The Centers for Medicare and Medicaid Services (CMS) uses a variety of metrics to calculate “Star Ratings” that are announced in October of each year. These ratings apply to two types of insurance plans:
- Stand-alone drug plans (PDP plans) that persons covered under Medicare are in most cases required to carry. Original Medicare doesn’t cover prescription drug costs.
- Medicare Advantage (MA) plans, in which insurance from a private carrier replaces Original Medicare. The carrier is paid by Medicare and these plans are requires to meet Medicare standards of coverage.
Medicare Supplement (Medigap) plans are not rated. CMS also conducts a separate rating of hospitals using a similar star system. That’s not included in this discussion.
The purpose of the ratings is to give consumers some guidance as to the relative quality of different plans as well as to encourage insurers to meet some quality and cost performance metrics.
The timing for the rating announcement is at best amusing. The release of the ratings comes after the initial printing and programming of insurer enrollment kits for the new plan (calendar) year, requiring insurers to prepare initial kits and them revise them. With some carriers, it takes a week of effort to implement these changes and a significant commitment of personnel and cost. But that’s the way it is.
A plan can receive a rating of from no to five stars.
- A 5-star rating is the best, and a plan with this rating has a Special Enrollment Period allowing it basically to take customers from lower rated plans throughout the year, instead of the Annual Election Period (October 15th – December 7th) and Open Enrollment Period (January 1st to March 31st, but with limitations as to which consumers can participate) to which other plans are limited.
- A 4-star rating is good, and the insurers with MA plans rated 4 or above receive incentive bonuses from Medicare.
- A rating of below 3 requires remedial work
- Plans with bottom ratings are at risk of losing accreditation with CMS, which would basically put them out of business.
There have been headlines this year about a massive increase in the proportion of Medicare clients who are covered with plans that have 4-star or higher rating. Some 90% of current enrollees will be covered by plans with 4-start or higher ratings in 2022, as compared with 77% of enrollees in 2021.(1)
Are the plans getting that much better?
Not necessarily. CMS implemented a Covid relief provision that may have prevented any ratings from declining, creating an upward bias in the results.
But Melissa Newton Smith, executive vice president of consulting and professional services at Healthmine, Inc., tells AIS Health that “stand-alone PDP plans were artificially boosted by CMS’ Star Ratings COVID relief provisions, with plans reverting to the measure-level 2021 rating on average more than 30% of the time.”(1)
So this year, what you see may not be what you get.