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SCAN Health Plan Wins Medicare Advantage Star Ratings Lawsuit
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The SCAN Health Plan won the lawsuit against the Department of Health and Human Services about how the government calculated Medicare Advantage star ratings for 2024.
The decision means that SCAN will receive the $250 million bonus it was initially denied and that other Medicare Advantage plans will also be able to receive federal dollars they were denied due to lower-than-expected star ratings.
CMS offers additional financing for plans with higher star ratings. These higher-rated plans can then use the funds to reduce costs for their beneficiaries and attract more consumers. Star ratings are released in October.
“The bottom line is that star ratings are very important for private Medicare plans,” U.S. District Court Judge Carl Nichols said in the ruling released Monday.
WHY DOES IT MATTER
SCAN, a California-based nonprofit health plan, said CMS improperly calculated its 2024 star rating.
Nichols sided with SCAN in ruling that the Centers for Medicare and Medicaid Services erred in the way it calculated star ratings for 2024. The court agreed with SCAN that the only reasonable interpretation of the regulations requires a different calculation and granted summary judgment to the SCAN.
SCAN’s 3.5-star rating for 2024 was set aside, and CMS cannot use the “illegal” star rating to determine SCAN’s eligibility for a $250 million quality bonus payment, Nichols ruled . SCAN star rating reverts to 4 stars.
The civil lawsuit ruling could prompt regulators to recalculate all carriers’ star scores for the 2024 plan year.
ON HERBS IN STAR CALCULATIONS
CMS determines star ratings through quality measures that are then converted into a star score on a five-star scale. It ranks the plans on a curve, performing a statistical cluster analysis to group the data set so that the raw scores within a group are as similar as possible to each other and as different as possible from the raw scores of any other group, according to The Court.
The CMS then identifies the dividing lines, or so-called cutoff points between the groups, and assigns stars accordingly.
CMS calculates a plan’s overall star ratings by taking a weighted average of all measures for a five-star scale in half-star increments.
The lawsuit filed by SCAN is related to two recent changes to the way CMS calculates star ratings. The first, the Guardrail Rule, increases the predictability of cutoff points. In April 2019, CMS set a 5% limit on how many cutoffs could change from year to year.
This means that specific measure threshold cutpoints for non-CAHPS (Consumer Assessment of Healthcare Providers and Systems) measures do not increase or decrease by more than the threshold value from one year to the next.
This increases the predictability of the score needed to achieve a high star rating.
CMS first implemented the Guardrail Rule in October 2022 in calculating 2023 star ratings.
The second change was to the Tukey Outlier rule, which represents the upper and lower limits of a data set.
In June 2020, CMS decided to remove these outliers from the raw data before calculating cutoffs. The Tukey Outlier rule was first implemented in October 2023 for the 2,024 star ratings.
The two changes complement each other in that Tukey’s Outlier Rule increases the stability and predictability of cutoff points by removing extremes, and the Guardrail Rule increases the stability and predictability of cutoff points by imposing a limit on their capacity. to change from year to year. .
However, CMS implemented the Guardrail Rule before implementing Tukey’s Outlier Rule. There tend to be more outliers at the low end of data sets than at the high end, the court said.
As a result, removing Tukey’s outliers resulted in significant changes in some cutoffs. Removing Tukey outliers in a given year would tend to increase certain cutoffs more than the 5% threshold of the Guardrail Rule.
The Guardrail rule would mitigate the effect of the Tukey Outlier rule if cutpoints calculated from data sets without outliers were linked to older cutpoints calculated from data sets with outliers. It could take years for the Tukey Outlier Rule to take effect.
To address this, CMS waived the application of the Guardrail Rule for one year. Instead of applying the Guardrail Rule to the previous year’s actual cutpoints, it applied the Guardrail Rule to the previous year’s hypothetical cutpoints, which it would calculate using the previous year’s data with the Tukey outliers removed.
“The problem is that CMS never changed its regulations to reflect this decision, at least not expressly,” the court said. Instead, CMS announced it in the Federal Register.
Between 2019 and 203, SCAN, which offers plans in California, Arizona, Nevada, New Mexico and Texas, had a 4.5-star rating and obtained additional funding.
In September 2023, after CMS informed SCAN that its 2024 star rating would drop to 3.5 stars. SCAN determined that part of the change could be attributed to CMS’s decision not to apply the guardrail to the prior year’s actual cutoffs.
“If CMS had done this, SCAN would have received a higher rating on two measures and an overall 4-star rating – a rating that would have made the organization eligible for approximately $250 million in additional funding from the federal government,” said the court.
SCAN requested a review of CMS. CMS refused, saying the calculation was consistent with regulations.
CMS said SCAN failed to raise this issue during rulemaking. Furthermore, the errors made by CMS were harmless because SCAN received notice of CMS’ intent to apply the guardrail based on hypothetical cutoffs and then had the opportunity to comment.
In December 2023, SCAN sued, arguing that CMS did not follow its own regulation in calculating star ratings. A hearing was held on May 24.
THE BIGGEST TREND
Fewer Medicare Advantage plans achieved the 5-star rating for 2024, and many blamed regulatory changes and the Tukey Outlier rule.
Star ratings affect federal bonuses for MA plans. Consumers also use them to determine which plan they will join.
Star ratings provide beneficiaries with information about the quality of a plan and allow consumers and CMS to evaluate a plan’s performance.
Send an email to the writer: SMorse@himss.org