Value of One Star Rating Measure

In this article, we estimate the dollar impact of improving one star rating measure in the MA Star Rating system. Based on the CMS advance notice [1], if an MA plan scores 4 stars and above, the plan can receive 5% Quality Bonus Payments (QBP). Below 3.5 stars, plans receive 0% QBP. Thus, we will limit our focus on those plans with 3.5 stars.

One Star Measure = $2 PMPM

Improving one star rating measure can increase a plan’s revenue by approximately $2 per member per month (PMPM) on average.

If a plan improves 3 medication adherence measures together, a plan can gain approximately $10 PMPM on average.

Methodology

A Medicare Advantage plan’s overall Star Rating is a weighted average of 44 different measures: 32 measures in Part C and 15 measures in Part D. There are three measures that are double-counted in Part C and Part D, and those are excluded when calculating the overall Star Rating. Each star rating measure has a different weight ranging from 1 to 5 [2]. Thus, for an MA plan that offers both Part C and Part D services, the overall rating is calculated based on 44 measures as follows [3]:

blog-eq-value-star

where the sum of weights (w_i) is “78.5” based on the measures in 2017. The average weight of the 2017 measures is “1.77”. Thus, if a Star Rating measure improves from 3 stars to 4 stars among 44 measures, the impact on the overall Star Rating is “+0.0225” (=1.77/78.5).

Although the impact may look small, this number can change a plan’s revenue drastically under certain conditions. Suppose there exists a plan with 3.7275 (3.5 after rounding) overall Star Rating in 2016. With everything else the same, if this plan improves on one star measure, then this plan can be a 3.75 overall Star Rating plan before rounding, and by rounding, this plan will be a 4.0 Star Rating plan. Yes, 5% QBP!

In theory, if a plan’s overall Star Rating is within the range of 3.7275 to 3.75 before rounding, the plan can receive 5% QBP by improving “one” star rating measure. For simplicity, we assume before-rounding overall Star Rating is uniformly distributed in the range of 3.25 to 3.75 (i.e. uniform distribution with a width of 0.5). Thus, the probability of gaining 5% QBP can be approximated as the probability of a plan’s overall Star Rating being in the range of 3.7275 to 3.75, which is:

[one star impact]/[rounding window] = 0.0225/0.5 = 0.045

With this observation, now we can calculate the expected dollar value of improving one star measure for plans with 3.5 overall Star Rating, as follows:

Expected QBP
= Base rate (PMPM) x +5% x [probability of changing overall Star Rating from 3.5 to 4]
= Base rate (PMPM) x +5% x 0.0225/0.5
= Base rate (PMPM) x +0.225%
= +$2 PMPM approximately

Note that this dollar value is for an average star measure among 44 different star measures. We can also calculate the dollar impact of a specific set of measures by replacing the average weight with actual weights. For example, if a plan improves 3 medication adherence measures together, which sums to the weight of 9, then the dollar impact of this change is +$10 PMPM.

Similarly, we can apply the same calculation to the 4 star plans. For a plan where its overall Star Rating is with the range of 3.75 to 3.7725, a plan can “lose” 5% QBP if its one star measure drops by one star. For those plans with 3.5 to 4 overall Star Rating, the value of one star measure is $2 PMPM, which is not a small amount.

References

[1] https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2017.pdf

[2] https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/2017-Measure-List.pdf

[3] https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/2016-Technical-Notes-Preview-1-v2015_08_05.pdf