Medicare Star Ratings: Consumers Ignore But Industry Debates

When the 5-Star rating system for Medicare Advantage Plans was launched several years ago, it provided something of a comparison-shopping system for senior citizens to evaluate the various private sector alternatives. Not surprisingly, there’s been considerable discussion about how well this method is working to recognize and reward better performers. Plus, most seniors don’t use the data when making their decision.

The star system distills some 50 measures of clinical quality, patient experience and customer service down to a one- to five-star rating. This year (2012) was the first year that the Centers for Medicare and Medicaid Services linked bonus payments to performance using this scoreboard.

All Health Maintenance Organizations (HMOs), Point of Service (POS) plans, local Preferred Provider Organizations (PPOs), regional PPOs, and Private Fee-for-Service (PFFS) plans are eligible for bonus payments, and are rated by the Centers for Medicare and Medicaid Services (CMS) unless they are too new or have too few enrollees.

The CMS defines the star ratings as:

  • 5 Stars   Excellent performance
  • 4 Stars   Above average performance
  • 3 Stars   Average performance
  • 2 Stars   Below average performance
  • 1 Star     Poor performance

In its rollout year, just about everyone gets a brass ring. With a threshold of three (out of five) stars, over 90 percent of Medicare Advantage plans achieve bonus payments this year (based on 2011 quality ratings). Some observers say that rewarding everyone provides no significant distinction among plans, and no particular incentive toward quality improvements.

The Government Accountability Office (GAO) and the Congressional Medicare Payment Advisory Commission (MedPac) are among the voices raising questions. And average rating of three stars qualifies a plan for a bonus. Others believe that the payments will encourage quality improvements as well as a consumer shift to better performing plans.

In 2012, virtually all Medicare Advantage plans will receive bonus payments based on their 2011 quality ratings, including plans receiving average quality ratings (3 stars). These bonus payments may create more incentives for plans to focus on quality improvements and ultimately encourage beneficiaries to shift to higher rated options.

One barrier seems to be consumer awareness. “While the original purpose of the quality ratings was to provide more information to Medicare beneficiaries about the quality of Medicare Advantage plans, one recent [Harris Interactive] study suggests that very few seniors are aware of their plan’s quality ratings, and, among those who were aware of the rating system, only about one-third used the ratings to choose their plan,” according to a report by the Kaiser Family Foundation.

Healthcare reform and a shift to pay-for-performance are certain for 2013, but the shape and substance of this shift is still under discussion. The Kaiser report (available online here) concludes: “As policymakers continue to focus on strategies to encourage high-performing plans and providers, it will be important to monitor whether quality ratings and bonus payments are associated with better care and improved health outcomes for Medicare Advantage enrollees.”

Lonnie Hirsch


About Lonnie Hirsch

Co-Founder of Healthcare Success Strategies, Lonnie has consulted for over 2,000 health care clients during his 20-year career. Lonnie writes for many healthcare publications, and also has spoken at hundreds of venues nationally. His topics include patient experience, customer service, marketing, branding and business development.

, , ,


  1. May the Stars Be With You, Hospital Executives! - February 1, 2014

    […] Centers for Medicare and Medicaid Services (CMS) has been evaluating Medicare Advantage Plans on a five-star scale.  It also rates nursing homes in that […]

Leave a Reply

Find us on Google+