their bid, which is their “rebate.” Star Ratings determine how much of a rebate a plan receives. Plans rated three stars or fewer receive 50%of the difference between the plan bid and the benchmark. Plans rated three-and-a-half or four starts get 65% of the difference, and plans with four-and-a-half or five starts get 70% of the difference.
Star Ratings also directly impact a plan’s enrollment flexibility, allowing members to join or leave outside of the standard enrollment period that runs from October to early December. If a five-star plan exists in their area, MA enrollees have the option to switch to this higher-rated plan any time between December 8 and November 30. Likewise, if a member is enrolled in a low-performing plan–i.e., one that has received a rating of fewer than three stars for three consecutive years–they can switch to a higher-rated plan any time between January 1 and December 31.
There is also some evidence that higher Star Ratings are associated with improvements in patient outcomes. A 2021 study published in Health Affairs looked at beneficiary information from 2014 to 2016. (Until 2020, payers were allowed to consolidate plans, effectively shifting enrollees from a lower-rated plan into higher-rated plan without enrollee consent.) The researchers found that when enrollees were shifted to a plan rated one star higher, they were less likely to voluntarily leave their plan to enroll in another MA plan or traditional Medicare. When they were hospitalized, these enrollees were more likely to use a higher-quality hospital and less likely to be readmitted within ninety days.
When stars fall
Rising Star Ratings help a plan but falling Star Ratings hurt. With the end of PHE allowances, one major insurer saw a prominent plan dip below a critical four-star threshold, to three-and-a-half stars. The plan became ineligible for bonus payments for its nearly two million enrollees, leaving the payer scrambling to blunt the financial impact.
A low Star Rating can discourage potential members from enrolling in a plan. For payers, low ratings also mean notably lower rebates and no bonuses. Falling stars can also plan ineligible for the MA program. In 2023, a rating of two-and-a-half stars or lower is a basis for CMS to deny a plan a new contract or turn down a service area expansion application.
Keep reaching for the stars
Several measures–in both the NCQA health plan ratings and the MA Star Ratings–rely on clinical data. Star Ratings track clinical information, typically using HEDIS measures, for things such as medication adherence, vaccinations, completed cancer screenings, and regular monitoring of chronic conditions like diabetes.
The more complete the clinical data, the more accurate the measurements. More accurate measurements impact ratings and, by extension, bonuses, and rebates for payers. For potential members, Star Ratings are essential in differentiating plans in a highly competitive marketplace and factor into which plan an individual ultimately chooses.
More than 20 of the measurements that determine a Star Rating are based on clinical information found in the EHR. If data are misclassified or overlooked, wrong, or include a mix of incompatible file types, these important measurements lose accuracy. Consequently, the measurements will not completely reflect plan and care quality. Star Ratings will be inaccurate, and the financial ramifications potentially significant. As different measurements are incorporated into Star Rating determination, such as the health equity index (HEI) reward being introduced in 2027, reporting complete and accurate data will continue to be consequential.
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1HEDIS® is a registered trademark of the National Committee for Quality Assurance (NCQA).
2CAHPS® is a registered trademark of the Agency for Healthcare Research and Quality (AHRQ).