The Trump administration has finalized a rule overhauling the Medicare Advantage star ratings system that’s expected to significantly boost insurers’ ratings — and the reimbursement that’s attached.
On Thursday, the CMS finalized a rule cutting measures that factor into the MA quality ratings and rolling back health equity initiatives that will funnel billions of dollars more to MA insurers.
Specifically, regulators eliminated 11 star ratings metrics measuring administrative processes on which plans perform similarly. The agency is also not implementing a new health equity award put in place by the Biden administration that was set to kick in next year, called the “health equity index.”
Instead, the CMS reinstated a bonus system that raises payments to payers with consistently high ratings.
The CMS argued that the changes refocus star ratings around clinical outcomes, instead of a system that prioritizes administrative functions that are similar between plans and don’t help beneficiaries shop for coverage.
“We are fundamentally shifting our approach to quality,” Medicare Director Chris Klomp said in a statement. “This isn't just about adjusting measures; it's about redefining success. We are moving away from a system that incentivizes administrative box-checking and are instead laser-focused on what truly matters: the clinical outcomes and health of our beneficiaries.”
However, the rule is also expected to increase star ratings for insurers, inflating the cost burden of MA at a time when regulators and legislators are increasingly alarmed about overpayments in the privatized Medicare program — including bonus payments based on stars.
The star ratings changes are expected to cost taxpayers more than $18 billion over the next decade, according to an analysis in the final rule. The CMS previously estimated the changes would cost about $13 billion when the rule was proposed in November.
The star ratings system grades MA plans on a scale from 1 to 5 based on a complex calculation of dozens of metrics measuring outcomes, patient experience and more. As part of the Trump administration’s focus on paring back what it views as overly onerous industry regulations, officials in the CMS proposed in November making the ratings simpler.
The goal was applauded by insurers eyeing the potential of higher scores, after stars fell coming out of the coronavirus pandemic, sparking a raft of lawsuits from the industry.
The metrics canceled by the CMS on Tuesday include one zeroing in on the performance of insurer’s call centers — the issue at the center of multiple suits from insurers, including MA giants UnitedHealthcare and Humana. Measures related to appeals and provider complaints were also cut.
The CMS had planned to nix a metric for eye exams for diabetic patients, but decided to keep it in after plans complained. Most of the changes take effect in the 2027 measurement period, and will inform star ratings in 2029.
MA groups applauded the final rule, saying they approved of changes to make star ratings simpler and more oriented towards clinical quality.
The Alliance of Community Health Plans, which represents nonprofit insurers, said it “strongly” supported CMS’ decision to eliminate the health equity index and restore the previous reward factor, noting it would better support rural communities.
Billions of dollars more in higher Medicare spending on star ratings bonuses is relatively nominal at the payer level, and when compared to the overall MA program — MA is expected to cost taxpayers more than $750 billion in 2028.
How much the rule benefits a plan also depends on their specific situation.
Beyond the impact on Medicare spending, “there may be effects on supplemental benefits, premiums, and plan profits. These impacts will likely vary significantly from plan to plan (or contract to contract) based on the business strategies and the competitive landscape for each plan and contract,” regulators wrote in the final rule.
But the rule is a boon nonetheless, especially for plans facing shrinking profit margins from a combination of stagnating government reimbursement and rising spending on members’ care. MA growth has slowed as major payers exit underperforming markets and trim benefits in a bid to resuscitate profits, though MA still covers 35 million seniors, more than half of all Medicare beneficiaries.
MA plans in particular are waiting anxiously for the CMS to finalize MA payment for 2027, and are crossing their fingers that final rates will be more generous than the flat update proposed earlier this year.
Regulators have until this coming Monday to publish the rate announcement.
The final rule also undoes key health equity changes to the MA program enacted by the Biden administration, as the Trump administration continues to target diversity, equity and inclusion initiatives.
MA plans’ quality improvement programs will no longer have to include activities designed to reduce health disparities, while their utilization management committees won’t have to include a health equity expert member, conduct annual health equity analyses or publicly post the result of those reviews, according to a fact sheet on the rule.
The CMS also finalized clarifications around MA plans’ supplemental benefits, which go above and beyond what can be provided in traditional Medicare.
Moving forward, debit cards used to administer supplemental benefits have to be linked electronically to the specific items and services covered by a plan, so that the plan can verify that a charge is eligible at the point of sale. Plans are not allowed to provide marijuana products as supplemental benefits for their chronically ill members, the CMS said.
Regulators rescinded a Biden-era requirement that MA plans notify their members of any unused supplemental benefits in the middle of the year. They also did not finalize a proposed ban on marketing the dollar value of supplemental benefits.
The CMS also declined to finalize a proposal creating a special enrollment period for enrollees affected by providers leaving their MA network to find a new plan. Regulators said they would consider the idea in future rulemaking, as contract disputes between MA plans and providers ramp up, affecting more beneficiaries.
