Stars 101: A primer on the ratings system for Medicare Advantage plans

Measuring satisfaction with health plans and health systems is important – and complex. This primer on Star Ratings breaks it all down.
Stars 101

Table of Contents

What is the Stars Rating System?

The Stars Rating System released each year by the Centers for Medicare & Medicaid Services (CMS), rates the relative quality of healthcare services supported by Medicare Advantage (MA) programs.

Why is the Stars Rating System for Medicare Advantage Plans important?

With almost 50% of Medicare eligible beneficiaries enrolled in commercial MA plans in 2023 –  and Medicare Advantage Organizations receiving an estimated $10 billion from CMS in Quality Bonus Program (QBP) payments in 2022 – the Stars Ratings program is of high value to MA organizations, enrollees, and clinicians. Stars Ratings are assigned at the contract level, not the plan level, and all plans under a given contract receive the same star rating.

How do plans, providers, and patients benefit from the Stars Rating System?

Established in 2007, the Stars Rating system is both a resource for consumers and the foundation of a reward system for Part C and D MA organizations. Star Ratings are comprised of a composite performance score on measures in nine domains.

What are the domains within the Stars Rating System?

Domain categories include:

  • Maintaining health
  • Chronic disease management
  • Member experience
  • Member complaints
  • Customer service

There are also four additional domains for Part D plans, with coverage for drugs. Scoring ranges from one to five stars, and consumers can compare how plans perform on the Medicare Plan Finder website.

How are participants rewarded in the Stars Rating program?

The Stars Rating system rewards MA organizations that receive at least four out of five stars. Organizations that are eligible for the Quality Bonus Program (QBP) can also be eligible for an additional rebate based on a portion of the difference between the organization’s adjusted benchmark and the organization’s annual bid to cover benefits for Medicare beneficiaries. Organizations with bids below the benchmark must use that rebate to enhance benefits to enrollees through reduced premiums; additional benefits such as vision, dental, or hearing coverage; or reduced cost sharing.

How does the benchmark system work?

The benchmark is the maximum amount paid to organizations by the federal government based on projected fee-for-service (FFS) spending for a Medicare enrollee in a particular county. Organizations that receive four out of five stars typically have their benchmark increased by 5%. If the plan is in a region with low traditional FFS Medicare spending and high MA enrollment, they have their benchmark increased by as much as 10% for an additional rebate.

The average annual QPB per MA enrollee was $352 in 2022. While rebates must be spent on enhancements for enrollees, bonus payments are not restricted, as plans within MA organizations often incentivize clinicians directly by offering bonuses for performance on HEDIS program measures.

How are Stars Ratings calculated?

Stars Ratings are calculated from performance scores on domain specific clinical performance measures and surveys. Clinical performance measures are those developed and maintained by the National Committee for Quality Assurance (NCQA) Healthcare Effectiveness and Information Set (HEDIS) and the Pharmacy Quality Alliance (PQA). Survey instruments include the CMS Health Outcomes Survey (HOS) and The Medicare Advantage and Prescription Drug Plan Consumer Assessment of Healthcare Providers and Systems (MA and PDP CAHPS).

What are the methodologies within these calculations?

CMS uses different methodologies to determine scoring for clinical performance measures and surveys, including clustering and mean resampling, along with relative distribution and significance testing.

Clustering maximizes differences across star categories and minimizes the differences within these categories for clinical measures. Mean resampling determines the measure’s cut points, or the ranges that a measure score must fall into for each star value.

Survey measure scores are determined through relative distribution and significance testing, and the Star Rating is adjusted based on the reliability of scores produced from survey data. CMS then determines the domain rating as an average of the domain’s measure stars. A plan must meet or exceed the minimum number of rated measures required for the domain.

Finally, CMS also adjusts Stars Ratings for socioeconomic status and disability with the Categorical Adjustment Index (CAI) for the plan’s percentage of beneficiaries with Low Income Subsidy/Dual Eligible (LIS/DE) and the plan’s percentage of beneficiaries with disabled status within an organization.

As organizations that score well for multiple years in a row have less room for improvement, they can be eligible for an improvement adjustment for high scoring organizations. Organizations that demonstrate consistent high and stable relative performance can also be eligible for a reward factor that can increase the organizations overall Stars Rating.

Are there updates to the Stars Ratings program?

As the MA program evolves, so does the Stars Rating program. CMS makes annual updates in response to trends in Medicare spending, advances in treatments and technologies, measure performance and refinement, and trends within the Stars Rating program itself. Updates to the Stars Ratings program are responses to emerging conditions in the healthcare environment combined with long-term strategies to improve and align the program with other CMS quality initiatives. 

What are some examples of these changes?

An example of a program change due to an emerging condition in the healthcare environment is the 2020 Extreme and Uncontrollable Circumstances (EUC) policy due to the COVID-19 pandemic. The EUC policy gave each contracted MA organization a higher measure level star rating compared to the previous year and increased overall Star Ratings and payments to all plans in 2022. CMS eliminated the EUC adjustment for 2023 so plans may see a decline in their Stars Ratings as a result.

What does the future look like for the Stars Rating program?

Long-term strategies to align the Stars Ratings program with other CMS initiatives include the Health Equity Index (HEI) reward and the Universal Foundation for measurement. The HEI reward factor – beginning with 2027 Star Ratings – would incentivize plans to improve care for enrollees with social risk factors (SRFs). Initially CMS will focus on LIS/DEs, but as data becomes available through new measures for Social Determinants of Health (SDOH), the agency will consider additional SRFs for the HEI reward.

What is the Universal Foundation?

The Universal Foundation is a long-term initiative that seeks to align measures across all CMS reporting programs to reduce reporting burdens and increase focus on measures that address diseases or conditions with high morbidity and mortality. 

The Stars Ratings program is not only a measure of value for enrollees, but also a path for Medicare Organizations to achieve bonus payments and rewards. These incentives drive additional benefits and lower premiums for members, which spurs higher enrollment. Plans must focus on performance measurement and improvement with data-driven strategies for care management and patient experience in order to excel in the Stars Rating program.

Click here for an overview of CMS’ proposed changes to Medicare Advantage payment models.

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