Seniors Favor Higher-Rated Medicare Plans

By David Pittman, Washington Correspondent, MedPage Today

Published: January 15, 2013

First-time enrollees in Medicare Advantage plans and those switching plans were more likely to enroll in ones with a higher star rating, a study of nearly 1.3 million Medicare beneficiaries found.

An increase of one star in the ratings made it 9.5% more likely a first-time Medicare Advantage enrollee would choose a given plan, the study published in Tuesday's Journal of the American Medical Association found. Similarly, for those switching plans, a higher star rating was associated with a 4.4% greater chance of enrollment.

"One interpretation of these findings suggests that publicly reported star ratings could be achieving one of their intended purposes of guiding beneficiaries toward higher-quality plans," Rachel Reid from the the Centers for Medicare and Medicaid Services' (CMS) Innovation Center, in Baltimore, and colleagues wrote. "Consequently, CMS may consider continued evolution of the rating methods to ensure that the quality information conveyed continues to reflect attributes important to both the agency and beneficiaries."

In 2011, CMS created a star rating for Medicare Parts C and D -- its Medicare Advantage and prescription drug benefit plans. Ratings incorporate data from several sources, including the Healthcare Effectiveness Data and Information Set quality measures, the Consumer Assessment of Healthcare Providers and Systems survey, the Health of Seniors survey, and other data sets.

Star ratings ranged from 2.5 stars to five stars, but only three contracts received five-star ratings. Plans with more stars are deemed to be of higher quality and better performers than those with fewer stars.

Also starting last year, CMS began to award bonuses to plans rated three stars and above, and provided five-star plans with year-long open enrollment. Bonuses in 2012 were projected at about $3.1 billion, or 3% of total payments.

But awareness and use of Medicare Advantage's star-rating system has been mixed, Jack Hoadley, PhD, of the Health Policy Institute at Georgetown University, in Washington, wrote in an accompanying editorial.

A 2011 survey found that only a third of seniors had heard of the star ratings and just 6% had heard "a lot" about the system, Hoadley noted. Additionally, only a third of those who had heard of the system reported using it to choose a health plan.

"It seems likely that familiarity with the system will increase as the Medicare program continues to publicize the ratings," he wrote.

To test the association between Medicare Advantage star ratings and enrollment, Reid and her CMS colleagues analyzed beneficiary behavior in 2011, the first year of the overall star ratings.

The study consisted of 952,000 first-time enrollees and 323,000 beneficiaries switching plans. Researchers used logit regression to assess the link between star ratings and enrollment, controlling for plan benefits and generosity.

With few exceptions, the results were statistically significant, Reid and others noted.

"Our finding of a positive association between star ratings and enrollment provides insurance companies with additional justification to pursue higher quality," the authors noted. "In addition, as state insurance exchanges are created, our findings argue for careful consideration of communication of quality information when presenting health plan options."

However, star ratings were less likely to influence the youngest, black, low-income, rural, and Midwestern enrollees.

The study can't link the observed preference for star ratings with the increase in higher-rated plans' enrollment. For example, more highly rated plans may have more aggressive marketing.

Reid and the others noted additional study is needed to find out if the selection of highly rated plans is associated with subsequent quality of care, health outcomes, and improvements in the Medicare Advantage program as a whole. To help spur a more comprehensive rating system, they suggested adding complaints, appeals, audits, and satisfaction data into star ratings, which could encourage disenrollment from lower-performing plans.

Despite the study's limitations, it's valuable to see enrollees may be using star ratings in making their choices, Hoadley said, adding that "It is critical for the program to keep improving the available plan ratings and to make them increasingly available and relevant to the needs of consumers."

If enrollees are in fact basing their decisions on the Medicare Advantage star ratings, it means the program could better harness skyrocketing costs by encouraging high quality, he noted. Conversely, enrollees ignoring a plan's performance means that plans could pay less attention to their cost and quality.

"If consumers choose plans without careful consideration of costs and quality, an important incentive for plans to manage their costs and quality is diminished," Hoadley wrote. "If plans can rely on current enrollees to ignore large premium increases or lower performance ratings, they may take fewer steps to prevent these negative changes."

Primary source: Journal of the American Medical Association
Source reference:
Reid RO, et al "Association between Medicare Advantage plan star ratings and enrollment" JAMA 2013; 309(3): 267-274.

Additional source: Journal of the American Medical Association
Source reference:
Hoadley J "Performance ratings and plan selection by Medicare beneficiaries" JAMA< 2013; 309(3): 287-288.

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David Pittman is MedPage Today’s Washington Correspondent, following the intersection of policy and healthcare. He covers Congress, FDA, and other health agencies in Washington, as well as major healthcare events. David holds bachelors’ degrees in journalism and chemistry from the University of Georgia and previously worked at the Amarillo Globe-News in Texas, Chemical & Engineering News and most recently FDAnews.