Sachin H. Jain: Why STAR ratings have such an enormous impact on Medicare Advantage plans and their beneficiaries

Sachin H. Jain shared a post on LinkedIn:

“Many don’t fully understand why STAR ratings have such an enormous impact on Medicare Advantage plans and their beneficiaries.

STAR ratings are a measure of plan quality.

They include objective and subjective measures of member experience and performance across a basket of measures.

It is at best an imperfect program at best—but it is all we have and has enormous financial implications for plans.

Depending on a beneficiary’s risk score, the difference in payment between a 3.0 STAR plan and a 4.5 STAR or 5 STAR plan (there is no difference in payments between these two levels) might be greater than $100 per beneficiary per month or $1200/year.

This is real money for plans.

What do they do with this money?

To be sure, some of it is added profit (which explains why so many public companies’ stock price swings with STAR ratings).

But it also dramatically affects a plan’s ability to compete.

A high STAR rated plan is able to fuel added benefits (like lower co-pays or total out of pocket costs; or richer supplemental benefits like better vision, dental, or transportation coverage).

The added benefits translate into higher growth and better member experience (and better long-term star ratings).

It also translates into higher payments to providers (if they are in risk-based contracts).

Which can translate into higher growth rates for higher rated plans.

Which is why beneficiaries and provider groups are best served by plans like SCAN that have consistently high STAR ratings (see attached table from California market).

And why low-rated plans often enter into a sort of death spiral with lower benefits, lower satisfaction, even lower star ratings—and eventual closure.

And so—on the eve of the start of this year’s annual enrollment— you might ask why people buy or sell consistently low rated plans in the first place?

Oftentimes it’s a matter of incentives from lower rated plans to brokers or gaudy unsustainable benefits to members.

But I also think that many people in the Medicare Advantage industry ignore STAR ratings at their own peril and forget the old maxim:

If it’s too good to be true it usually is.”

Sachin H. Jain is the President and CEO of SCAN Group and Health Plan and an Adjunct Professor of Medicine at Stanford University School of Medicine. He also serves as a Board Member at The Paul & Daisy Soros Fellowships for New Americans, an Academic Hospitalist (WOC) at the U.S. Department of Veterans Affairs, and a Board Member at America’s Health Insurance Plans (AHIP). He is also a board member of Omada Health.