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Why Medicare Advantage Star Ratings Matter

 |  By jfellows@healthleadersmedia.com  
   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.

The JAMA study seems to contradict the Kaiser study definitively, because the JAMA authors looked at real-time enrollment data in 2011 and studied behavior patterns among those who enrolled in Medicare Advantage plans. The Kaiser study was a random sample of 483 Medicare-eligible seniors.

However, the JAMA study authors admit limitations and do not make an absolute conclusion on the link between enrollment and the quality ranking.

That's because other factors may also play into the decision-making process, such as help from family and friends and year-round marketing tactics. One of the advantages of being a coveted five-star Medicare Advantage plan is that advertising to seniors is allowable all year, not just the period around fall's open enrollment.

Medicare Advantage plans are becoming more popular. In 2011, the year that JAMA study authors looked at, 11.9 million seniors enrolled in a Medicare Advantage plan making up 25% of the total Medicare population. Last year, enrollment in Medicare Advantage plans grew by 10% to 13.1 million.

With the aging baby boomer population as one of the major projected healthcare cost drivers, health plans that can maintain a high star quality rating may fare better in the future.  An earlier report noted however, getting the top rating—five stars—is no easy feat. Only 15 health plans reached that apex in 2012.

If there are still doubters of the impact of the quality rating system, health plans aren't noticing. They're investing in processes to make maintain or improve its "star" standing. The JAMA study reinforces this belief, and could even cross marketplaces, especially with growing consumerism and quality scores of hospitals becoming public.

An accompanying editorial on the JAMA study from Jack Hoadley, PhD, from Georgetown University's Health Policy Institute, notes a star rating type system can help control costs and increase quality if it is presented to consumers in a way they can use it.

"In this spirit, it is important to think about better ways to present performance ratings, along with information on costs, to consumers," writes Hoadley.

In the study, the authors suggest that CMS consider "communicating information specific to plans or service areas within the larger, contract-level star rating to enhance their relevance."

"There is no question that we certainly want to continue to raise awareness about star ratings and about public reporting of quality to try to continue to empower and inform our beneficiaries," says Shrank.

Another key take away from the JAMA study suggests that CMS is accomplishing its goal of steering beneficiaries to higher quality health plans by publicly reporting the star quality data. If public reporting of quality data leads Medicare beneficiaries to pick higher quality health plans, then there are important implications for health plans as they begin to decide how to participate and communicate their participation in state health insurance exchanges.

The study's conclusion that the star quality ranking system provides verifiable confirmation of a link between quality and enrollment gives payers "additional justification to pursue higher quality."

It's advice, Shrank says, the healthcare industry as a whole could use.

"In the setting where there may be more public reporting of quality, this helps to build a business context for promoting quality."

Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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