Elevance – The Health Care Blog

When Star Ratings Backfire: How CMS Could Better Support Health In Medicare Advantage

May 13, 2025

By EMMANUEL ANIMASHAUN

The Centers for Medicare & Medicaid Services (CMS) Star Ratings system represents a cornerstone of quality assessment in Medicare Advantage (MA), designed to empower consumers with transparent information while rewarding plans that deliver superior care. Yet recent developments, particularly the seismic downgrading of Humana’s ratings reveal an unintended consequence: a system created to measure and incentivize quality may now be actively undermining it.

The Humana Case: Symptom of a Broader Problem

In 2025, Humana’s Medicare Advantage star ratings collapsed, with only 25% of members remaining in four-star or higher plans, down from 94%. This wasn’t due to declining clinical performance but resulted from CMS’s “Tukey outlier deletion” statistical adjustment implemented with minimal industry consultation. The change raised performance thresholds, causing Humana to lose billions in Quality Bonus Payments and $4 billion in market value. Humana’s legal challenge, arguing that CMS violated the Administrative Procedure Act through non-transparent processes, was denied. Other insurers including UnitedHealthcare and Centene also share concerns about methodological rigidity and that the rating system may have diverged from its purpose of improving patient care.

Perhaps more striking are the cases of Elevance and SCAN, which further illustrate how rigid metrics can distort assessments of actual care quality. In March 2023, both insurers were penalized after allegedly missing a single CMS “secret shopper” phone call, a call they claim was never received. The downgrade cost them tens of millions in Quality Bonus Payments and triggered legal challenges. As SCAN’s CEO wrote, the sanction came despite strong clinical performance and patient outcomes. A federal judge later ruled in favor of SCAN in June 2024, prompting CMS to recalculate the Star Ratings across all Medicare Advantage plans. This episode underscores a key concern: when measurement hinges on unverifiable administrative moments, it may end up punishing rather than promoting quality.

How Quality Measurement Can Undermine Actual Quality

The Star Ratings system aggregates over 40 metrics across preventive care, medication adherence, member experience, and customer service. However, it disproportionately rewards process compliance and documentation over health outcomes. Plans can excel by optimizing coding, maximizing documentation, or boosting survey participation without delivering better care. This misalignment diverts resources from genuine health innovations. Research from an NBER working paper even found that better-rated plans aren’t statistically better at keeping patients alive than lower-rated ones, raising fundamental questions about whether the system measures what truly matters for patient health.

Even more concerning is that MA contracts with higher proportions of dually eligible, disabled, or racially diverse members consistently score lower, not because they provide inferior care, but because the scoring system inadequately adjusts for social risk factors. A JAMA Health Forum study highlighted how plans serving more Black beneficiaries had lower star ratings even when controlling for other factors. This structural bias effectively penalizes plans doing the challenging work of serving populations with complex needs, creating a perverse disincentive to focus on health equity.

The uncertainty from frequent changes in star rating computation could also pose severe implications for strategic planning for companies. When a company like Humana loses billions due to a technical recalibration, it sends a troubling message: long-term investments in quality improvement may not yield returns if measurement methodologies change unpredictably. This volatility makes strategic planning difficult and discourages sustained investment in quality initiatives.

The Real-World Impact on Patients

These methodological shortcomings do not just affect health plans’ bottom lines; they have tangible consequences for Medicare beneficiaries. When plans lose Quality Bonus Payments (QBPs), they often must scale back valuable supplemental benefits like transportation assistance, dental coverage, or in-home support services, or increase plan premiums, as Avalere Health suggests. McKinsey estimates CMS rating changes could cost plans over $800 million in bonuses, reducing resources available for such benefits.

Matthew’s health care tidbits: Health care pricing is cray-zee

May 16, 2023

Each time I send out the THCB Reader, our newsletter that summarizes the best of THCB (Sign up here!) I include a brief tidbits section. Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

It’s no secret that health care pricing has been out of whack for a very long time. This past week PBMs and pharma manufacturers were in front of congressional committees trying to defend the indefensible–how much drugs cost and why? Hospitals have been required to publish their fictional price lists (their chargemasters) for a few years now and more recently have been instructed to reveal what they actually get from health plans for specific procedures. You would assume that this would move overall pricing pressure down to the “best price” but that effect seems to not be happening. At least not yet. This week also did see the bankruptcy of PE-backed (or should that be PE-toppled) emergency staffing corporation Envision. But that was more because its business model depended on surprise billing and not being in insurer networks.

More typical is the recent dispute in which primary & urgent care chain Carbon Health went public with its fight against Elevance subsidiary Anthem Blue Cross in California. While it was in-network Carbon claims that it received less than Medicare rates from Anthem, while its large delivery system competitors were getting 2-4 times Medicare rates.

This sounds about right to me. Late last year I had two identical telemedicine visits for back pain with specialists. One in a private practice, another with a doctor from UCSF–my local academic medical center. Before you troll me, they were both offered to me last minute, I didn’t know which doctor would be available if I needed a procedure, and it’s always good to get a second opinion. Plus I had blown through my deductible by then so they were free to me!

My insurer paid $795 to UCSF and $219 to the private doctor. So for exactly the same thing one provider got more than 3&½ times what the other did.

There’s still lots of chatter about the growth of value-based care, but even within Medicare Advantage there’s lots of fee-for-service, and it even pops up in places it’s supposed to be dead-–like Geisinger. We are nearly 20 years on from the Bush Administration talking about transparency as the solution to health care costs yet the opacity and confusion around pricing is as bad as it’s ever been. Yes, we know some of the numbers, but the US is a long way from seeing the invisible hand working its magic and making the same thing cost the same amount across health care. The only place where that happens is under the neo-Stalinist central pricing of Medicare. Not that that seems to work well either.

There’ll be a couple more years while the “new” transparent plays out in the market, but don’t expect too much of a revolution. Then likely we’ll try something else.