More lawsuits and more Star rating scenarios in play
Ok, so this is my fifth blog on the fallout from the Clover lawsuit decision, but continuing the saga is certainly merited. The Tukey outlier and guardrail decision in 2024 for SY 2024 Star Ratings certainly was defining in that plans won their point that the Centers for Medicare and Medicaid Services (CMS) was blatantly ignoring the regulatory process. Yet the Clover decision now appears to be going even farther in that Clover Health has exposed the fact that the Stars program as we have known it was not based in statute. More so, it now has created program uncertainty and the real chance that there may be no solid Stars foundation on which to calculate quality outcomes for the near future. Indeed, I am now characterizing what is occurring as the “balkanization of Star Ratings.”
Let’s back up and give you the background on the case, including the most recent development from Elevance Health.
- A federal judge ruled that 20 Star measures either were not allowed because they are not prescribed in statute or did not go through proper Administrative Procedure Act (APA) notice requirements. The court directed CMS to recalculate Clover’s SY 2026 rating.
- CMS did this exactly as the judge directed, removing 20 measures and moving Clover’s main contract from 3.5 to 4.5 Stars for Star Year (SY) 2026. It directed the managed care company to submit an alternate bid for payment year 2027.
- A short time later, CMS then came back and recalculated many contracts’ SY 2026 ratings by using a “better of” methodology similar to how it handled the now infamous Tukey decision some years ago. The agency looked at each contract’s SY 2026 rating and compared the original rating with one based on fewer measures tied to the court decision. But the list of measures it included in the refined rating did not exactly comport with what the judge ruled – it did not remove some the judge ordered and yet removed others. Contracts were held harmless if their new rating was lower than the original. Thus, no contract did poorer – you could only rise.
- CMS continues to say it could appeal the district court ruling and that the hold harmless strategy does not set a precedent for SY 2027 and beyond.
- Now, Elevance Health has filed a suit against CMS arguing that it should have used the Clover judge’s measures for recalculation rather than one created by the agency. Elevance says it lost out on $115 million in bonus payments as a result.
Elevance has a point. How can one contract get the judge’s ruling while others receive the “better of” a brand new interpretation from CMS or the original SY 2026 rating? I get that CMS is likely attempting to preserve its chances to overturn the ruling in part, but that also has created even more confusion and uncertainty. Here is how it actually breaks down and where plans could sue if they benefit from any of these scenarios.
- Original SY 2026 measures – 45 measures. Not awarding on this basis could lead plans to sue CMS for due process and notice reasons. That is in part why CMS adopted a better-of strategy.
- Clover Judge’s decision specific to Clover – 25 measures. This is what was awarded to Clover and what Elevance says it is entitled to as well.
- Clover Judge’s literal ruling – 17 measures. While the judge opined on 20 measures in the Clover suit, a deeper reading seems to indicate that another 8 measures are not allowed under statute. Plans could argue this reading of the Clover decision as well.
- CMS interpretation/recalculation – 27 measures. Again, CMS attempted to defend its legal rights moving forward by recalculating based on 27 measures, eliminating categories disallowed under the literal reading of the judge’s ruling, but preserving measures it feels it can defend against allegations of lack of APA notice.
For those who are tracking, in SY 2029 the regulatory restructure from CMS sets 34 measures.
Notwithstanding the merit in the CMS’ position on recalculation, its interpretation also has the negative impact of the likelihood of more lawsuits. Under the CMS recalculation using better of, (a) 10% of contracts fared better and got higher ratings than before, (b) just short of 40% would have fared worse if they were not held harmless, and (c) just over 50% of contracts had results that were comparable to their original rating. But as the Elevance suit shows, there are contracts in the 40% or 50% bucket that could benefit from the Clover judge’s ruling specific to Clover. I view this as a relatively easy win for plans. It, too, opens up the possibility of suits for those in the 40% or 50% bucket who might benefit from the literal reading of the Clover judge’s ruling.
CMS’ actions, too, almost assuredly now will lead to the agency awarding the “better of” these two to four options in SY 2027. CMS cannot repair the statutory or likely regulatory deficiencies by October’s SY 2027 Star Ratings announcement. And the CMS recalculation has now raised expectations that no plan will receive a lower result – only better.
Plans will insist on it as Star bonuses are big business. They will use the legal process as needed. Healthcare policy group KFF reports that the share of Medicare Advantage enrollees in plans that qualified for federal quality bonus payments dropped to 68% in 2026, its lowest point since 2018. The number of MA contracts achieving at least a four-star rating fell to 209 in 2026 from 261 the prior year. Two million fewer people are in highly rated plans. But quality bonus program payments will increase due to enrollment growth. They will total $13.4 billion in 2026, up from $12.7 billion in 2025. This is 2.3% of all MA payments. The awards tend to be dominated by the biggest players – over 70% of monies. Again, some of this is driven by high performance and not necessarily absolute high ratings.
- UnitedHealth Group — $3.9 billion
- CVS Health — $2 billion
- Humana — $1.5 billion
- Kaiser Foundation Health Plans — $1.2 billion
- Elevance Health — $462 million
- Health Care Service Corp. — $323.8 million
- Centene — $21.5 million
So, we have these counts to contemplate over the next few years – 45 (SY 2026 and 2027 original), 42 (SY 2028 original), 34 (SY 2029 restructure), 25 or 17 (Clover Judge with two interpretations), and 27 (CMS Clover interpretation/recalculation). It will be mind-boggling.
The lawsuits and sheer number of calculations and viewpoints means CMS and Congress must move more quickly than not to fix all this. And the almost daily headlines will attract attention of opponents and even supporters who are increasingly suspicious of certain MA policies. Indeed, the influential Paragon Health Institute just published a comprehensive healthcare reform package that includes major changes to MA risk adjustment, benchmark setting, and the quality bonus program. This now becomes a real risk for MA.
As I have said in previous blogs, I do not believe Stars is going anywhere. It is too important to value-based care overall. A stump of a Star quality program is not in the best interests of CMS, Medicare, MA plans, beneficiaries, or the public at large. Certainly, the Part D program should have quality ratings. CMS and Congress should:
- Pass legislation that makes clear that the CMS SY 2029 plan is legal and is the one that should move forward.
- Include a hold harmless for SY 2027 and SY 2028 at a minimum. Exactly how that is done now with so many variables needs to be thought through.
- Examine and fashion solutions to address the existing and growing inequities related to lower ratings for SNPs and highly penetrated duals plans.
- Avoid further changes for now, including proposals that would make the program budget neutral rather than additive.
- Phase in a separate transparency dashboard for multiple operational areas to engender greater faith in MA.
#medicareadvantage #cms #stars #quality
— Marc S. Ryan
