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Discussing the Medicare Advantage star rating system

by Gus Iversen, Editor in Chief | March 19, 2018
James R. Smith
In response to the growing Medicare enrollment population and Affordable Care Act (ACA) uncertainty, many private payers are expanding or shifting their focus to Medicare Advantage (MA). HCB News spoke to James R. Smith, FACHE, managing director of Navigant, about the program, its recent growth and why MA plans have become so popular.

HCB News: To start, can you please provide us with some background on what Medicare Advantage is all about?

James R. Smith: The private version of the federal Medicare program, Medicare Advantage – also referred to as Medicare Part C – has served beneficiaries since the 1970’s. Today, it primarily offers health maintenance organization (HMO) and preferred provider organization (PPO) benefit plans.



Whereas the federal government pays for Medicare benefits under traditional Medicare coverage, MA plans are offered by private payers that contract with the Centers for Medicare & Medicaid Services (CMS) to provide MA benefit plans. Medicare pays the contracted payer to cover and administer benefits; in turn, plans negotiate with local and regional healthcare providers to deliver services to enrollees. As part of the ACA, minimum medical-loss ratios were set at 85 percent, meaning MA plans must spend at least 85 percent of plan revenue on healthcare services for members.

More recently, MA plans have been increasing in popularity, with approximately one-third of all Medicare enrollees – about 20 million Americans – choosing these plans, up from 13 percent in 2004. Analyses project MA enrollment to exceed 50 percent market penetration by the end of 2025. Why are these plans so popular? They present a win-win-win for Medicare enrollees, payers and providers (see Figure 1 here).

So, it’s no surprise that many commercial payers – including the likes of UnitedHealth Group, Aetna, Anthem, and Humana – are expanding or shifting their focus to MA.

HCB News: Considering MA plan popularity, what can plans do to differentiate their value to beneficiaries and providers, and preserve adequate enrollment?

JS: It’s important to understand that increasing a plan’s MA star ratings is a key way to attract new enrollees, expand market share and increase revenue.

Developed under the ACA, the MA star ratings scale measures how well plans perform across five categories including staying healthy through screenings, tests, and vaccines; managing chronic, long-term conditions; enhancing the member experience with the health plan; managing member complaints, problems getting services, and choosing to leave the plan and finally improving health plan customer service.

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