By Charles Baker, VP, Compliance Solutions

In the world of Medicare Advantage, the calculation of Star Ratings is more than a measure of quality – it’s a pivotal marker that can significantly sway federal funding and market competitiveness.

Against the backdrop of high financial stakes and rigorous scrutiny, recent legal victories for SCAN Health Plan and Elevance Health have charted a path in challenging Star Ratings methodology. These cases emphasize the importance of the Plan Preview process; a thorough understanding of calculation methodologies is imperative to ensure accuracy of ratings. Since the preview occurs several months before final ratings are released, it allows plans to review preliminary ratings and potentially challenge CMS if discrepancies or misapplications are detected, following SCAN and Elevance’s lead.

As we delve into the specifics of these legal actions, it becomes apparent that what’s at stake is not just financial, but the long-term viability and strategic planning of health plans. The implications of these lawsuits extend beyond the involved parties, offering lessons and tactics for other plans grappling with similar situations.

These legal tests and the evolving scrutiny of Medicare Advantage plans highlight the need for proactive measures. The cases demonstrate that plans have a structured avenue for disputing Star Ratings, especially when CMS deviates from established regulatory guidelines. The outcomes of these lawsuits underscore the opportunity for rectifying immediate issues and broader implications for future Star Rating calculations across all Medicare Advantage plans.

Recent Legal Outcomes Affecting the Future of Medicare Advantage Star Rating Methodologies

SCAN Health Plan. In its lawsuit against CMS, SCAN’s argument centered around the alleged misapplication of the methodology used to calculate its 2024 Star Ratings. The main contention was that CMS did not adhere to its own rules, leading to an incorrect Star Rating of 3.5 instead of 4.5, costing the insurer $250M in bonus payments.

SCAN Health Plan contended that the new guardrail methodology and Tukey outlier model were applied to the recalculated hypothetical cut points from a prior year, rather than actual observed data. The court agreed with SCAN that CMS’s approach was not in compliance with the regulatory framework, particularly criticizing the statistical methods used for clustering quality measure scores, which led to lower Star Ratings. This erroneous calculation directly impacted the financial incentives tied to higher ratings.

Elevance Health: The Elevance lawsuit highlighted issues similar to those raised by SCAN, such as the application of statistical techniques and the adherence to the regulatory guidelines outlined by CMS. In the Elevance case, the focus was on the Tukey method; the crux of the argument was that while the Tukey method aims to stabilize and improve the predictability of cut points by removing outliers, its application by CMS in 2024 was inconsistent and led to a destabilization of these points.

Elevance contended that CMS failed to adhere to the 5% guardrail rule, which limits how much cut points can change annually. Elevance argued that this failure led to an unjust and significant shift in the Star Ratings, causing a dramatic impact on its financial standings due to a reduction in quality bonus payments that could amount to approximately $500M. Although Elevance achieved only a partial victory, the case brought attention to potential inconsistencies in CMS’s rating processes that could affect other plans.

These cases underscore the impact that Star Ratings have on the financial and operational aspects of Medicare Advantage plans. The major takeaway is that there is now a roadmap for other health plans to challenge CMS if there are perceived inconsistencies within Star Ratings calculations. With the ever-growing scrutiny around Medicare Advantage and the almost daily news of health plans divesting from the market, it’s even more critical for plans to maximize every financial opportunity available.

Don’t let the changing tides in Medicare Advantage jeopardize your plan’s financial health and market position. Talk with an ATTAC compliance expert about how we can help your plan craft its strategy for success.

 About ATTAC Consulting Group

ATTAC Consulting Group is nationally recognized as an expert in regulatory interpretation, design, and operation of effective compliance programs for Medicare, Medicaid and commercial health plans, PDPs, ACA plans, ACOs, IPAs, medical groups, dental and vision plans.