Despite Top-Level Decline, Tukey-Impacted Star Ratings Suggest Mostly Stable Performance

Reprinted with AIS Health permission from the Oct. 19 issue of Radar on Medicare Advantage

Only 42% of Medicare Advantage Prescription Drug (MA-PD) contracts that will be offered in 2024 achieved an overall rating of 4 stars or higher, compared with approximately 51% of contracts in 2023, according to the latest Medicare Part C and Part D Star Ratings data. Weighted by enrollment, the average MA-PD Star Rating fell from 4.14 for 2023 to 4.04, with approximately 74% of MA-PD enrollees estimated to be enrolled in contracts that achieved 4 or more stars for 2024, compared with 72% for 2023, CMS reported on Oct. 13. 

Those changes were largely expected due to the application of the new Tukey outlier deletion methodology, which was used in determining the cut points for measures not directly related to member experience and largely achieved CMS’s stated goal of infusing more “predictability and stability” into the Star Ratings.

CMS also attributed the shifts in performance to the addition of two Part C measures, Transitions of Care and Follow-Up after Emergency Department Visit for People with Multiple High-Risk Chronic Conditions; the return of the Part C Plan All-Cause Readmissions measure (with substantial revisions); and the retirement of the Part C Diabetes Care — Kidney Disease Monitoring measure. 

But “of all the stories” that could be told from the latest ratings release, “the Tukey story trumps even the new measures, which feels ridiculous, quite frankly…in a year where we’ve had three brand new measures added. In any other year since Stars was launched out of the demo, that would have been the story. And in this particular case, it’s really not.…The story is Tukey this year,” marvels Melissa Smith, chief consulting officer with Healthmine, Inc., a health rewards and engagement company. That change raised 19 cut points by more than 10%, making it harder for plans to earn 5 stars on the impacted measures than in previous years.

While movement in cut points can be a “symptom of changing performance patterns,” that didn’t appear to be the case this year, adds Smith. “This is a story of a new bar of performance for many plans. Usually, we see one measure domain or another that jumps off the page, and this year it’s just sustained improvements. If you look at the plans that earned 4 or more stars, everything from HEDIS to CAHPS [Consumer Assessment of Healthcare Providers and Systems] to HOS [Health Outcomes Survey] and the SNP [Special Needs Plan] measures are almost all identical…compared to last year’s.”

Improvement Measures Saw Some Upward Movement

But there was upward movement on the heavily weighted improvement measures, such as Health Plan Quality Improvement and Drug Plan Quality Improvement. Those measures make up about 10% of the overall rating and were created specifically to help newer plans get to the 4-star overall rating, “but also to reward high performing plans for continuously raising their own personal performance even if they’re already at 4 and 5 stars,” explains Smith. “We think that’s particularly important because from a tactical perspective, there are so many plans that struggle to mathematize the continuous quality improvement needed for sustained ratings, [and] this is a really good reminder of why that’s so vital and why it’s such an important element of the overall Star Rating.”

Smith also points out that 34 plans gained a fourth star while 74 lost their 4-star rating and associated quality bonus payment. “That in and of itself is not particularly noteworthy, but the impact to each set is coincidentally, approximately $1.4 billion in either direction,” which suggests that “the macro impact of these changes is interestingly pretty stable,” she remarks. With the proportion of membership in 4-star or higher plans largely remaining the same while twice as many contracts lost a fourth star, it would appear that “CMS is using strong Star Ratings to reinforce strong consumer value propositions, which has always been the intention of the program.” 

Meanwhile, only 31 contracts — representing 6.8% of current MA-PD enrollment — earned 5 stars, down from 57 contracts serving 21.5% of enrollees last year, according to estimates using data from AIS’s Directory of Health Plans (DHP). For 2024, MA-PD contracts were rated on up to 40 unique quality and performance measures, while MA-only contracts were rated on up to 30 measures. Stand-alone Prescription Drug Plans (PDPs) were ranked by 12 measures. Like last year, only two PDPs received 5 stars. Additionally, three Medicare Cost plans earned 5 stars. 

Plans that receive 4 or more stars earn quality bonus payments, which many MA sponsors have used to enhance their supplemental benefits. KFF estimates that MA plans in 2023 qualified for at least $12.8 billion in bonus payments. Plans that receive 5 stars have the added benefit of being able to market their products all year long and enroll beneficiaries who qualify for the 5-star special enrollment period.

While the proportion of 4-star or higher plans improved by 2%, the redistribution of contracts with 5 stars vs. those with 4 or 4.5 stars “likely makes investors antsy,” observed equity analyst David Windley in an Oct. 16 note from Jefferies. “It’s becoming clearer that the risk model [adjustment] and a compression of Star scores means the MCOs have to find cost outs to maintain benefits or find ways to continue driving [health service delivery] enrollment with marginally lower benefits,” he wrote, referring to CMS’s plans to begin phasing in major revisions to the model used to adjust MA plans’ pay starting next year. “The current AEP, with core benefits down slightly on average, is an important year for shaping a multi-year narrative on the industry’s ability to grow through skinnier rates. We see industry growth closer to 5%-6%, not 8%+, with the view that convincing the [approximately 30 million individuals opting for fee-for-service Medicare] to switch to MA with lower [year-over-year] benefits poses a challenge.”

Aetna Was Big Stars Winner for 2024

Whereas CVS Health Corp.’s Aetna saw a considerable decline in performance in 2023, the big takeaway from investment firms this year is that CVS was the biggest gainer. For 2024, 87% of Aetna’s membership is expected to be in 4 star or higher contracts, compared with a 21% estimate provided this time last year, when a major PPO serving more than 2 million lives lost half a star. Aetna at the time blamed the performance decline on CAHPS scoring.

On Oct. 13, the company said its 2024 Star Ratings success was largely driven by its National PPO contract earning 4 stars, which was due in part to improvement by nearly 1 star in the member experience domain — where Aetna says it made “significant investments.” The insurer also credited sustained 4+ star performance in the HEDIS and operations domains “in the face of the measurement being significantly harder year-over-year in these domains,” and 5-star performance on Part C HEDIS measures such as Breast Cancer Screening, Controlling Blood Pressure and Diabetes Care — Eye Exam.

To Evercore ISI, the performance improvement supported its notion that Aetna’s “business operations are moving back on track,” securities analyst Elizabeth Anderson wrote on Oct. 13.

Elevance Health, Inc., however, did not fare as well. The insurer’s three biggest contracts fell below the 4-star threshold, although one of the three contracts has a “high mix” of group MA membership, “so an immediate negative impact to enrollment is unlikely,” pointed out Windley. Just 35.1% of Elevance’s members are expected to be enrolled in a 4-star contract next year, compared to 64.4% in 2023, according to DHP estimates.

“We repeatedly hear that brokers don’t want to see plans for [plan year 2024] that will have benefits axed in PY2025,” he continued. In evaluating the data, Jefferies looked for large contracts (i.e., those with 100,000 or more lives) “that will experience a material Stars benefit/headwind in PY25.” Of Elevance’s three large contracts that fell below 4 stars, one contract (H4036) was the only one declining from 4.5 stars to 3.5 stars, which Jefferies estimated will result in a 25% hit to rebates (that can be accessed when bonus plans bid below the benchmark for payment). The company is in “a tricky spot,” he added, because “the breadth of the Stars pressure makes it difficult to cross-subsidize investment in benefits.” 

UnitedHealthcare, for example, has approximately 370,000 enrollees in an HMO-POS in California that lost half a star and put that contract below the 4-star threshold, but the insurer is likely to “find offsets in the competitive” California market, noted Windley. Overall, 76.6% of UnitedHealthcare’s current membership is enrolled in a plan that received 4 or more stars for 2024, compared with 80.2% in 2023 and 95% in 2022, per DHP estimates. And Humana Inc. once again retained high ratings from the prior year, with 94% of members currently enrolled in MA plans receiving 4 or more stars, compared with 96% in 2023.

Contact Smith at contact@healthmine.com.

— By Lauren Flynn Kelly