What Do Medicare Star Ratings Mean for Me?
Key takeaways:
Star ratings range from one to five, with one being the lowest rating and five being the highest. You may be able to switch to a top-rated plan once a year during the five-star enrollment period.
The Centers for Medicare & Medicaid Services (CMS) updates ratings for Medicare plans every fall.
The CMS rates each plan on up to 40 different factors such as ease of filling a prescription or coordination of healthcare services to give you an idea of how good the plan is. But it may not measure the details that matter to you most, such as affordability.
When it comes to Medicare Advantage plans and prescription drug coverage, you have a lot of options. The average Medicare beneficiary will have 39 Medicare Advantage plan choices available for 2022, according to the Kaiser Family Foundation (KFF). The decision can seem overwhelming, and your biggest concern might be to get the best care possible for your money.
Luckily, there is a way to see how plans perform — by looking at their Medicare star ratings. Knowing how these ratings work can help you be more confident about which Medicare plan to choose.
Below, we take a closer look at the Medicare star rating system.
Save over 40% on Qsymia with GoodRx
Discover the once daily Qsymia for weight management. Qsymia is for adults and children 12-17 in combination with a healthy diet and regular exercise.
How does Medicare's star rating system work?
You could choose from a wide range of Medicare Part C (now known as Medicare Advantage) plans as early as 1997. But you didn't have a good way to compare them until 2008. That's when the Centers for Medicare & Medicaid Services (CMS) first rolled out the star rating system.
The way the star rating system works is simple. It's a scale of one to five stars, with one star being the worst quality, three being average, and five stars the highest-quality plan. The system behind the ratings is more complex. More on that in a minute.
MA plans have financial incentives to improve. Since 2012, the CMS has provided annual quality bonus payments and rebates to plans with four stars or higher. Total plan bonus payments grew to $11.6 billion in 2021, KFF found. That’s up from $3 billion in 2015 — nearly four times the amount in 6 years. In some cases, this can translate into cheaper healthcare costs for you.
These potential savings depend on a couple of variables. MA plans have to bid on how much they will charge Medicare to take care of their enrollees. Medicare, in turn, sets its own guidelines for how much each healthcare plan should cost, known as a “benchmark.” Medicare reviews the bids and gives bonuses to higher-rated plans in the form of higher benchmarks. If a healthcare plan bids below the benchmark, then part of that difference in cost must go back to you in the form of more benefits and lower premiums. That’s according to a CMS spokesperson.
So, whether a higher-rated plan is more affordable depends on two factors: Medicare's benchmark and the healthcare plan's bid.
How often are Medicare's star ratings updated?
The CMS updates Medicare's star ratings once a year, in the fall. Like with car makers, the new plan ratings are released for the upcoming year, not for the current year. For example, in October 2021, CMS announced the ratings for 2022 Medicare plans. The timing is good for enrollees making plan choices during Medicare open enrollment, which runs every year from October 15 through December 7.
Read more like this
Explore these related articles, suggested for readers like you.
What parts of a health insurance plan are rated?
The way that the CMS rates healthcare plans depends on what type of plan it is.
For Medicare Advantage plans without prescription drug coverage, the CMS rates them on 28 separate factors, each of which falls under five main umbrellas (or "domains," in CMS lingo):
Percentage of enrollees who get preventative care like screenings and flu vaccines
Managing chronic (long-term) conditions like diabetes or cardiovascular disease
Member experiences, like how easy it is to get an appointment
Member complaints, including how many people leave the plan and if it's improved
Customer service, including timeliness of appeals and accessibility
The CMS rates Medicare Part D plans — prescription drug coverage — differently. The CMS rates these plans on 12 different factors in four domains, including:
Availability of foreign-language interpreters and teletype (TTY) for customer service calls
Member complaints, including how many people leave the plan and if it's improved
Member experiences, like how easy it is to get the drugs you need
Drug safety, and how well people take their medications for chronic conditions
You can also choose from Medicare Advantage plans with prescription drug coverage (sometimes shortened as MA-PD plans). CMS rates these plans on a combination of all the factors mentioned above.
Where does the data come from for Medicare star ratings?
The data that the CMS uses to create the star ratings comes from a few different sources:
Surveys of plan members
Administrative data from the CMS
The healthcare plan itself
Third-party contractors that collect additional data
What is the standard rating for a Medicare plan?
Most Medicare plans have a good rating these days, but not all. According to the CMS, nearly 68% of Medicare plans with prescription drug coverage (MA-PDP) in 2022 have a four-star rating or higher. That’s up from 49% in 2021.
If you've heard about Medicare plans from years prior, you might have heard that they get a bad rap. And they did — in 2012, for example, before insurance companies had financial motivation to improve their performance, the average MA-PDP had a rating of just 2.56.
Medicare Part D plans available today are better than the plans of old, and that's good news for you.
How to use the rating system to pick the best health insurance plan
In general, it's best to choose the highest-rated plan that you can afford. You can compare plans and their ratings on the Medicare Plan Finder website. On the Plan Finder tool, each plan has an overall star rating based on all the rated categories. Then, when you click on the plan details link, you can scroll down and “expand all ratings” to show a group of subcategories with separate star ratings for each. If you need help, free, local counselors from the State Health Insurance Assistance Program (SHIP) can assist you in choosing a plan.
There's also a special five-star enrollment period that you may not know about. If you're not happy with your current plan, you can switch to a plan with a five-star quality rating if one is available in your area. You can only do this once per year between December 8 and November 30. But you’ll want to be careful if you switch from an MA plan with drug coverage to a five-star plan that doesn’t have medication coverage. There’s a chance you may end up triggering the Part D late enrollment penalty.
Why you should avoid Medicare plans with lower scores
Most people are more comfortable choosing plans with higher scores. In 2021, about 90% of people who had Medicare Advantage with prescription drug coverage chose plans with a four-star rating or higher, according to the CMS.
In general, higher-rated plans are associated with better health outcomes. But, again, that's not a guarantee that you'll always have an A+ experience. For example, one part of a Medicare plan's rating is how well enrollees’ long-term conditions are controlled. Medicare rates this factor for a few common long-term conditions like osteoporosis and kidney disease.
But if you have a less common condition, such as rheumatoid arthritis or epilepsy, the ratings won't be based on these conditions. The chances are that if a MA plan has a good record of taking care of other people with long-term conditions, you will find quality care, too, but it's not a guarantee.
Can Medicare's star ratings be gamed?
It's possible that the ratings are not accurate.
This can happen if the healthcare plans provide data that's not correct or is biased, whether they're aware of it or not. For example, one study showed that minority groups were more likely to be left out of estimates of how well people followed their prescription medications for diabetes, high blood pressure, and high cholesterol compared with white people. Another study found that the quality of healthcare that people of color received wasn't as good as the quality of care that white people received. This difference was largest for plans with the highest star ratings.
A 2021 post on the Health Affairs blog pointed out that higher-rated Medicare Advantage plans may score higher because they're better at controlling administrative costs than with actually improving patient outcomes.
If enrollees are unable to recall accurate information when answering customer experience satisfaction surveys, that also may influence the ratings. Surveys can have other flaws. It’s not unusual for only the enrollees with the strongest opinions to participate in such surveys in the first place, according to a report from McKinsey & Company.
Intentional deception is another matter. Medicare plans that the CMS catches lying to profit from the system face penalties.
The bottom line
Choosing between different Medicare plans can be tough. But the star ratings can help you identify high-performing ones and those with higher scores in categories that may matter to you. The CMS rates each plan on up to 40 different factors to create a helpful picture of how well the plan treats its members and their healthcare needs. It updates the ratings each fall for the upcoming year, just in time to help you choose the best plan for you. If you miss Medicare open enrollment, you may still be able to upgrade to a top-rated plan by taking advantage of the five-star enrollment period once a year.
Why trust our experts?
References
Abt Associates Inc. (2013). Nursing home compare five-star quality rating system: Year three report. Centers for Medicare & Medicaid Services.
Biniek, J. F., et al. (2021). Medicare advantage in 2021: Star ratings and bonuses. Kaiser Family Foundation.
Centers for Medicare & Medicaid Services. (2021). CMS releases 2022 Medicare advantage and part D star ratings to help Medicare beneficiaries compare plans.
Centers for Medicare & Medicaid Services. (2021). Health plans - general information.
Centers for Medicare & Medicaid Services. (2021). Medicare 2022 part C & D star ratings technical notes.
Carlton, S., et al. (2020). New stars ratings for Medicare advantage prioritize customer experiences. McKinsey & Company.
Freed, M., et al. (2021). Medicare advantage 2022 spotlight: First look. Kaiser Family Foundation.
L&M Policy Research. (2016). Evaluation of the medicare quality bonus payment demonstration.
Medicare.gov. (n.d.). 5-star special enrollment period.
Medicare.gov. (n.d.). Find a Medicare plan.
Meyers, D. J., et al. (2021). Association of Medicare advantage star ratings with racial, ethnic, and socioeconomic disparities in quality of care. JAMA Health Forum.
Shah, S., et al. (2021). Rating the Medicare advantage star ratings—improving the status quo. HealthAffairs.
State Health Insurance Assistance Program. (n.d.). State health insurance assistance program.
Tsang, C. C. S., et al. (2021). Racial/ethnic disparities in measure calculations for part D star ratings among medicare beneficiaries with diabetes, hypertension, and/or hyperlipidemia. Research in Social and Administrative Pharmacy.
Tudor, C. G. (2010). 2012 quality bonus payment determinations and administrative review process for quality bonus payments and rebate retention allowances. Centers for Medicare & Medicaid Services.
