Enhancing Star Ratings

Unlocking the Key to Health Plan Excellence

The Centers for Medicare & Medicaid Services (“CMS”) Stars Program not only reflects the quality of Medicare Advantage and Part D plans but also has significant financial implications for health plans. A high Star Rating equates to considerable bonuses from the federal government, directly benefiting the bottom line. For example, in the 2024 Star Ratings (published October 2023), a large national plan experienced a drop from 4.5 to 3.5 stars, resulting in approximately $800 million less in operating income.¹ This underscores the immense financial stakes involved in maintaining high ratings.

Recent trends showcase a challenging environment. There was a significant reduction in 5-star contracts from 74 in 2022 to only 31 in 2024 and a drop in the average Star Rating from 4.37 to 4.04 over the same period. This highlights the urgency for health plans to prioritize quality improvements to sustain and enhance their competitive edge.

The CMS Star Ratings program is dynamic. One notable change is the Tukey outlier deletion method implemented in the 2024 Star Ratings, which refined accuracy by eliminating statistical anomalies that can skew results. In April 2023, CMS finalized a key update to the Star Ratings program by introducing the Health Equity Index (“HEI”). The HEI gauges health plans’ effectiveness in serving diverse and underserved members based on analysis of 2024 and 2025 service data. CMS projections underscore the HEI’s significant financial benefits, estimating a $670 million saving for the Medicare Trust Fund by 2028, which is expected to increase to $1.08 billion by 2031.The inclusion of HEI underscores a strategic shift towards prioritizing health equity.

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Footnote:

1: Link