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Medicare Advantage contracts with prescription drug coverage (MA-PD) that received four or more Star ratings have dropped to 42% in 2024, from 51% in 2023 and 68% in 2022, according to data compiled by the Centers for Medicare & Medicaid Services (CMS).
Releasing the latest star ratings for Medicare Advantage and Medicare Part D plans on Friday, the CMS said that approximately 74% of people are currently enrolled in MA-PD contracts that earned four or more stars for the 2024 rating year.
The CMS’ annual star ratings report comes as Medicare’s open enrollment period is set to begin on October 15.
“The Medicare Advantage and Part D Star Ratings are important tools to help people find the right option for their needs and circumstances, and make informed health care decisions,” CMS Administrator Chiquita Brooks-LaSure said.
Introduced under the Affordable Care Act (ACA) in 2010, the agency’s annually updated Five-Star Quality Rating System considers the enrollees’ experience to measure the quality of health and drug services the health plans offer.
It categorizes MA and MA-PD plans on a one-to-five scale, with five stars indicating the highest level of performance.
The gradual decline of plans with the highest star ratings partly reflects adjustments the CMS introduced to the system over the years.
In 2023, plans with the highest star ratings declined following the removal of a disaster provision that CMS implemented to help plans cope with the COVID-19 pandemic. That change helped the average contract rating to reach 4.37 stars, an all-time high for the 2022 rating year.
However, this year’s decline partly reflects a statistical adjustment that, according to consulting firm McKinsey, could cause $800M in annual revenue impact to plans in the 2024 rating year.
Digging deep into the 2024 ratings, the number of MA-PD plans with a high-performing icon, meaning they have earned five stars, has dropped to 31 from 57 a year ago, with 21 plans retaining the top rating they received last year.
The number of consistently low-performing plans has risen from one to six from 2023 to 2024. This year’s list indicates that nonprofit organizations with four or higher stars have outnumbered similarly rated for-profit plans by 56% to 36%.
Managed care players UnitedHealth Group (NYSE:UNH), Humana (NYSE:HUM), Elevance Health (NYSE:ELV), CVS Health (NYSE:CVS), Centene (CNC), Cigna (CI), and Alignment Healthcare (ALHC) operate in the market for Medicare Advantage, a private alternative to the federal insurance program.
Star ratings can impact their financial performance, as MA plans with a rating of four or five stars are eligible to receive bonus payments when CMS calculates their reimbursements.
In May, CVS Health (CVS), the owner of the Aetna health insurance plans, projected a $800M–$1B impact on its 2024 operating income after its Medicare Advantage members in plans with Star ratings of at least four fell to 21% at the 2022 year-end compared to 87% a year ago.
On Friday, Elevance (ELV) shares fell after announcing that the percentage of its MA enrollees in plans with ratings of four stars or higher has dropped to 34% for the 2024 rating year from 64% a year ago.
