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Medicare Advantage Stars Strategy Must Be a Top Priority for Health Plans

Medicare Advantage Starts Strategy Web

In the ever-changing and rapidly expanding Medicare Advantage (MA) landscape, health plans must develop new strategies to improve their Stars program performance or risk decreased enrollment, financial losses, and compromised benefit offerings.

The Congressional Budget Office (CBO) has estimated that the share of Medicare beneficiaries enrolled in MA plans will reach approximately 51% by 2030. This would represent a drastic increase in penetration from current 2021 levels of roughly 42%. And yet it wouldn’t be the biggest increase in the program’s history. In the last decade, the industry has already seen these rates nearly double—up from just 24% penetration in 2010.

As MA growth continues and market competition rises, performance in the MA Star Rating program will be a key differentiator among plans as well as a driver of overall success.

Performance Shifts as Program Significance Is Recognized

MA Star Ratings not only determine eligibility for bonus payments and higher rebates; they also translate to financial benefits that enable high-performing plans to provide additional supplemental benefits and lower premiums to their members. This, in turn, creates a more attractive offering that can prompt higher enrollment. In fact, one prior analysis suggested that a 1-star rating increase has been associated with an 8% to 12% increase in enrollment the following year. The same study estimated that a 3- to 4-star rating improvement can result in a revenue increase of 13.4% to 17.6% the following year.

Such benefits have not gone unnoticed by health plans. As organizations continue to recognize the power of this fundamental program and develop associated strategic initiatives, the proportion of plans surpassing the 4-star threshold for bonus eligibility has increased dramatically. As shown in figure 1, roughly 37.8% of MA prescription drug (MA-PD) contracts (weighted by enrollment) received a Star Rating of 4 or higher in 2013, compared to an estimated 81.2% of plans achieving that rating in 2020.[1][2][3][4]

Figure 1

Furthermore, an ECG analysis of the average Star Ratings among all MA-PD plans shows an improvement in the average rating by nearly 9% between 2013 and 2016, from 3.71 stars to 4.03 stars, as shown in figure 2. This represents the first time that the average score for MA-PD plans have surpassed the 4-star threshold necessary for bonus eligibility.[5][6][7][8]

However, as more plans achieve bonus payments for high-quality performance, the corresponding costs to CMS skyrocket. In 2015, Medicare spending on bonus payments was approximately $3.0 billion. This has risen to nearly $11.6 billion in 2021—representing a near quadrupling of Medicare spending in a six-year period.

Figure 2

A Program of Continuous Change

It is vital for plans to understand these dynamics and remember that their individual performance, and the industry-wide upward trend, is subject to change. Simply put, as the MA program evolves, so does the Star Rating program. Annual updates from CMS continue to remove measures and add new ones, revise existing measures, and refine underlying calculation methodologies. Measure cut points, or thresholds, to achieve each Star Rating threshold also shift, and often rise, over time—making it more difficult for plans to achieve higher ratings.

In 2020, CMS announced an additional, more significant, change to the program: the gradual increase in weighting for patient experience measures. With changes finalized, these measures are slated to account for nearly 57% of overall Star Ratings by 2023, an increase of nearly 25 percentage points from baseline. Based on a contract’s current performance, this programmatic shift can boost or decrease a contract’s individual rating, and depending on the enrollment within that contract, can have a large influence on the plan’s overall Star Rating. To weather this change and accurately assess potential impacts to their organization, plans must evaluate their performance on a measure-by-measure and contract-by-contract basis.

Developing tactics around performance measurement and improvement will be a critical component of long-term plan strategy, as additional changes to the MA program are likely. For instance, CMS has noted a desire to include new measures and further refine scoring methodologies.

While the specific nature of these changes and their respective timing remains unknown, organizations should anticipate a continued focus on delivering value, increasing patient satisfaction, and controlling costs to combat Medicare solvency and affordability challenges. On that note, plans can count on MA being a focus of Medicare cost-saving discussions, as MA spending outpaces traditional Medicare. A recent 2021 study from the Kaiser Family Foundation (KFF) found that MA spending is higher and growing faster than traditional Medicare—with 2019 spending per beneficiary approximately $321 higher in MA compared to traditional Medicare.

In aggregate, this led to about $7 billion in additional spending.

Four Actions Health Plans Can Take Right Now

Plans that fail to create innovative, data-driven strategies around quality care management and patient experience are likely to realize financial losses and declining membership amid the increasingly competitive and value-driven arena of MA. To mitigate this risk, plans can take several actions in the immediate term:

1. Build out a quality and innovation team. To be effective, plans will need a dedicated team led by a chief innovation or chief quality officer to monitor and develop long-term strategies around Stars and other value-based programs. This can help situate plans in a proactive, rather than a reactive, positioning.

2. Improve patient experiences. Given the recent increase in weighting, plans should identify performance gaps and develop targeted tactics to increase aspects of the patient experience. This may require initiatives such as:

        • Gathering member feedback.
        • Optimizing the provider network.
        • Enhancing care management.
        • Streamlining administrative processes.

    3. Implement data-driven dashboards. Plans must analyze current performance while modeling future outcomes to develop a well-informed strategy.

          • First, plans should conduct a detailed analysis of each contract on a measure-by-measure basis across several years to identify trends, highlight best practices of high-performers, and diagnose areas of poor performance.
          • Informed by these analytics, the organization can then model potential improvement strategies to understand the relative impact on measure and plan performance.

      Forecasting the impact of internal and/or external changes on performance will allow the organization to prioritize investments and respond to proposed programmatic changes.

      4. Align with industry priorities and direction. While plans need to assess their performance, they should also consider the broader industry landscape and goals of CMS within the MA program, such as emerging trends in care patterns, proposed program refinements released by key stakeholders such as MedPAC, and innovative private partnerships or offerings. Understanding these industry-wide goals and challenges will help plans anticipate future program changes.

      These strategies must be tailored based on current organizational positioning, unique goals, and local market dynamics.

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