The Centers for Medicare and Medicaid Services (CMS) uses the Five-Star Quality Rating System to determine compensation for Medicare Advantage plans and educate consumers on health plan quality. The Star Ratings system consists of over 50 measures from six different rating systems. The cumulative results of these measures make up the Star rating assigned to each health plan.

Star Ratings have a significant impact on the financial outcome of Medicare Advantage health plans by directly influencing the bonus payments and rebate percentages received. CMS will award quality-based bonus payments to high performing health plans based on their Star Ratings performance. For health plans with a four star or more rating, a bonus payment is paid in the form of a percentage (maximum of five percent) added to the county benchmark. (A county benchmark is the amount CMS expects health care to cost to provide hospital and medical insurance in the state and county.) After 2015, any health plans with Star Ratings below four will no longer receive bonus payments.

The Star Rating is comprised of over 50 different measures from six different rating systems


Five Main Components of the Star Ratings System:

  1. HEDIS (Health Effectiveness Data and Information Set) is a set of performance measures developed for the managed care industry. All claims are processed regularly to extract the NCQA (National Committee for Quality Assurance) defined measures. For example, this allows the health plan and CMS to determine how many enrollees have been screened for high blood pressure.
  2. CAHPS (Consumer Assessment of Health Care Providers and Systems) is a series of patient surveys rating health care experiences performed on behalf of CMS by an approved vendor.
  3. Administrative measures evaluate a health plan’s ability to address customer complaints, appeals, various enrollment items, and also calls to its customer service line.
  4. PDE (Prescription Drug Event) is data collected on various medications related events, such as high-risk medications, adherence for chronic conditions, and pricing.
  5. HOS (Health Outcomes Survey) is a survey that addresses customers’ perceptions of their health plan and recollection of specific provider care delivered over a 2.5 year time period.

These Systems Rate the Plans Based on Six Domains:

  1. Staying healthy: screenings, tests and vaccines.
  2. Managing chronic (long term) conditions.
  3. Customer experience with health plan.
  4. Customer complaints, problems getting services, and improvement in the health plan's performance.
  5. Health plan customer service.
  6. Data used to calculate the ratings comes from surveys, observation, claims data, and medical records. 

CMS continues to evolve the Star Ratings system by adding, removing and adjusting various measures on a yearly basis to ensure continuous quality improvement by Medicare Advantage health plans.