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Should I Buy or Stay On a Medicare Plan with a Low Star Rating?

Dear Matt,

I was researching Medicare Advantage plans in my area. One caught my eye, but it’s rated two Stars by Medicare. In your experience, do the Medicare Star ratings reflect on the company or the plan? Should I buy a Medicare Plan with a low star rating?

Thanks,

Bill M.

Hey, Bill!

Medicare Star Rating System

The Medicare Star Rating system is a scoring system Medicare uses to rate the performance of all Medicare Advantage and Medicare Part D Prescription Drug plans. Star Ratings range from 1 to 5 stars, with five stars being the highest score.Medicare Supplement plans do not have star ratings; they usually get rated by insurance rating companies, like AM Best.  If any Medicare insurance plans from ANY company only get two stars from Medicare, I’d be cautious. I would personally not buy any Medicare insurance product with a two or a 2.5 Star Rating.

2 and 2.5 Star Medicare Plans Are Rare

Here’s a link from a CMS/Medicare Star Ratings Fact Sheet from 2019. It’s a year or two old, but pay attention to Table 1 and Table 6. That’ll show you how rare it is for a company to “achieve” 2 stars and what companies have been deemed “consistently low performers.” Take a peek at the names of the companies/plans. None of them are what I’d call household names. You can find both tables by clicking the link here.  

Do Medicare Star Ratings Matter?

As I note in my book, the CMS/Medicare STARs rating measurements and systems are, in my opinion, deeply flawed. They’re not at all like a Morningstar or JD Power-type rating system. However, a 2-star plan is at least a directional indication that something, and potentially many things, is just not right. It could be customer experience feedback, operational items, or access to healthcare; it could be many things.  

But as I wrote in the book, I’d personally stay away from any Medicare Advantage (MAPD) or Medicare Part D Prescription Drug Plan (PDP) under 3.5 stars, flawed system or not. 

Here’s an excerpt from my book:

Medicare Star Ratings are the federal government’s attempt to tap into this idea we’ve all grown accustomed to: a five-star rating system concept. This star rating system only applies to Medicare Advantage and Medicare Part D Prescription Drug Plans; Medicare Supplement plans are excluded.

The Medicare Star rating system is numbered from one to five, with five being the best and one being the lowest in terms of quality of service:

  • Five Stars = Excellent
  • Four Stars = Above Average
  • Three Stars = Average
  • Two Stars = Below Average
  • One Star = Poor

To determine these ratings, Medicare Advantage plans are rated in five different categories: Staying healthy (screenings, tests, and vaccines), Managing chronic (long-term) conditions, Plan responsiveness and care, Member complaints (problems getting services, and choosing to leave the plan), and Health plans customer service.

Medicare Part D Prescription Drug Plans are rated in four different categories:

  1. Drug plan customer service
  2. Member complaints, problems getting services, and choosing to leave the plan
  3. Member experience with the drug plan
  4. Drug pricing and patient safety

Medicare Star Rating Process—How Much Stock Should You Put In the Star Ratings?

First of all, the star ratings for plans you see on Medicare.gov and in plan documents for Medicare insurance companies are at least a year old. The measurement periods don’t line up very well with how Medicare Advantage and Medicare Part D Prescription Drug Plans are deployed. The lag can be as long as three years in some situations.

Second, Medicare changes the rules around scoring health plans every year. Think about it; there are over sixty-seven million people on Medicare. Can you break down plan ratings across the country in only one way on a five-star scale? The obvious answer is no, and policy professionals and insurance companies quietly (and sometimes not so quietly) let Medicare know about it. Differences in geography, access to hospitals and doctors, income, and even attitudes about what it means to be healthy meaning the results are suspect and imperfect.

Here’s another problem and the difference between the Medicare star rating system and Amazon, Google, Yelp, and everyone else; the star ratings are not based on direct consumer feedback. They’re based on how Medicare and the federal government rate the Medicare insurance company plans, with a little bit of direct consumer feedback sprinkled in. Medicare Advantage plans are rated on more than forty quality and performance measures, and Medicare Part D Prescription Drug Plans are rated on up to fourteen measures.

Like most attempts to aggregate lots of information into a small rating system for easy public consumption, it’s not very clear how it affects the quality of your health insurance plan because there are so many data points Medicare monitors that don’t apply to everyone on the same Medicare insurance plan. Yes, consumer feedback has a component, but most of the rating methodology is based on medical and prescription drug data.

My advice is this; plan star ratings should be one aspect of your Medicare insurance coverage decision. I urge you not to consider any Medicare Advantage or Medicare Part D Prescription Drug Plan lower than a three-and-a-half star rating. In my opinion, Medicare Star ratings shouldn’t overshadow other considerations like premium, network, MOOP, or prescription drug coverage.

That said, star ratings are important to you because, ultimately, if your plan is rated three stars or below, you’ll likely pay more money for your policy, or your benefits won’t be as rich as plans with four stars or higher. This is because Medicare insurance companies get bonuses and rebates from the federal government for higher star ratings. When they get this bonus money, they have to spend much of it to improve the insurance benefits or lower the monthly premiums for the Medicare insurance plan. 

So, if you have a four-star rated plan, odds are you have better benefits available to you than a two-star rated plan.

I hope that helps, Bill!

I love answering Medicare questions. Send me yours clicking here and I’ll pick a few for a future blog post!

To your wealth, wisdom, and wellness!

-Matt Feret

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Author Bio Matt Feret is the author of the Prepare for Medicare book series and launched prepareformedicare.com to help people get objective answers to questions about Medicare. Matt is also the host of The Matt Feret Show. He has held leadership roles at numerous Fortune 500 Medicare health insurers in sales, marketing, operations, product development, and strategy for over two decades.