Understand and prepare for changes in Medicare Star Rating calculations
Health Plans

Falling Stars: The impact of new Medicare star calculations

October 19, 2021
Key changes impacting enrollment, bonus payments & program eligibility
Chief Product and Client Officer

The Centers for Medicare and Medicaid Services (CMS) assign a rating of one to five stars to Medicare Advantage (MA) plans each year. Ratings influence enrollment reimbursement and even continued participation eligibility in the Medicare Advantage (MA) program.

For example, in 2021, 80 percent of MA beneficiaries enrolled in plans with four or more stars. In addition to higher enrollment, these plans earned more than $11 billion in quality bonus payments. These funds bolster competitive advantages, enabling four-star plans to lower member cost and deliver expanded supplemental benefits such as dental, vision and hearing. On the other end of the spectrum, plans with less than three stars for three years in a row face expulsion from the MA program.

That’s why, when CMS introduced changes to the way star ratings were calculated for 2021, it caused quite a stir.

Changes to 2021 Medicare star calculations

COVID-19 changed everything, including the way CMS calculated Medicare star ratings. In response to industry-wide disruption, CMS released a rule in April 2020 to modify data submission requirements. Two key datasets in calculating star ratings are the Healthcare Effectiveness Data and Information Set (HEDIS) and the Consumer Assessment of Healthcare Providers and Systems (CAHPS). These datasets account for approximately half of the measures that make up the star ratings.

Because in-person data collection became unsafe, CMS decided to re-use HEDIS and CAHPS data used to calculate 2020 star ratings (as reported in 2019, based on care delivered in 2018). Remaining measures were updated by using safely collected data.

So, roughly half of measures that make up the 2021 Medicare star ratings were carried forward from 2020, while the other half were updated based on new data.

Impact: Star ratings fell in 2021

Common sense tells us that when half of the input stays the same, the output should also stay the same. Unfortunately, this was not the case for many MA plans. Of the 400 rated MA plans:

  • 83 dropped half a star
  • 2 dropped a full star
  • 63 increased by half a star
  • 2 increased a full star

The overall decline in star ratings means fewer plans qualify for quality bonus payments. However, members within these plans have come to expect lower premiums and expanded supplemental benefits. This expectation and drop in bonus payments means additional pressure for MA plans.

Experience and access measures gain weight

CMS increased the weight of member experience and access measures, as driven by CAHPS, member complaints, healthcare access, member attrition, appeals and call center measures. Measurement weight increased from one and a half to two for 2021 star ratings and, beginning in 2023 ratings, will increase again to four, contributing to 60 percent of the final rating for all Medicare plans.

Weight increases for member experience and access measures

These changes reinforce a focus by CMS on member experience. By awarding more weight to experience and access measures, plans with a strong member-centric offering stand to earn higher ratings, quality bonus payments and reimbursement rebates. Plans that struggle in these measures will likely drop in star ratings, as will plans who do not intend to improve member experience.

Analysis: How to improve CMS star ratings

Most experts agree that MA plans will be stuck in a holding pattern for a while as challenges continue across preventive care delivery and data collection, due to ongoing pandemic impacts. This holding pattern is likely to result in further decreased star ratings.

However, one area ripe for improvement is the aforementioned patient experience and access measures. Health plans have long known that the cost of disengaged members is high in terms of health and financial outcomes. Now, we can add the cost of losing ground in quality reporting. In fact, the time has never been better for health plans to invest or further their investment in delivering personalized experiences for their members.

To hold on to current Medicare star ratings, or to drive improvement across ratings, quality bonus payments and rebates in an increasingly competitive and difficult environment, health plans are encouraged to focus on improving their overall member experience.

Resources focused on improving member experience