A little noticed fact emanating from the release of detailed Medicare-Advantage Star-ratings on October 11, 2017 was the number of contracts that either gained 4-star status in 2018 or lost their 4-star status that they had earned in 2017.
Focusing on just the 55 contracts (about 15% of all contracts rated for both 2017 and 2018) that crossed the 4-star threshold (either up or down), we can see how impactful the Star-ratings bonus is, in dollar terms. For the 37 contracts that dropped below 4-stars when compared to their 2017 performance, they will forego at least $788 million in revenue during 2018. This figure is estimated by relying on the contract’s October 2017 enrollment by county and the 2018 rate book, containing the maximum benchmark rates CMS will pay for each county in the United States. I did not include the financial impact of the reduction in the rebate percentage for contracts dropping below 4-stars, so this $788 million estimate is actually understated. Because this analysis has to rely on 2017 enrollment by county, any changes to enrollment in 2018 will also impact these estimates.
The 18 contracts that exceeded the 4-Star threshold after having been below 4-Stars in 2017 are estimated to gain $385 million in 2018, plus a bump in the rebate dollars that they hold on to.
All totaled, these 55 contracts will trigger at least $1.2 billion worth of premium changes, with CMS coming out the “winner” (it will pay out less to the 37 contracts that lost their 4-Star rating than it will pay out to the 18 contracts that now exceed 4-stars) Ignoring the win/lose aspects of this analysis, the key conclusion is that gaining or losing 4-Star status is financially significant AND retaining the 4-Star designation requires contracts to focus on quality year-in and year-out. The financial consequences of not maintaining a consistent focus on quality improvement is demonstrated by these results.