Last month, the Center for Medicare & Medicaid Services (CMS) issued a memorandum announcing a change pertaining to the effect of intermediate sanctions on the calculation of Star Ratings for Medicare Advantage organizations (MAOs) and Part D sponsors.  This is a significant change for plans.

The Star Rating program has continued to evolve since being introduced by CMS in 2006, and is a part of CMS’s efforts to define, measure, and reward quality health care and member services. The ratings incorporate data from Healthcare Effectiveness Data and Information Set quality measures, Consumer Assessment of Healthcare Providers and Systems surveys, the Medicare Health Outcomes Survey, and CMS administrative data.

Beginning in 2012, quality/Star Ratings directly affected the monthly payment amount MAOs receive from CMS. First, CMS is required to make quality bonus payments (QBPs) to MAOs that achieve at least 4 stars in a 5-star quality rating system. In addition, the percentage share of savings that MAOs must provide to enrollees as the beneficiary rebate is tied to the level of an MAO’s QBP rating.

CMS utilizes a five-point scale to “score” Part C and D plans on the level of quality and care provided to enrollees:

  • Five stars = excellent
  • Four stars = above average
  • Three stars = average
  • Two stars = below average
  • One star = poor

A plan’s Star Rating is calculated each year, and results are posted on the CMS website.  CMS generally issues its Request for Comments and the Call Letter that lay out the Star Ratings methodology for two or more years ahead.

Initially proposed in the September 6, 2012 draft technical notes, CMS policy provided that contracts that are subject to an enrollment sanction are automatically assigned 2.5 stars.  But, if a contract under sanction already has 2.5 stars or below, it would only receive a 1-star reduction.   Over the year, CMS has imposed enrollment sanctions on four organizations – potentially resulting in automatic reductions of the plan’s Star Ratings.

CMS’s March 8, 2016 memorandum announced a major revision to this policy.  CMS notes that there has been a growth in the number of highly rated contracts – from 30 percent of Part C contracts with a rating of 4 stars or above in 2012, to more than 49 percent of MA contracts with a rating of 4 stars or above in 2016.  Based on comments from stakeholders and the recent growth in the number of highly rated contracts, CMS immediately suspended its policy of automatic sanction-based reductions in Star Ratings.

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