The Fundamentals of Medicare Advantage Star Rating Methodology

Measures, domains for star ratings

CMS assesses a Medicare Advantage plan’s quality of care according to the plan’s performance on a list of quality measures. Each measure falls under one of nine domains. The domains include maintaining health, chronic disease management, member experience, member complaints, and customer service as well as four domains for scoring drug plans.

Thus, measures could include annual flu vaccination, diabetes care—eye exam, rating of health care quality, members choosing to leave the plan, reviewing appeals decisions, and more.

The Medicare Advantage Star Rating system is not static. CMS updates and improves the methodology annually for Medicare Advantage plans—or Medicare Part C plans—, Medicare Part D drug plans, and Medicare Advantage-Part D health plans. 

For example, in 2015 CMS referenced 33 measures for Medicare Advantage and 11 measures for Part D plans. In 2018, CMS leveraged 34 Medicare Advantage quality measures and 14 Medicare Part D measures. By 2021, the agency based its star ratings on a total of 46 measures—32 measures for Medicare Advantage and 14 measures for Medicare Part D.

Although the number and nature of these measures may fluctuate, certain aspects of the Medicare Advantage Star Rating process remain the same.

Each year CMS releases the Medicare Part C & D Star Ratings Technical Notes, which elucidate the quality measures and the thresholds that indicate a plan has achieved high quality of care. 

For example, for plan year 2021, CMS retained breast cancer screenings as a quality measure under the first domain, “Staying Healthy.” 

In the technical notes, the agency explained that health plans should share the percentage of their Medicare Advantage female beneficiaries within an established, high-risk age range who received a mammogram. The agency set the reporting expectations, the parameters excluding some health plans from this quality measure, and the exclusions for certain beneficiary populations. 

The document also included a cut point for the star ratings. A health plan that reported that 83 percent or more of its female beneficiaries between the ages of 50 to 74 years old received a mammogram will receive five stars for that measure. However, if only 55 to 60 percent of the plan’s eligible beneficiaries received a mammogram, the health plan will receive two stars.

Health plans must offer data from a variety of sources including the Healthcare Effectiveness Data and Information Set (HEDIS), Consumer Assessment of Healthcare Providers & Systems (CAHPS), Medicare Health Outcomes Survey (HOS), Medicare Beneficiary Database Suite of Systems (MBDSS), and more. Typically, plans submit data from the previous year.

Categorical adjustment index

The fact that stars are assigned to contracts and not individual plans could pose a problem for contracts that cover a diverse set of Medicare Advantage health plans. 

For example, one employer-sponsored Medicare Advantage plan in a contract could serve a healthier demographic with lower social determinants of health barriers. Meanwhile, a special needs Medicare Advantage plan that is under the same contract might serve a low-income, less healthy population with many barriers.

The special needs Medicare Advantage plan might lower the star value of the contract because it serves a less healthy beneficiary population, but not necessarily because it is performing poorly.

To avoid this issue, CMS uses the categorical adjustment index to account for beneficiary population differences between health plans in the same Medicare Advantage contract.

The categorical adjustment index number is largely based on the share of beneficiaries within a plan that is disabled, requires low-income subsidies, or is dual-eligible. The higher the percentage of beneficiaries that fall in these categories, the more CMS will boost the health plan’s overall rating.

Adjustments for stable, high performance

Additionally, CMS has incorporated an improvement measure for plans that receive high scores multiple years in a row. Consistently high-scoring plans would receive a lower star score in successive years because they have less room for improvement. 

Calculating the improvement measure involves assessing the net improvement for process measures, patient experience and access measures, outcome and intermediate outcome measures, and the number of eligible measures for each of those categories.

The reward factor is another element of the process that helps account for consistently strong performance. This calculation uses the individual quality and performance measure stars to boost the star rating for a high-performing plan. The reward factor could increase the contract’s overall star rating by anywhere from 0.1 stars to 0.4 stars.

Based on all of this data, CMS assigns each Medicare Advantage-Part D health plan a star rating for the individual Part C and Part D measures, a star rating for each Part C and Part D domain, separate summary star ratings for Part C and Part D, and finally a summary rating for the overall Medicare Advantage-Part D plan.

Anyone can access the star ratings and display measures for every year since the Medicare Advantage Star Ratings Systems began in 2007 through the CMS website.

Quality bonus payments

As a result of the data collection and calculations involved in this methodology, the Medicare Advantage Star Rating system helps consumers compare Medicare Advantage plans. It also informs CMS how much to reimburse payers with Medicare Advantage contracts. 

The additional quality bonus payment for high-performing health plans is directly linked to the number of stars a health plan achieves. 

In most counties, CMS pays health plans that receive four stars or more an additional five percent on top of the benchmark Medicare payment, according to a Kaiser Family Foundation (KFF) issue brief. For urban counties with high Medicare Advantage enrollment—called “double bonus counties”—health plans with four stars or more will receive an additional ten percent on top of the benchmark Medicare payment.

Plans that have a low rating because they are new to the market or they have low enrollment receive a 3.5 percent payment boost over the benchmark.

As a result of an influx of beneficiaries in high-quality health plans, quality bonus payments are rising. The average Medicare Advantage quality bonus payment per enrollee was $186 per enrollee in 2015. By 2021, the average rebate had almost quadrupled $446 per enrollee. 

Quality bonus payments overall rose from a total of $3.0 billion in 2015 to $11.6 billion in 2021.

Once equipped with an accurate understanding of the Medicare Advantage Star Ratings methodology, healthcare professionals can more effectively develop and pursue a five-star strategy in their Medicare Advantage plans.