Medicare Star Ratings: Why They Matter

Apr 29,2022

Read Time 3 Minutes

As a plan administrator, you help choose the best plan for your retirees’ needs. The Medicare Star Rating System is a tool that can make your job easier. 

Star Ratings use federal benchmarks to determine how effectively healthcare is being delivered to Medicare beneficiaries across the country, allowing you and other decision-makers to compare the value of different plans. The ratings serve to both monitor quality and promote higher standards for Medicare Advantage and Part D plan offerings.


Insurance carriers with Medicare Star Ratings of 4 or above are eligible for bonus and rebate incentives, which can lead to lower premiums, extra benefits, and higher-quality care. Anthem currently has a Star Rating of 4.5.


How The Medicare Star Rating System Works


Star Ratings were created by the Centers for Medicare & Medicaid Services (CMS) in 2007 to measure the quality of healthcare and medication services received by Medicare beneficiaries, as well as their overall satisfaction with their healthcare experience. CMS reports this information annually, so plan sponsors can review plan performance metrics and make informed decisions about their retirees’ health benefits.


The Rating Scale


Each plan is rated on a scale of 1 to 5 stars, with 5 stars being the gold standard for “excellent” performance. Reviewed categories include “Staying Healthy,” “Managing Chronic Conditions,” “Member Experience with the Health Plan and Drug Plan,” “Member Complaints,” “Health Plan and Drug Plan Customer Service,” and “Safety and Accuracy of Drug Pricing.”


The ratings are based on a variety of measures within these categories and include the following data sources:

  • Internal CMS data.
  • Healthcare Effectiveness Data and Information Set (HEDIS) scores, which evaluate service and care quality.
  • The Consumer Assessment of Healthcare Providers and Systems (CAHPS) and Health Outcomes Survey (HOS), both administered by CMS, which consider patients’ feedback on their experiences with their plan and doctors.

For those with prescription (Part D) coverage, the ratings take the following data sources into consideration:

  • Comprehensive medication reviews, conducted by a plan pharmacist.
  • CAHPS.
  • Prescription drug event (PDE) information, which measures if members are taking their medications properly.

Each measure is weighted differently, with more emphasis placed on measures of member experience and access.  The scores for each measure are statistically processed, per CMS technical specifications, and converted to a 1-to-5 Star Rating.


What A High Star Rating Means For You


High Star Ratings showcase positive Medicare plan performance.


Plans that receive Star Ratings of 4 or higher are eligible for a bonus of ~5% of revenue, which enables your plan to reinvest in the programs and infrastructure needed to deliver high-quality healthcare.


Plus, CMS gives stronger-performing plans higher rebates, which they can pass along to the member through lower premiums or enhanced benefits. Combined bonuses and rebates can go a long way toward helping keep premiums down while boosting benefit offerings and quality of care for your retirees.


Driving Health Equity


As a measure of both healthcare quality and patient experience, Star Ratings can help our industry find critical care gaps in populations that are traditionally underserved or poorly served – and Medicare beneficiaries are one of our most vulnerable groups. With these insights, we can better address health disparities, promote health equity, and improve healthcare in all our communities.


It is critical for your employees to understand their Medicare options as they transition into retirement. One study found that 7 out of 10 Medicare beneficiaries didn’t compare Medicare plans during their open enrollment period. With Medicare Star Ratings, they have a valuable decision-making tool to help them find the right benefits for their coverage needs and budgets, and you have a tool to help you select the right plan for your retirees.