By Steph Carlton, Monisha Machado-Pereira, and Alok Ladsariya
November 12, 2014 at 5:00 am ET
Under current law, CMS will continue to compress the reimbursement level for private Medicare Advantage (MA) plans so that it is closer to the expense equivalent of Medicare fee-for-service. As these payment adjustments continue to phase in, the ability of MA to “win” is likely to depend in large part on their quality performance as measured by the CMS Star ratings system, first implemented in 2008.
In 2012, CMS began awarding MA carriers a significant bonus payment based on their products’ performance across a set of clinical, customer satisfaction, and contract performance metrics. For 2015, the stakes are much higher: the eligibility for Star bonuses is now bi-modal—only plans achieving 4 or more Stars will be awarded a bonus payment. We estimate that 2015 plans with fewer than 4 Stars will forfeit $3.47 billion in bonus payments.
For MA carriers, Stars performance is important not only because it has been shown to correlate with market share, but also because it results in 5% higher payments, contributing to healthy plan economics, richer benefit packages, and the ability to invest in new plan capabilities and innovative benefit designs.
CMS just released the MA Star ratings for 2015. My colleagues and I analyzed CMS’s data covering 691 MA plan contracts across the 50 states to determine which types of products are achieving the highest average Star ratings. We found several key insights:
Our research into the MA Stars program revealed other important observations:
Star ratings are not a perfect measure of carrier performance, but they do offer seniors a standardized basis for judging the quality of care delivered through a given plan. Evidence is emerging that the ratings influence seniors’ purchasing decisions. In 2009, only 17% of MA members were enrolled in plans with 4 or more Stars. If enrollees stay in their current MA plans in 2015, CMS estimates that number will be approximately 60%.
Stephanie Carlton, Monisha Machado-Pereira, and Alok Ladsariya are consultants in McKinsey and Company’s Health Care Systems and Services Practice.
Read their briefing here.