How are Medicare Star Ratings calculated? A summary of performance factors

Star Ratings for Medicare Advantage (MA) plans affect reimbursement and member retention, so it’s important for plan leaders to understand how Medicare Star Ratings are calculated. Issued by the Centers for Medicare & Medicaid Services (CMS), Star Ratings are on a scale of 1 to 5 and objectively assess plan value and performance to help consumers find the plans that offer them the best overall value.

The ability to achieve high ratings is increasingly essential as market competition grows and more plans are offered by payer organizations. Star Ratings have become vital as a beneficiary, payment, and compliance tool – providing insights that inform consumer healthcare choices, incentives that encourage health plans to focus on quality improvement, and penalties for continually low-performing plans.

How Medicare Star Ratings are calculated

CMS reviews Medicare plan performances each year and ratings can change up or down based on the following scale:

• • 5-star: Excellent
  • 4-star: Above average
  • 3-star: Average
  • 2-star: Below average
  • 1-star: Poor

Each October, CMS releases Medicare Star Ratings to prepare consumers for the annual open enrollment period. Star Ratings use five categories to impact their score, including:

• • Preventive service (health outcomes of members)
  • Plan responsiveness
  • Chronic condition management
  • Customer service
  • Management of member complaints

How Star Ratings affect payers

Star Ratings for 2022 are based on data provided in 2021 (and each subsequent year ahead based on data from the previous year) and may have changed from previous years. In some cases — like when plans are new or have low enrollment — ratings aren’t available. This doesn’t mean the plans are low quality.

Newer plans are more difficult to rate than those that have been in use for several years because they may not yet have enough data to substantiate a rating score.

Payers can work toward achieving the highest Star Ratings by investing in member engagement platforms and developing strategic programs and communications that establish and improve relationships with Medicare beneficiaries. Payers can also increase member experience with intuitive reporting services that allow members to provide feedback about their experiences with a plan throughout the year.

Star Ratings are critically important for Medicare consumers who want to evaluate insurance plan choices. Additionally, a data analytics platform that delivers comprehensive member insights and can predict future member behavior based on past behavior can help inform intervention planning and improve plan efficiency and effectiveness. For example, if the historical data tells you that Jane Smith gets her annual mammogram (a star measure) in June, the health plan likely doesn’t need to spend resources targeting her for an intervention until later in the year and then, only if the payer found she didn’t behave as expected.

For a health plan quality program, having access to timely data on members throughout the year enables the organizations to course correct and allocate resources where they’re needed most to achieve quality improvement goals.

CMS star ratings also:

• • Provide a standardized tool for CMS to measure the quality of all Medicare Advantage plans and prescription drug plans
  • Give plans the ability to differentiate and attract new participants
  • Impact per-member-per-month (PMPM) rates from Medicare; higher performance yields higher PMPM, thereby directly affecting revenue

Better plans receive higher Star Ratings

Highly rated MA plans receive Quality Bonus Payments and higher rebates, allowing them to provide additional supplemental benefits and lower premiums. Plans that fail to perform are penalized or risk having contracts terminated for consistently receiving low ratings. Thus, the importance of CMS Star Ratings performance continues to increase.

Receiving a high CMS Star Ratings is a necessity. The Star Rating informs future quality improvement strategies. There are various trends evidenced in the 2021 Star Ratings. While there is one more 5 Star plan for 2021 compared to 2020, there are fewer total plans in 2021 that rate 4 Stars or higher compared to 2020 (195 to 210). There are also more 3 Star plans in 2021 compared to 2020 (61 to 55). The number of 2.5 Star plans is the same at 4, and there was one 1 Star plan. This shows a global decrease in Stars at a rate of 21% year over year compared to 17% of plans experiencing increases.

As payers seeks ways to increase the overall Star Rating, there is increased pressure to develop MA plans that provide the same or better quality of care as other high-performing plans while also covering supplemental benefits including telehealth, meals, and transportation.

Payers can continue to drive plan improvement by using forecast measure trends and analytics to create personalized strategies for engaging members, improving outcomes, and driving ratings performance..

Read more information about MA plan Star Ratings.

To better understand how Inovalon can help payers navigate quality measures improve reporting, explore our Quality Measurement solution.