Earlier today, CMS made available its 2013 Medicare Health Plan Quality and Performance Ratings, also called “Star Ratings.”  The Star Ratings will assist enrollees during the annual enrollment period that extends from October 15, 2012 to December 7, 2012 and will also play a significant role in determining reimbursement rates for Medicare Advantage Plans.

In the past, Star Ratings were used both as an informational tool for beneficiaries and as a way for CMS to help identify poor performing Medicare Advantage and Prescription Drug Plans.  These ratings have become increasingly important since the enactment of the Affordable Care Act and its requirement that Medicare Advantage quality bonus payments be tied to Star Ratings.

 The Star Rating System 

CMS created Star Ratings for Medicare Parts C and D based on a comprehensive assessment of various healthcare metrics.  CMS sets forth its Star Rating methodology, along with changes from year to year, in a technical notes guidance document.

Medicare Advantage and Prescription Drug Plans receive a Star Rating for certain categories called “domains.”  Each domain is composed of various measures and each individual measure receives a Star Rating as well.  For example, one measure is based on whether enrollees have had at least one primary care doctor visit in the last year.  The number of stars assigned to applicable measures and categories are aggregated, applied to various plans within a contract, and then CMS assigns a contract-level star rating.  CMS assigns stars based on the following scale:

For contract year 2013, Medicare Advantage plans are rated based on how they perform in five domains: 

1. Staying Healthy: Screenings, Tests and Vaccines (10 measures);
2. Managing Chronic Long Term Conditions (13 measures);
3. Member Experience With Health Plan (6 measures);
4. Member Complaints, Problems Getting Services, and Improvements in the Health Plan’s Performance (4 measures); and
5. Health Plan Customer Service (4 measures).

Prescription Drug Plans are rated on how they perform in four domains:

1. Drug Plan Customer Services (5 measures);
2. Member Complaints, Problems Getting Services, and Improvement in the Drug Plan’s Performance (4 measures);
3. Member Experience with the Drug Plan (3 measures); and
4. Patient Safety and Accuracy of Drug Pricing (6 measures).

Medicare Advantage plans that offer a prescription drug benefit under Medicare Part D (“MA-PDs”) are rated on both the Medicare Advantage and Prescription Drug Plan domains/measures and receive one comprehensive Star Rating.  Star Ratings compile information from various sources including:

• The Healthcare Effectiveness Data and Information Set (HEDIS).
• The Consumer Assessment of Healthcare Providers and Systems (CAHPS) Survey. 
• The Health Outcomes Survey (HOS).
• CMS administrative data, including but not limited to member satisfaction, appeals processes, audit results, and customer service. 
• Prescription drug event (PDE) data submitted to the CMS by the drug plans (for Part D). 

Expansion of the Use of Star Ratings to the Medicare Advantage Program

The Affordable Care Act expanded the scope of Star Ratings, which now play a significant role in Medicare Advantage reimbursement.  The Affordable Care Act mandates that only plans with a quality rating of 4 stars or higher (based on the most recent data available) are eligible to receive quality bonus payments.  This is a significant shift in the use of Star Ratings, which prior to the Affordable Care Act were used to assist both enrollees (in plan selection) and CMS (in plan monitoring efforts), but did not impact plan payment.

Following enactment of the Affordable Care Act, CMS created a demonstration project that extended quality bonus payments to Medicare Advantage plans that receive at least 3 stars.  This demonstration has been the subject of Congressional hearings and has led the Government Accountability Office (GAO) to issue a Report entitled Quality Bonus Payment Demonstration Has Design Flaws and Raises Legal Concerns.  Among other things, the GAO Report states that the structure of the demonstration may not be effective to meet its stated purpose of testing whether a scaled bonus structure leads to faster quality improvement than the structure set forth in the Affordable Care Act.  Critics have also asserted that CMS created the demonstration project, at a cost of over $8 billion, as a means to temporarily offset the significant Medicare Advantage reimbursement reductions authorized by the Affordable Care Act.  Despite this criticism, the CMS demonstration project is set to continue through 2014.

Plan sponsors will want to closely monitor the ultimate outcome of the CMS demonstration project.  In the meantime, sponsors will need to focus efforts on the Star Rating categories identified above or risk not receiving performance bonuses.