Federal Court Upholds CMS Medicare Advantage Star Ratings, Denies Elevance Health Lawsuit

A federal judge in Texas ruled against Elevance Health's lawsuit challenging the Centers for Medicare and Medicaid Services' (CMS) Medicare Advantage star ratings methodology. The legal challenge contended that CMS unfairly reduced Elevance's ratings, which impacts bonus payments to Medicare Advantage plans.

The judge found Elevance's arguments to be unconvincing and affirmed that CMS properly applied the statutory requirements in calculating star ratings. This ruling has significant financial implications, potentially costing Elevance up to $375 million in Medicare Advantage bonus revenue. The decision adds to a series of setbacks for the Medicare Advantage sector, which has been actively litigating to contest federal methodology changes affecting their financial incentives.

The outcome underscores ongoing tensions between Medicare Advantage insurers and regulators concerning performance metrics and payment structures. It also highlights the regulatory scrutiny on quality measurement systems that can materially influence payer/provider revenues and market competition within Medicare Advantage programs.