In wake of industry compromises, are Medicare’s star ratings useless?

That’s a good question for consumers to ask themselves as the government continues to send more rating schemes into the marketplace as part of its drive to encourage “shopping” for extremely complex services with tons of unknowns. The thinking goes like this: If consumers use ratings to avoid the worst hospitals, nursing homes, home care agencies, or Medicare Advantage plans, the bad ones will go out of business or get better. It’s possible both could happen. It’s the old voting-with-your-feet argument. Health care, though, is not like a bad restaurant that customers can ditch if the food is lousy. Too many other variables come into the mix.

One very big variable surfaced this spring that calls into question Medicare’s star ratings for Medicare Advantage plans. The government quietly changed the rules of the ratings game to satisfy sellers of Medicare Advantage plans that count on high star ratings for government bonus payments. In January the Centers for Medicare and Medicaid Services (CMS) sent Cigna, a large seller of Medicare Advantage plans, a strong letter of sanction telling the carrier it had “substantially failed to provide its enrollees with services and benefits in accordance with CMS requirements.” It also cited “serious violations” and barred the carrier from enrolling new members until the infractions were corrected. The letter said beneficiaries experienced inappropriate delays and denials of medical services and medications, received inaccurate and incomplete information, and did not get timely resolution of requests for coverage — not exactly what you’d expect for a highly rated plan. The sanction also carried an automatic lowering of the star ratings for its plans to 2.5 stars, which meant Cigna would not be eligible for bonus payments. To get a bonus, plans must achieve 4, 4.5, or 5 stars based on a variety of metrics that take into account such things as how well the plan has managed chronic conditions, encouraged screenings for disease, resolved consumer complaints, and handled customer service.

The sanctions meant Cigna could lose as much as $350 million in bonus payments, and as Cigna itself has said in its “Stars Guidance” to health care professionals and providers: “Star Ratings have a significant impact on the financial outcome of Medicare Advantage health plans by directly influencing the bonus payments.” Plans with 4, 4.5, or 5 stars get about $500 extra each year for every beneficiary they’ve enrolled. A 4-star plan with one million members would earn $500 million in bonuses. Star ratings have become a government gravy train.

In early March, CMS announced it would stop its practice of automatically lowering Medicare Advantage plans' star ratings in the wake of sanctions. After CMS announced its new policy, Cigna’s stock rose nearly two percent. 

The stars have also become outstanding marketing tools. Although a 2015 McKinsey & Co. study found that only 21 percent of those enrolled in an Medicare Advantage (MA) plan knew their plans’ star rating, that will change as the plans market their high ratings more aggressively. Shopping for an MA plan is not easy. Seniors are asked to compare which plans have the lowest coinsurance and copays for services like chemotherapy drugs, and they must consider if they can swing the out-of-pocket maximum — this year as much as $6,700 — they would have to pay, points often glossed over during an insurer’s sales pitch.

It’s easier to reel in new customers if a seller can promote its 4.5-star plans as Cigna did last year in a press release: “No other Medicare Advantage HMO plan in the state of Arizona has a higher rating than Cigna HealthCare of Arizona.” If a plan has 5 stars, it must be good, and a 5-star rating is simpler to understand than all that stuff about coinsurance for expensive cancer drugs.

In early March, CMS announced it would stop its practice of automatically lowering star ratings in the wake of sanctions after listening to what Modern Healthcare reporter Bob Herman called “an onslaught of comments asking that the policy be thrown out” — presumably from insurers and providers. After CMS announced its new policy, Cigna’s stock rose nearly two percent. Herman noted, though, the change did shock many in the industry, and left some consultants scratching their heads. One Medicare Advantage data consultant told him the decision could be characterized as “a huge gift or even corporate welfare. CMS’ actions definitely send a mixed message to plans.”

A mixed message to the MA plans? What about the message sent to seniors and Medicare counselors who advise them? In junking the rule, Medicare undermines the integrity of its ratings. Who can rely on them?

CMS has a history of kowtowing to Medicare Advantage sellers. CMS has authority to terminate Medicare Advantage plans and prescription drug plans that fail to achieve at least three stars for three consecutive years. In early 2014 CMS announced it would exercise its authority and end the contracts of plans that did not meet that threshold. But by that fall it had changed its mind, saying it would not terminate contracts for 2015 because the agency wanted to give the plans a chance to improve. “We were concerned about this,” says David Lipschutz, managing attorney at the Center for Medicare Advocacy. “If plans performed badly, they shouldn’t be allowed to enroll new members.”

In the meantime, plans with lower ratings have taken their case to Capitol Hill, arguing that the ratings were less than stellar because they had enrolled a disproportionate number of beneficiaries who came from low-income backgrounds, had many chronic conditions, and among other factors, were less likely to keep appointments, comply with medication instructions and have preventive screenings. “Some plans were telling Congress that people who have lower socioeconomic status don’t allow them to perform as well,” said Lipschutz.

The threshold for being a “good” plan is already low. Ninety-seven percent of the plans already get three stars. Yet some of those plans at the bottom are pushing CMS to further adjust the scoring system to account for a higher percentage of beneficiaries coming from lower socioeconomic backgrounds. Such adjustments could raise the scores and thus the ratings without any improvement to the health of a plan’s beneficiaries, and as a result they might mask real disparities and make a plan look better than it actually is. Lipschutz says his Center is arguing to delay major changes in the star ratings until data from a government study become available later this year. So far the MA sellers have succeeded in getting Medicare to agree to make modest adjustments in how they calculate the quality scores that go into the ratings. Next year CMS will begin making those adjustments, calling them a “necessary first step for building the foundation for a long-term solution.” Such adjustments could further undermine the usefulness of the star ratings. Furthermore the industry continues to press its case for delaying Medicare’s authority to banish bad plans.

Today about half of all Medicare Advantage plans receive 4 or 5 stars plus a lot of bonus money. Some 70 percent of all MA members are in those plans, compared to 60 percent in 2015, and 50 percent in 2014. Are the plans getting better? Given the political games being played, it’s not clear the stars are truly measuring good performance. Dr. Robert Berenson, an Institute Fellow at the Urban Institute, told me “the stars are not capturing what we want the plans to do.” For example, do the plans send very sick people out of their networks when they need care? Tricia Newman, senior vice president of the Kaiser Family Foundation, points to a knowledge gap. “We know very little about how plans are caring for people with complex needs and how that differs from care provided under traditional Medicare,” she said.

Evidence is coming in that beneficiaries in Medicare Advantage plans are leaving them when they get really sick. Last fall, a study published in Health Affairs reported “substantial” switching from Medicare Advantage plans back to traditional Medicare by seniors who used nursing home and home health care. There was virtually no switching by those in traditional Medicare into MA plans. Those switching do it even though most are unable to buy traditional Medigap supplemental insurance policies to cover what traditional Medicare doesn’t. The Medicare drug law and most state regulations say insurers don’t have to sell Medigap policies except when someone is first eligible for Medicare or within a year of trying an MA plan.

As so often happens with health care rating schemes, the industry co-opts them, and the public is none the wiser. Diane Archer, who founded the Medicare Rights Center and now runs Just Care, a website that offers consumer-friendly information about health and insurance topics, sums up the MA star ratings this way: Medicare ratings of Medicare Advantage plans are “a farce.”

Veteran health care journalist Trudy Lieberman is Contributing Editor of the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care blog.