Expect Medicare Advantage star ratings to decline next year, McKinsey says

Medicare Advantage plan star ratings hit their highest-ever levels in 2022 — but plans shouldn't expect these increases to continue, McKinsey analysts warn. 

CMS methodology changes and the end-of-pandemic provisions mean star ratings for up to half of Medicare Advantage plans are likely to decline, according to a new report from McKinsey. 

Because of the pandemic's impacts, CMS allowed plans to use the better of historic and current performance data to calculate ratings. The provisions are ending this year, meaning plans that relied on this methodology could see lower ratings. 

Plans that fail to maintain their current star ratings could face financial consequences from reduced Medicare bonuses and rebates. McKinsey analysts estimated plans could experience $800 million in revenue impacts as a result of rating changes. 

"The financial impact may be substantial, particularly for those that have struggled with declining quality performances during the pandemic," McKinsey analysts wrote. 

CMS is implementing other methodology changes designed to make ratings more predictable for plans and to remove outliers. According to analysts, these changes could also lead to decreased ratings, but eventually result in advantages for plans that perform well. 

"For plans that successfully adapt to a more demanding Star ratings environment, quality may emerge as a source of competitive advantage," analysts wrote. "Maintaining a Star rating of four or higher can help plans remain financially stable, offer rich supplemental benefits for members and compete for the 56 percent of enrollees for whom Star ratings are a top buying factor." 

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