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CMS’ TukeyGate: Lawsuit Decision Threatens To Unravel Much of Medicare Advantage Star Scoring in 2024 and 2025 and Next Year’s Bids And Benefits

A bombshell legal decision this week from a federal district judge threatens to unravel much of the Centers for Medicare and Medicaid Services (CMS) Star process. CMS may have to revisit 2024 Star ratings across the Medicare Advantage (MA) industry, pay out several hundred million more in bonuses, and revisit the bids and benefit designs already in flight for next calendar year.

The entire issue is a bit arcane, so let’s break it down here and then get to the implications.

The lawsuit and decision

Scan Group, a prominent and highly successful non-profit MA plan based in California and serving a number of western states, has successfully won a challenge in a federal district court on its Star ratings for 2024. The case centers on the introduction of the Tukey outlier formula that CMS implemented beginning with the 2024 ratings. The court decision said CMS violated the Administrative Procedures Act (APA) when it ignored the plain language of the regulations to calculate 2024 Stars.

Under pressure budgetarily and politically due to cries of overpayments in MA, what CMS wanted to do was immediately implement the entirety of the effect of the Tukey outlier change. The Tukey change removes outlier performance at the top and the bottom of the non-consumer assessment survey measures before deriving cut points to then group plans into a 1-5 score. There are bigger outliers at the bottom, but this has the effect of making it tougher to achieve higher ratings. Data that came out after the 2024 Star scores were published shows that previously high-performing plans lost so-called Star power as cut points inflated upward and they performed more poorly on many measures from 2023 to 2024. Their actual performance may not have gone down, but the cut points rose to give them lower scores on those measures.

The problem is that another regulatory process includes placing guardrails on the changes in measure cut points from year to year to ensure better predictability and stability of cut points. The provision limits changes up and down for each cut point for non-consumer assessment survey measures to no more than 5%. This was introduced for 2023 ratings and Tukey was introduced for 2024 ratings.

Again, CMS wanted to immediately implement the full effect of Tukey in 2024, but it botched its regulatory rule-making and did not remove or suspend the application of the guardrails. It noticed it erred and attempted to slip guidance in on this on two occasions in what is known as the Preamble or Comments sections of published rules. But this is not the actual Code of Federal Regulations (CFR) text. It has no force of law but simply explains the rationale for its decisions in rule-making, including after comments are made between the interim and final rule.

When plans received their 2024 Star ratings, many MA plans were shocked. Their measure scores went down as did their aggregate scores. Cut point changes for measures were greater than 5% compared with published 2023 ratings. Plans assumed that Tukey would be implemented, but effectively be phased in through the 5% guardrail limitation. CMS, however, implemented an alternative strategy to calculate 2024 Star measures based on the Preamble/Comments noted above. What it did was simulate Tukey in 2023 Stars (when it was not in effect), came up with cut points, and then applied the guardrails to 2024 results to establish cut points. (As an aside, I would note that CMS actually wanted to get rid of guardrails entirely in a draft 2024 rule, but abandoned it in the final 2024 rule and did not recommend it in the 2025 rule. It did say that it could be the subject of future rule-making. It also removed a proposed hold harmless provision for improvement measures calculation.)

Scan and a number of other plans (Elevance Health, Zing Health, and Hometown Health) sued in federal court. Scan itself dropped from 4.5 Stars in 2023 to 3.5 Stars in 2024, which made the plan lose $250 million in bonus revenue. Scan should have been rated at least a 4.0 and have received the bonus.

Scan’s case is the first to be decided. The judge clearly sided with Scan, saying that the text references in the Preamble/Comments do not have the force of law and CMS should have calculated Tukey but also safeguarded the plans by then applying the guardrails. The simulation on 2023 Star was not something CMS could legally do to get around the guardrails that are clearly still in the CFR.

The judge’s decision was totally appropriate and clear. It broke down an entirely complex situation very logically. I would note that the decision in a small way ties to a bigger trend of courts reining in federal agencies’ regulatory authority under the APA. The Supreme Court could significantly change agency regulatory policy in a coming decision.

What’s the impact?

The Scan calculation on impact alone is big — $250 million. So we are talking in the hundreds of millions of dollars in my view. More than half of MA plans rated at least 4.5 in 2023 received lower scores in 2024. In 2020, CMS said that Tukey would cause at least 16% of plans to lose half a star. In 2021, CMS said that Tukey outlier removal implementation would save $935 million for 2025 and $1.5 billion by 2030. As actuary Milliman notes, given the huge surge in enrollment, these number are now low. Enrollment is at least 18% higher and inflation has been more robust than predicted.

What’s next?

As a former government official, I can tell you there are two rough tenets in government – government is never wrong (even when it is) and it is slow-moving.

There are a few potential outcomes here:

— CMS could recalculate just Scan’s scores, but that would not be fair to other plans. Further, CMS has a number of other lawsuits pending on the issue and more will be filed in light of the Scan decision. The issue is not important just to plans that get a Quality Bonus at 4.0 or more.  Star ratings also give plans (from 3.5 to 5 Star) more Rate Rebate dollars and plans not yet at 4.0 could still benefit from Star recalculation. In both the Quality Bonus and Rate Rebate, the added dollars flow back to members in supplemental benefits. Further, while the added revenue is earmarked to members, the higher a plan’s score the more competitive it is in the marketplace, the more members it receives, and the more margin it can earn overall.

— CMS could appeal the ruling and wait to do anything. But its chances of success are narrow and the same lawsuits noted above will proceed and be filed. But this is what government usually does. Given the clarity of the opinion, CMS might not go this route.

— CMS could admit it was wrong and recalculate all plans’ scores for 2024. But this leads to a whole bunch of repercussions on the Star, bid, and benefit fronts.

In all cases, we have a big mess and it simply depends on whether CMS wants to tackle it now or down the road. Tackling it now would be a herculean effort, but mean the right revenue flowing to plans in 2025 and the right benefits for members. Again, the bonus and extra rebate dollars flow to members in added benefits — lower cost-sharing, closing the gaps in the traditonal benefit, and supplemental benefits not offered in the traditional program. Making Star changes later robs the plans of correct revenue and members of better benefits. And if it stalls, CMS then will likely argue that the revenue should not flow to plans because they didn’t actually send it out in benefits to members.

In essence, this is a discussion more on revenue, bids, and benefits for 2025 and 2026 given the lag in how Star scores impact revenue. The Star Year impacts the next Payment Year. In this case, the 2024 Stars impact the 2025 Payment and Benefit Year. The 2025 Stars impact the 2026 Payment and Benefit Year.

And there is major lead time to ensure the enrollment season can kick off each year in October for the following year. Bids and benefits are already at CMS for 2025. They go through an approval process and CMS needs about a 4-month lead time to prepare for the enrollment process. Many plans are thought to be contracting benefits and perhaps their geographies for many reasons – increased utilization, changes in prior authorization mandated by CMS, lower-than-anticipated rates, and erosion of Star scores. The big question is would plans rein in the benefits as much as they did if Star scores were different? Perhaps not.

Could CMS engineer an expedited process to re-publish 2024 Star scores and allow plans to resubmit bids and benefits and still meet an October open enrollment season or extend the season due to the issue? If plans did exit certain geographies, that would be a taller order to overcome this late.

Beyond the 2025 benefits, CMS now has a huge issue with computing 2025 Star ratings. The court has said the 2024 cut points are wrong. Thus the year-to-year guardrails are still in force. So how will CMS compute 2025 Star scores. They should not use the 2024 cut points to develop 2025 cut points. Do they use them anyway and perpetuate the legal issue? Or do they come clean and apply the right cut points for 2024 Star scores (deirved from the real 2023 data) before they calculate 2025 Star scores?

Let’s see if CMS says something soon. But as I said earlier, this is all a big mess and members who rely on MA as a safety net, especially those with low and fixed incomes, are being hurt the most.

The Court Decision:

Sources and Additional Reading:,factor%20(SRF)%20population%20measures. (Note: not everything discussed in this analysis ended up in final CMS rules.)

JUNE 11, 2024 UPDATE:

A second lawsuit challenging the 2024 Star calculations has now been decided and again it goes against CMS. In this case, Elevance Health challenged its Star scores for most of its enterpise. It had won some Star concessions earlier from CMS for 2024.

The lawsuit states that Elevance’s BCBS of GA subsidary should have its Star scores recalculated based on the findings in the ruling. For now, the court said that Elevance did not provide sufficient detail to apply the decision to other Elevance health plan subsidiaries.

The decision was lengthy, but the conclusion was in line with the earlier federal court decision mandating Scan Group’s 2024 Star scores be recalculated. Like the earlier one, this decision stated that CMS ignored the in-force regulations when calculating guardrails for certain measures in 2024. As opposed to using actual 2023 cut points, it compared cut points in a 2023 simulation it did (which included the Tukey outlier formula introduced in 2024) to arrive at 2024 cut points. This allowed CMS to get the full savings impact of Tukey recognized immediately.

While CMS discussed its approach in a Preamble of a rule, it never codified the one-year change for guardrails in the actual text of the regulation.

This is more evidence to me that CMS will need to act on this issue. Pressure is building. With two lawsuits decided, more will be filed claiming the same injury. Plans could also ask that their Stars be recalculed administratively.

The lawsuits really impact the following:

— 2024 Star scores.

— Coming 2025 Star scores, as the regulation is still in force and the 2024 cut points are wrong.

— And 2025 bids and benefit designs are with CMS. Many plans reduced benefits and geographies served because of numerous issues, including poor rate hikes, lower Star scores, and other regulatory pressures.

Would the benefits be as low as they are in the bids if Star scores were calculated based on the actual regulation? Likely not?

CMS has yet to make public statements. I think it owes Americans thoughts on a possible path forward, especially given the magntiude of the expected benefit reductions.

Additional sources and lawsuit:,only%20for%20BCBS%20of%20Georgia.

#medicareadvantage #stars #rates

— Marc S. Ryan

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