CMS Updates Medicare Advantage Star Ratings: Overview and Implications

The Centers for Medicare and Medicaid Services (CMS) have finalized updates to the Medicare Advantage (MA) star rating system, significantly impacting rebates and quality bonus payments for healthcare providers. Announced on April 2, these changes include removing 11 rating measures previously deemed redundant for assessing plan quality. A new Part C measure focuses on depression screening and follow-up, while a measure rewarding plans with consistently high scores remains. However, CMS decided against adopting a proposed measure that would reward plans addressing health disparities.

The updates are projected to require an additional $18.6 billion in federal funding from the Medicare Trust Fund between 2027 and 2036. This figure represents roughly 0.21% of Medicare payments to private health plans during this timeframe, according to CMS. While AHIP supports a slower implementation to focus on clinical outcomes, experts like Laura Skopec of the Urban Institute argue that the reward system is flawed. Skopec notes bonuses lack budget neutrality incentives and fail to penalize poor outcomes adequately.

The Kaiser Family Foundation (KFF) predicts CMS will distribute at least $12.7 billion in quality bonus payments by 2025. Studies, including those coauthored by Skopec, suggest these bonuses are not notably linked to improved plan quality. The Medicare Payment Advisory Commission has called for a restructured bonus system with enhanced CMS oversight, highlighting flaws in the current system. CMS simulations indicate that by 2027, 4% of MA contracts might receive quality bonus payments, while 3% could face reductions. Additionally, compensation for MA plans will rise by 2.48% in 2027. CMS remains open to feedback for potential reforms to enhance the star ratings and incentive programs.