The value of Medicare Advantage Star Ratings and effects on enrollment

The Centers for Medicare and Medicaid Services (CMS) initiated the Medicare Advantage (MA) star ratings system  to drive plans toward higher quality and improved outcomes, and inform enrollees about the quality of their options.  Last year CMS began awarding quality incentive payments to all plans that achieved a rating of three stars or above, encouraging many MA plans to improve quality to receive bonuses. While there is broad agreement that the star ratings matter to insurers and influence their behavior, it has been less clear if consumers are aware of the rankings, much less influenced by them.

The National Committee for Quality Assurance (NCQA) recently tried to find the answer to this question, setting up focus groups with both insured and uninsured Californians as they shopped for health insurance. At first the consumers seemed to associate higher costs with higher quality care. But once presented with value data – information on both cost and quality – they were more receptive to the idea that more expensive options do not always translate to higher quality care.

While many in the focus groups seemed eager for more information to help them assess value, the researchers found that data needed to be clear and easy to understand in order to effectively inform decision-making.

Complementing these findings is a recent study, published in the Journal of the American Medical Association (JAMA), which takes a more quantitative approach to the issue. Researchers affiliated with CMS attempted to determine an association between MA star ratings and enrollments – particularly, whether MA beneficiaries are choosing higher-rated options. They found a positive correlation: A one-star higher rating was associated with a 9.5 percent greater likelihood of enrollment.

In providing both a qualitative and a quantitative perspective, these studies offer a more complete picture of market trends, and contest previous research and notions that consumers are unwilling, or unable, to shop based on quality. Taken together, the NCQA focus groups and JAMA study confirm that when presented with simple, easy-to-understand data – for example, star ratings – consumers are likely to make more informed decisions based on value. William Shrank, M.D., a co-author of the study, attested that this correlation is a positive sign for the star rating system. The authors also noted that this link may have implications for the inclusion of quality ratings in the health insurance exchange environment, where enrollees will face a similar choice of health insurance companies and benefit packages.

On a similar topic, Ewe Reinhardt, an economist at Princeton, recently penned a blog post in The New York Times comparing the quality of care in both Medicare Advantage and traditional Medicare plans. While he notes that there is an overall dearth of information on the relative performances of both types of plans, he cites several studies showing that patients in Medicare Advantage plans experienced fewer preventable hospital admissions, and likely receive more appropriate services and better quality care than similar patients in traditional Medicare. This type of quality-based information is vital to promoting patient engagement and informed decision making, and should be more widely available to consumers.

As states work to implement online exchanges by the October deadline, these findings hold particular pertinence. But with CMS recently deciding to postpone a quality rating system until at least 2016, consumers will continue to have limited access to quality information. Health policy analysts have long believed that this type of data is vital to encouraging consumers to make informed health care decisions – and now we know that consumers prefer having it, too.

Photos courtesy of Fallon Community Health Plan and

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