McKinsey Offers Advice on Upcoming Changes to CMS Star Ratings

By John Zimmerer, VP of Healthcare Marketing at Smart Communications 

In an article (registration required) published August 13, 2024, McKinsey & Company provide an excellent analysis on the upcoming changes to the Centers for Medicare and Medicaid Services (CMS) Star Ratings program.  

In the article linked above, the firm underscores the significance of CMS’s shift toward health outcomes and highlights how member experience will continue to impact scoring. I’ve compiled those insights, what they mean for healthcare payers like you, and how Smart Communications’ solutions can help, in this article below. 

Key Findings from the Report 

The full report is well worth the read, but I’d like to call out a few points that caught my attention. 

I’ve written and presented in the past on the importance that Medicare beneficiaries place on the Star Ratings when choosing a plan. McKinsey has been surveying this population for several years, and noted in the report that Star Ratings, as the most important factor in plan selection, increased from 5% in 2020 to 24% in 2023. They also analyzed plan enrollment data and found that, as of the 2023 plan year, 76% of those enrolled in a Medicare Advantage plan were in plans rated four or more Stars, up 10 percentage points since 2015. Clearly, Star Ratings matter to potential enrollees. 

McKinsey called attention to the fact that, starting in 2025, quality of care and outcomes will be weighted more heavily in CMS Star Ratings. According to their analysis of plans with a high percentage of members in value-based contracts, McKinsey found that providers that do better on HEDIS and CAHPs surveys can be linked to a 0.5 to 1.5 percent reduction in medical loss ratio (MLR). So, focusing on quality should help Medicare Advantage plan members achieve better outcomes and the payers that offer those plans be more profitable. 

And while member experience measures will decline in weighting in rating year 2026, McKinsey pointed out that those measures will still make up a considerable portion of the aggregate Star score. McKinsey advises: “High performance in these competitive measures will continue to be critical to achieving a 4+ Star Rating for the foreseeable future.” 

What Payers Can Do to Improve CMS Star Ratings 

McKinsey suggests that, to help improve quality metrics, payers can strengthen provider relationships by developing digital provider-enablement tools that offer near-real-time member data. They called out that these capabilities will become increasingly critical as clinical Star measures become more time-bound (for example, requiring member-level follow-ups within 30 days after an event). 

They also noted that this year marks the first time in which CMS will collect data to benchmark performance for the Health Equity Index (HEI). As McKinsey puts it: This means that to maximize performance in rating year 2027 (RY2027), payers need to prioritize identifying—and engaging—members with HEI-defined social risk factors now.  

They suggest that two of the important demographics to focus on will be members of dual-eligible special needs plans (D-SNPs) and those eligible for the low-income subsidy (LIS). The article says, “Improving HEDIS scores is important, as their performance will have a greater effect on overall Star Ratings given that the newly introduced HEI is expected to comprise select HEDIS and pharmacy measures. While identifying D-SNP and disabled members from member profiles should be relatively easy, identifying LIS-eligible members could require more effort. CMS estimates up to three million seniors could benefit from this program but are not currently enrolled. To find likely LIS-eligible members, payers can consider claims, socioeconomic data, geospatial data, as well as information from screenings and surveys related to social needs and wellness, among other data types. Beyond current MA members, payers can also zero in on their own commercial or individual plan members who will age into Medicare in the near term.” 

McKinsey also states that, “…member outreach is imperative, and personalizing targeted messages can help ensure necessary actions are taken. Subsequently, tracking how such outreach initiatives affect results is important for reallocating resources away from low-ROI methods.” They suggest that the focus of this outreach should be on recommending that members consider higher-quality yet lower-cost care, and that enhancing member experience to address care gaps and identifying members with social risk factors are important next steps. 

McKinsey closes with this statement, which I’m including verbatim: 

“Investing in automation and other digital technologies such as generative AI is key to improving member experience. For example, automated prior authorization, customer self-service AI chatbots, targeted member messaging, and automated outreach could help plans’ Star performance. 

A Smart Solution for Improving Star Ratings 

Such tools, like The Conversation Cloud™, can also have the added benefit of helping reduce costs, especially administrative expenses. Our analysis indicates that in 2025, MA payers could face administrative and medical cost increases of $50 per member per month (PMPM), driven by increased healthcare utilization and administrative spend, and $30 PMPM revenue impact due to rate declines (Exhibit 3). Administrative efficiencies gained from improved digital tools will help offset these increases and the investments needed to fully integrate Star Rating improvements into the overall MA strategy.”