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Why Medicare Advantage Star Ratings Matter

Jacqueline Fellows, for HealthLeaders Media, January 16, 2013

New evidence examining the correlation between the Centers for Medicare & Medicaid Services Star Quality Rating System for Medicare Advantage health plans and actual enrollment puts to rest some of the doubt that has lingered about whether the quality rating system really matters to beneficiaries.

A study in the Journal of the American Medical Association looked at 2011 enrollment among two groups of Medicare beneficiaries: first-time enrollees and beneficiaries who switched plans. Most beneficiaries in both groups (62.5% of first timers; 67.2% of switchers) enrolled in a plan with a 3–3.5 star rating.

Here's the payoff: Health plans receive bonus payments beginning at the three-star rating benchmark. In 2011, those payments totaled $3 billion.

The study also found that if a plan was rated one star higher, the likelihood that a first-time beneficiary would enroll increased by 9.5%. The likelihood of enrolling in a plan with one more star also increased by 4.4% among those who switched Medicare Advantage plans.

One of the authors of the study, William Shrank, MD, director of the rapid cycle evaluation group at the Centers for Medicare and Medicaid Innovation, called the positive association between enrollment and star ratings reassuring.

"The previous research has been mixed," says Shrank. "It wasn't as though it was all in one direction or the other. And we can't say for sure in our study that it was the star ratings... we can just comment on the association, but we do see a strong association that tells a compelling story."

The "mixed" results Shrank refers to is a 2011 Kaiser Permanente poll that showed 59% of Medicare-eligible seniors knew nothing about the star rating system. Among those who had heard of it, only 32% said the star rating of a health plan had a bearing on their enrollment decision; half did not consider the star rating at all.

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