The Medicare Advantage star rating system and its quality bonus payment program is failing to achieve its two main goals of helping beneficiaries select a plan and incentivizing payers to improve plan quality, according to a new report from the Urban Institute.
According to the June 26 report, the star rating system was intended to reduce payments to MA companies when it was established under the Affordable Care Act, but those savings have not materialized because the majority of plans are receiving bonuses for high star ratings. Bonus payments are given to plans with four or more stars, and the average MA star rating was 4.15 in 2023.
"In short, the QBP is a windfall for insurers that does not provide valuable information to beneficiaries or protect them from poor performance," the report said.
The study analyzed CMS data on 2023 star ratings for MA plans with wide availability, along with measures specific to D-SNP plans. The star ratings data was supplemented with MA plan enrollment by county in June 2021.
Seven key takeaways:
1. Clinical quality measures make up more than half of the measures used in the star rating system, but about two-thirds of a rating is determined by beneficiary experience and administrative effectiveness after weighting.
2. Beneficiary experience measures do not provide enough information to properly evaluate MA plans, and administrative effectiveness measures do not address issues identified with MA plans.
3. The star rating system inflates plan scores and there are limitations with underlying data sets, leading to measures focused on healthier beneficiaries.
4. Star ratings are not useful for selecting a MA plan in part because ratings can cover a large geographic area, therefore limiting information about the local experience.
5. MedPAC has proposed replacing the bonus program with a system that includes more local population health measures to measure quality, but the report suggests policies that focus more on "poor plan administration."
6. CMS has made adjustments to the quality bonus program in the past and has implemented strategies to reduce ratings inflation in 2023 and 2024, but the report said the agency should go further by making contract reporting more local.
7. CMS could also adjust the point system to decrease the number of plans receiving quality bonuses and introduce more relevant measures for beneficiaries, but that would require congressional action.