Medicare Advantage Plans - year two of the battle over Star ratings (and lucrative bonuses)
John Simmerling
Chief Science Officer / Thought Leader / Chronic Care Management, Molecular & Cellular Science, GCT, BioMed, BioTech, SDOH, IAQ, Healthcare Innovation / 20k+ Followers
Medicare Advantage (MA) plans are again lining up litigation against CMS for how improper Star Ratings will affect their MA plan revenue. These lawsuits are similar to those filed in 2024. As a result of the 2024 suits, CMS was forced to recalculate ratings and related MA plan bonuses.
"The lawsuits come as payers hustle to batten down the hatches amid turbulence in MA. Along with less-than-favorable regulatory changes, insurers have struggled with rising medical costs as seniors in the privately run Medicare plans use more healthcare than expected. Humana has been particularly hard hit, posting $1.4 billion in net income in the first half of this year, down more than a third from the same period in 2023."
To this author, the question is whether this is a mathematical issue or a real-world quality and outcomes issue. Where are the detailed outcomes measured that refute CMS's Star ratings? What improvements have resulted from the highly lucrative Star ratings previously awarded to Humana and other MA payers?
Transparency and Quality within MA programs
In a 2022 New York Times essay, and after extensive research that examined several lawsuits by the DOJ, the paper contended that "the insurers, among the largest and most prosperous American companies, have developed elaborate systems to make their patients appear as sick as possible, often without providing additional treatment, according to the lawsuits."
Throughout 2023 and 2024, congressional committees have questioned the relationship between large Medicare insurers and the giant PBMs that they own, which, they contend, is driving up the costs of drugs billed to Medicare using elaborate rebate programs and other mechanisms.
During the same period, MA plans were said to lower costs (the payments they make to providers) through the widespread use of preauthorizations, denials, and lack of provider access. Of course, this lowers quality, reflected in the plans' Star ratings.
2025 Ratings - and another Humana CMS lawsuit
Under the 2024 ratings, 94 percent of Humana’s Medicare Advantage enrollees were in a plan rated four stars or higher. In 2024, Humana sued CMS and won based on ratings calculations for their SCAN plan. With recalculated Star ratings for 2025, the number of 4-Star plus plans will drop to 25 percent.
In a lawsuit filed in October 14, 2024, Humana once again is calling out the secret shopper calls that it claims lowered its ratings.
Humana, while suing CMS based on secret shopper calls, said that star rating calculations are “dizzyingly complex” and that ratings have dropped precipitously despite no indication that plans’ quality has gotten worse.
Really?
CMS, with a plethora of "dizzyingly complex" data on quality and outcomes, could probably refute that claim, especially in light of widespread focus and the use of pre-authorizations and denials by MA plans as well as reduced access to MA providers compared to traditional fee for service plans.
MA Plan Providers - the Few and the Powerful
KFF illustrates that only a handful of insurers offer MA plans. They include:
"MA Costs Exceed the Costs of the Army and Navy Combined" - NYT
The government now spends nearly as much on Medicare Advantage’s 29 million beneficiaries as on the Army and Navy combined.
Astounding.
A program designed to lower healthcare spending has become substantially more costly than the traditional government program it was meant to improve.
MA Enrollment is Growing - For Now
Medicare Advantage (MA) enrollment has been steadily increasing - as MA plans offer benefits beyond traditional Medicare, such as no-cost premiums apart from the Part B premium and coverage for dental, vision, and hearing services. MA plans also provide critical financial protections, including out-of-pocket spending limits, which traditional Medicare does not offer. However, these plans often have restricted provider networks and implement cost-control mechanisms like prior authorizations.
Notably, Medicare (CMS) pays private MA plans (Payers or Payer-providers) an average of 122% of traditional Medicare spending for comparable beneficiaries, adding an estimated $83 billion in excess costs in 2024.
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As MA continues to expand within the Medicare landscape, policymakers are intensifying their examination of the program’s payment structure. This scrutiny includes determining whether the substantial bonus payments to plan administrators—totaling $83 billion—are translating into actual improvements in quality and efficiency for beneficiaries and the Medicare system.
Bonus payments don't promote high-quality care in MA programs
Yesterday, November 4th, a Washington Post article had this to say about the wave of litigation on quality measures and bonus payments:
"The nonpartisan Medicare Payment Advisory Commission has said the bonus payments are costly, don’t promote high-quality care and need to be revised. With more than half of people eligible for Medicare now enrolled in privately administered Advantage plans — up from 19 percent in 2007, according to?KFF?— there’s an “urgent need for a major overhaul,” a commission?report?said.
The "Rounding Effect"
One fundamental issue is how CMS "rounds" scores. If a score was calculated at 3.75, CMS dropped it to 3.5. If it was 3.76, CMS raised it to 4.0. Mathematically and conceivably, a single secret shopper phone call could swing the rating from 2.76 to 2.75 (2.5) or 3.76 to 3.75 (3.5).
Therefore, it can be argued that a single phone call could theoretically affect one of the multidimensional measures within CMS's rating algorithms.
How CMS calculates Star Ratings
Star ratings are based on measures defined explicitly by CMS, and plans must report on all applicable measures rather than selecting preferred ones. These standardized measures ensure consistency across all Medicare Advantage plans and allow CMS to compare quality nationally. Additionally, CMS sometimes updates the weighting and methodology of these measures to reflect policy priorities, such as emphasizing patient experience or reducing costs for specific service lines.
Lower Star ratings equal lower quality - which enrollees often discover too late.
Are Star ratings important? Many studies have shown that plan members don't extensively consider ratings when selecting a plan during enrollment. Still, the reality of poor ratings is revealed once healthcare access is needed. By then, it's too late—until the next enrollment period.
CMS needs to adopt more transparent and consistent methods of forcing MA plans to deliver quality. One simple but essential addition to driving quality would be requiring MA providers to adopt robust Chronic Care Management (CCM) programs.
This is especially important for certain specialties, like Cardiology, Nephrology, Oncology, Neurology, Endocrinology, and Primary Care providers.
CCM programs align with CMS’s emphasis on proactive care, reducing avoidable hospitalizations, and improving long-term health outcomes, all of which are critical factors in star ratings.
A focus on chronic disease management supports preventive care, strengthens CMS quality metrics, and increases the financial stability of MA plans.
CCM should be an integral part of Medicare Advantage and Medicare FFS plans
Chronic disease management programs improve health outcomes by reducing avoidable hospitalizations, which directly aligns with CMS’s goal of enhancing long-term care quality. Moreover, chronic disease management often leads to a more proactive approach, focusing on prevention and maintenance rather than acute crisis interventions. This translates into better patient satisfaction, a key component in the star rating.
Conversely, common Medicare Advantage program administrator (payer) practices such as pre-authorizations and frequent denials, though aimed at controlling costs, may undermine quality by delaying necessary care, leading to more acute health issues over time. When patients encounter barriers to timely treatment, they often experience worse health outcomes, higher readmission rates, and increased acute care episodes.
This reactive approach contrasts sharply with CMS's focus on preventative care and efficient management, which can ultimately jeopardize the plan's star rating. Hence, while denials may seem cost-effective initially, they often lead to a cascade of high-cost acute admissions and deteriorating patient satisfaction scores, which is counterproductive for quality ratings and long-term cost containment.
Restructuring rating calculations is essential. CMS star ratings, driven by complex, multi-factorial algorithms, should be resilient against single-event distortions, and the calculation metrics should be restructured.
One element of that restructure should be incentivizing the use of CCM programs with all Medicare Plans. Health plans can improve ratings and revenue by prioritizing chronic disease management and improving patient outcomes, satisfaction, and STAR ratings.
Isn't that a better strategic plan than limiting access and increasing denials and pre-authorizations to reduce costs?
In every way, a preventive, patient-centered approach aligns better with CMS quality measures and financial stability.
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