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Diving brief:
- Elevance has won a partial victory in its bid to get the federal government to recalculate the Medicare Advantage star rating for its plans. This is the latest court ruling suggesting that CMS may have to redo the quality scores for each MA plan in what would be a massive overhaul of payments for the private Medicare program.
- Elevance first sued for scores in December, arguing that regulators failed to follow administrative procedure when they changed the methodology for calculating star ratings, costing it hundreds of millions of dollars in bonus revenue. The insurer wanted CMS to redo the scores of six of its subsidiaries.
- Friday, a district court ruled on CMS must recalculate the number of Blue Cross stars Blue Shield of Georgia, one of Elevance's projects, but Elevance failed to prove that its other subsidiaries were affected by the methodological adjustment.
Dive overview:
In Medicare Advantage, the federal government pays private health plans a monthly per-member fee based on their members' health needs and the plans' performance. Each year, plans are rated one to five stars based on a series of quality measures, including outcomes and beneficiary satisfaction, which are factored into the monthly payment.
Star ratings are a tempting carrot for insurers. They are used to determine two parts of a plan's prospects: whether it receives a bonus and its ability to bid against a higher benchmark rate. Essentially, the higher a plan's star rating, the more it gets paid each month to care for its beneficiaries.
There is also a stick. Plans that receive a rating below three stars for three consecutive years may be removed from the MA program completely.
That's why insurers fiercely defend their stars and cry foul when regulators make changes that threaten bonuses. Recently, payers have latched on to a technical methodology adjustment intended to stabilize star ratings.
In 2020, CMS announced that it planned to use a new strategy to account for outliers in the data used to calculate thresholds or “cut points” for star ratings, called the outlier removal method. of Tukey Outer Fence, starting in 2023 for plan year 2024. .
However, regulators failed to include Tukey in the text of a proposed 2022 payment rule. They then reinserted him into the preamble of another regulation, citing a typing error.
Despite the alleged oversight, regulators moved forward with Tukey, using the methodology to recalculate cutoff points from 2023 so they could have an apples-to-apples comparison of star ratings for 2024.
The move sparked a number of lawsuits from insurers who saw their ratings plummet. In its lawsuit, Elevance said CMS's use of simulated cutoff points instead of actual cutoff points starting in 2023 caused its overall rating to drop to 3 stars, costing it dearly. $500 million bonus.
On Friday, a federal judge in the District Court for the District of Columbia agreed that regulators should not have relied on the prior year's thresholds as recalculated using the current year's methodology.
The language supporting the regulators' actions was only in the rule's preamble, not in the regulations themselves, and therefore has no binding legal effect, Judge Randolph Moss wrote in his opinion.
The decision could have wider implications. It remains an open question whether CMS should recalculate star ratings for all insurers to avoid distorting the MA market. Since consumers compare plans based on their stars, improving the ratings of one without giving equal consideration to others could be unfair, Moss said.
“No party (nor third party) has expressed this concern to the court,” he wrote in his opinion. But the “CMS, in turn, is free to decide whether others (Medicare Advantage Organizations (MAOs)) should receive similar relief as part of the administrative process, and, if necessary, any MAO suffering from a identifiable harm may in fact seek judicial relief to the appropriate extent. »
Although Moss found that only Elevance's plan in Georgia was affected by CMS's use of Tukey, he said the insurer could still file another suit on behalf of its other subsidiaries “with the legal argument and appropriate evidence.
CMS has already surpassed Elevance's star rating earlier this year, after the payer requested an administrative review. However, the adjustment did not negate Elevance's expected losses from the bonus cut.
The Biden administration's defense of Tukey has struggled in court. Last week, Scan Health Plan won its own lawsuit against the government over its changes to the calculation of the number of stars. Scan claims to have lost $250 million in payments because of the Tukey controversy.
Star ratings have increased during the coronavirus pandemic due to COVID-19 disaster relief provisions. But in 2022, CMS has taken steps to reduce what he considered to be overinflated scores. Therefore, fewer packages reached the four-star threshold for premiums in 2024: 42% compared to 51% of contracts in 2023.
The star rating system is controversial among some health policy experts And Medicare Watchdog Groupswho argue that it is not a useful indicator of the quality of the plan and place new financial strains on Medicare.
Insurers submitted MA offers to the CMS for 2025 last week.