As more of the Medicare population enrolls in managed care plans – 16.8 million people, 31% of the Medicare population in 2015 – the Centers for Medicare and Medicaid Services (CMS) star rating program for these plans has gained importance (see Medicare Advantage 2015 Spotlight: Enrollment Market Update).
Established in 2012, CMS measures how well Medicare Advantage and Part D prescription drug plans perform (see Health Care Reform Brings Pay-for-Performance to Medicare Advantage to Reward Quality of Care). Using a five-star system (from 1 to 5), the plans are ranked on overall performance and also get a star rating in each individual performance category. The star ratings are based primarily on data collected from five sources: the Healthcare Effectiveness Data and Information Set (HEDIS); Consumer Assessment of Healthcare Providers and Systems (CAHPS); Health Outcomes Survey (HOS); CMS administrative data support measures; and Part D measures developed by the Pharmacy Quality Alliance.
Why do the star ratings matter? Two reasons – the star ratings have a direct effect on CMS rewards/penalties to the health plans and the ratings affect consumer selection of plans.
Financial rewards come in two parts. “Rebates” are calculated by taking the plan’s bid to CMS (the plan’s cost for providing Medicare Part A and B benefits in a specific county), which are usually lower than a pre-determined county “benchmark” of the maximum that CMS will pay for those benefits in that county. When the bid is below the county benchmark, then plans that achieve the necessary star rating receive a share of the difference between the bid and the benchmark (this is called the rebate). The rebate percentage varies from 50% for plans with fewer than 3.5 stars, to 70% for plans with 4.5 or more stars (see The Star Rating System and Medicare Advantage Plans). The second part is additional quality bonus payments (QBP) that plans with four or more can earn. These bonus payments are paid per enrollee and are calculated as a share of the MA benchmarks, usually five percent (see Primer: The Medicare Advantage Star Rating System).
There is also a penalty for plans that consistently perform poorly. Those plans that achieve fewer than three stars for three straight years face possible termination of their contract. For the 2016 plan year, CMS announced that six plans failed to meet the performance guidelines, and CMS would “effectively end their contracts by December 31, 2016” (see Medicare Advantage Star Ratings Reveal Mix Of High, Low Performers).
The star ratings have also had a significant effect on consumer selection of health plans – 72%, or about 12 million, of the 16.8 million Medicare Advantage beneficiaries have enrolled in a plan with four or more stars, according to a recent study by Avalere (see More Than 70 Percent Of Medicare Advantage Enrollees In Plans With Four Or More Stars). Additionally, consumers are encouraged to enroll in plans with 5-star ratings through special enrollment periods – open enrollment in Medicare advantage plans takes place between October 15 and December 7; however, consumers can switch to a 5-star plan throughout the year, bypassing the regular open enrollment period. As The National Health Policy Forum reports, with nearly 30% of Medicare beneficiaries in 2014 opting to enroll in MA plans instead of fee-for-service Medicare, the star ratings are going to continue to carry more weight with consumers (see The Star Rating System and Medicare Advantage Plans).
So how are health plans performing? Better every year – about 49% of Medicare Advantage plans with prescription drug coverage earned four stars or higher for their 2016 rating, whereas 33% earned four stars or higher in 2015, 32% four stars or higher in 2014, 26% earned four stars or higher in 2013, and 20% earned four stars or higher in 2012 (see Medicare Advantage 2015 Data Spotlight: Overview of Plan Changes).
What are the plans doing? Many plans are working diligently to improve their star ratings. Let me give you a couple examples – to improve their scores, Vantage Health Plan bought a $10,000 mobile ultrasound unit in 2015 so it could give its elderly female members bone density screening; and Aetna mailed complimentary blood pressure cuffs to its members to use at home last year (see Medicare Advantage Ratings Proving To Be Boon To Insurers, Patients). And the bonus for improving can be big – United Healthcare will receive a $1.4 billion bonus this year, an increase of $532 million from the year before. Others are facing penalties – like Cigna, which may lose its $252 million bonus due to a CMS sanction for not providing the mandatory services and benefits.
So what are the implications for provider organization strategy? There are opportunities to develop new service lines that “fill the gaps” in health plan star ratings. We have some resources on this topic in the OPEN MINDS Industry Library – Understanding The CMS Five-Star Quality Rating System: How Provider Organizations Can Help Payers Close The Quality Gap; Quality Ratings For Health Insurance Plans – Why Do They Matter?; and From Payer Vendor To Payer Partner. Look for more next week when we outline how to use the “gap filling” strategy to uncover new opportunities with health plans in any market.