With Medicare Advantage Star Ratings tied up in litigation, the future is uncertain. Here's what your health plan needs to know to protect its pay-outs.
Since a federal court ruled substantially in favor of Clover Health and its challenges against CMS’s Medicare Advantage Star Ratings on May 27, a domino effect has taken hold of the industry. On July 1, Elevance Health filed their own suit against CMS. On July 7, SCAN Health Plan did the same. And on July 10, Alignment Healthcare joined the fray (Source).
Each lawsuit has its own nuanced argument, but the core argument across all 4 suits is essentially the same: the Medicare Advantage Star Ratings methodology is unfairly working against health plans, costing them millions in quality bonus payments.
So, what exactly should health plans do, knowing how much is at stake…and how much is now up for debate? We asked three experts—Marc Ryan of Medisolv, Jessica Muratore of Muratore Advisory Services, and Dwight Pattison of QPAdvantage—to weigh in on what the domino effect really means and how health plans can prepare for the road of uncertainty that’s ahead.
Marc Ryan: I'll be honest with the audience: even if you're following this closely, like we are, it's very complex and confusing. These cases sit at the intersection of administrative law, statutory interpretation, and the post-Chevron environment, where courts are far more willing to second-guess agency decisions than they used to be. Adding to the complexity is the fact that these lawsuits are being adjudicated by different judges in different federal court districts [Georgia and Washington, D.C.], so different legal views will inevitably come into play.
Dwight Pattison: Exactly. The Clover case is interesting because they put forth a set of measures that affected them positively, but they made arguments that could affect other measures beyond the scope of their litigation. So, now we have other lawsuits that are saying, "Well, what about those other measures?"
On the other side, you have CMS arguing that what the health plans are asking for is so broad it would leave them with almost nothing to measure. There is so much the courts will have to work though. This will take time.
Marc Ryan outlined five potential scenarios for how the litigation could play out:
Five potential outcomes for SY 2026–2029 Star Ratings, depending on how the courts and CMS respond.
Marc Ryan: I believe there are five scenarios that span the range of what CMS might do, very broadly speaking.
In scenario one, CMS holds firm on its original ratings for Star Year 26 and 27. Nothing changes, and no impact from the lawsuits is felt.
Scenario two, the Clover-specific interpretation scenario, these are the specific set of measures that Clover's main contract was recalculated on in Star Year 26, and this is essentially what Elevance is asking for in their lawsuit. They’re saying, "Clover got this. We want it, too."
The third scenario is the CMS recalculation scenario. After resetting Clover's main contract, CMS recalculated the Star Year 26 ratings for everyone else, and used a hold-harmless or better-of approach. In other words, you had two ratings, your original rating and your recalculated rating, and you got the better of the two. What’s important to note here is that during the recalculation, CMS adopted some of the judge’s mandates from the Clover ruling, but not all of them, likely because of their plans to appeal. And so, this created a whole different measure set from Clover’s recalculated measure set in scenario two.
Scenario four is an interesting concept because it’s what's known as a Clover-strict interpretation scenario, and this is what SCAN and Alignment Healthcare are demanding. They are arguing that CMS’s recalculated measure sets in both scenario two and scenario three were not in conformance with what the judge ruled, and they're aiming for a narrower measure set, taking out about 10 more measures. So, in scenario two, Elevance is arguing they want what Clover got. In scenario four, SCAN and Alignment are arguing for total compliance with the Clover ruling.
And last but not least, with scenario five, we don’t want people to forget about the Star Year 29 restructure. We know that CMS and Congress need to remediate some of what's come out of the Clover lawsuit. Remediating that for Star Year 26 and 27, and maybe even 28, is very difficult given how complex this is. But Star Year 29 is the opportunity for CMS and Congress to get together and make those necessary, large-scale regulatory and statutory changes. And so, health plans should still be mindful of a Star Year 29 restructure because that is a strong probability, in my view.
Marc Ryan: My view is that CMS will have no choice but to do a better-of structure in Star Year 27. The advocacy pressure from plans is significant, and a better-of or hold-harmless approach is the most defensible path politically and legally. That said, I want to be precise: the exact better-of formula remains unknown. Is it the better of their CMS memo recalculation versus the original, or is there something that's going to happen in the next several weeks or months that suddenly brings one of the other scenarios in, like the Clover-specific or potentially even the Clover-strict approach?
Jessica Muratore: Given the proximity of the midterms and the impact that this has on CMS and the Star Ratings program integrity, I also wouldn't be surprised if we see Star Year 27 given the better-of/hold harmless approach. Many, if not all, health plan advocacy groups are pushing for this, so CMS is hearing it from so many different areas.
But I actually think the most likely scenario is that CMS will maintain the existing 2027 Star Ratings methodology while handling legal challenges on a case-by-case basis. Based on what I’m reading in the transcripts from these lawsuits, I think CMS is going to dig their heels in until they're forced by the courts.
Dwight Pattison: I’m hesitant to make any kind of a call because I underestimated how quickly CMS would move on its appeals. So rather than forecast a specific outcome, I'd point out that CMS, in their proposal for Star changes last year, signaled that it's willing to put everything on the table. That includes the possibility of decoupling Star ratings from Quality Bonus Payments entirely. When CMS is willing to entertain that kind of structural change, firm predictions become risky.
Jessica Muratore: Up until now, most health plans have treated Plan Preview as a quick validation, a light check that the numbers look roughly right. That's no longer good enough. I think Plan Preview needs to be treated as an audit and not a validation exercise.
An audit mindset means you reconcile every measure from your source data all the way to CMS's final calculations. The objective is not simply to identify calculation errors, but to determine whether CMS correctly applied its own methodology. Were the correct data sources used? Where procedural requirements met? The Clover lawsuit has opened the door here: plans need to validate every single measure. In a year where a fraction of a point could move you between rating tiers, that rigor pays for itself.
Marc Ryan: I would add that health plans should always proceed with each Plan Preview as if nothing has changed from CMS’s stated regulatory requirements. I know some plans are thinking, “Why do I care about validating a given measure? Because it doesn't look like it's going to be in play.” My message would be that any measure could be in play for the next couple of years.
If you look at those five scenarios we laid out earlier, there are sound legal arguments in each one. We see some of them playing out in Clover’s favor. But there are other arguments that could also be made about why CMS’s original ratings, despite statutory and regulatory deficiencies, should stand. In this climate, nothing is a given and you have to scrutinize everything, because you don’t know what could mean the difference between three, three-and-a-half, and four stars in this climate.
Jessica Muratore: I think that health plans can also, and should also, assess the financial significance for each measure. That includes not just a measure’s Star ratings impact, but also its impact on QBP, rebate, bid, enrollment, and marketing. Understanding the financial stakes helps prioritize which issues warrant deeper review or appeal, so you aren't spending time on something that's going to give you minimal impact.
Furthermore, we know that Plan Preview falls around the same time every year. Plan Preview 1, when plans get their first look at contract measure-level scores and data calculations, is typically in early to mid-August. Plan Preview 2, when plans can look at the draft cut points and updated Star ratings by measure before the final embargoed release, is usually five weeks later, in early to mid-September. Blocking your audit resources around those two months, rather than reacting when the dates are officially announced, keeps your team from getting caught short.
Dwight Pattison: But in general, your question raises a good point: plans are at not just at a point of confusion as to what measures might be dropped, they're also trying to cut budgets without sacrificing performance. So, they are all asking, "Where can I cut? What do I do?"
Jessica Muratore: We know HEDIS is the dominant domain in Star ratings moving forward, and nothing related to HEDIS has been challenged through litigation or recalculated by CMS.
We also know that all the other line of business quality rating systems, like Medicaid and Marketplace and Commercial, all focus on predominantly HEDIS. So is the Universal Foundation. So HEDIS is absolutely a solid plan, and the QI measures will remain untouched for those measures, so you can double-dip with them. We also know about a new HEDIS measure making its debut, the DSFE measure, the depression screening and follow-up measure. So, asking your executives for resources and help with HEDIS barriers, to develop strategies and improve around HEDIS, is a sure bet.
Dwight Pattison: It’s true that HEDIS, along with HOSS and CAHPS, have been the least argued over in all the litigation. But if you are underperforming in any significant way, you're simply going to need to overcome that. If you are an underperforming plan and you are challenged by Part D measures, for example, my recommendation is you still need to put your full foot forward in addressing that.
It’s worth remembering that quality can have a cost-of-care effect. When we evaluate measure performance, we tend to focus narrowly on the score itself. But investing in the kind of clinical support that measure improvement requirements does more than move the metric. It can reduce hospitalizations and drive real cost savings for the plan. The same logic applies to CAHPS. Higher member satisfaction tends to translate into better retention, which is its own source of savings. So, when the conversation turns to cost and dollars, it's worth remembering that these programs deliver value well beyond their Stars impact.
Marc Ryan: I want to underscore that point, Dwight. If you set aside all the lawsuit noise and think about the CMS restructure in Star Year 29, there's very much a paradigm shift toward clinical evaluation. I think strengthening the overall care management process is going to be key. I do think drug measures will come back in to play because I can’t imagine a long-term scenario where CMS is not going to want to measure both clinical and drug measures.
Jessica Muratore: I had very smart plans reaching out to me after the Clover litigation and the CMS memo recalculation, and asking, "Should we be getting rid of medication adherence vendors? Should we be limiting the outreach that our pharmacy benefits manager is doing?" I think that is a shortsighted approach.
I agree with Marc: I don't think Part D is going away because Congress allows CMS to very easily put these measures back into place. And, to Dwight’s point, there’s a lot of medical cost reduction that happens when the Part D measures, particularly medication adherence, are done right. It impacts so much on the Part C side. Just take the controlling blood pressure or the HbA1c measures, two triple-weighted measures. Unless you can get all of your members to vehemently change diet and lifestyle, medication adherence is what's going to get them in control with their blood pressure and A1c. So, I would strongly advise health plans to not lose sight of the Part D measures.
Jessica Muratore: There is almost always a huge gap in Stars rating expertise at the executive level. What I've found helpful when communicating with executive leadership is communicating that the plan is prepared, regardless of the uncertainty. Executives always appreciate transparency paired with a plan. Separate the actual facts from the crystal-ball reading and the fear-mongering. Keep your plan focused on the controllable factors. Send out weekly, high-level reports. In other words, navigate uncertainty with discipline.
Another thing I’ve learned is that if you're a Stars leader and you don't speak CFO, then you're going to have a very difficult go. A CFO doesn't need to know every HEDIS specification. They just want to understand the financial impact and what's within your control. They are usually your most important audience in the C-suite because they hold the purse strings. Learn to speak their language.
Dwight Pattison: I think Stars leaders need to be transparent with their executive teams: we have to get comfortable with being uncomfortable for the time being. Stars leaders are going to have to run multiple scenarios and modeling on a regular basis to make sure leadership understands all the latest possibilities. As Jessica said, I’ve found that you don’t need to explain every measure. Leaders just need a dashboard.
Stars leaders should also be the voice of reason. There's no reason to jump ahead and dramatically change your programs until all of this is actually decided [by the court system]. There will eventually be a decision by the courts, there will eventually be a plan that gets implemented by CMS, and you'll be able to react. The better you’ve prepared through modeling, the easier it will be for you to act when that time comes.
Jessica Muratore: Make sure that short-term gains from recalculations and anything you may be pursuing from a legal perspective are not going to harm you in the long term. If you try to go after a different measure set and you prevail, assume that CMS will move forward with calculating your improvement on that same measure set year to year. The short-term gain from one QBP or additional rebate might not be worth it.
Marc Ryan: Jessica and I talk about this frequently: sometimes you have to sacrifice one year so that you can perform better on the next three. The math of Stars is very complex. It goes year to year. And those short-term scenarios that you thought you did well on in one year, as Jesscia said, could be very different looking down the road. Don't back yourself into a corner without really understanding exactly what the implications of given scenarios are from year to year.
Dwight Pattinson: I would say to any health plan: become an active voice in this program. As I mentioned earlier, CMS has suggested that the future of the Stars program is very much open to change, possibly even radical change. That’s the mindset of this administration.
Up until now, we in the industry have been very poor at proposing what Stars should be. This is our opportunity to become participants in the ideation of the future of this program. If we don't speak up, we will be stuck with bad ideas and decisions that we’re going to have to implement in the next few years. We must stop reacting and start giving our input—what are good measures, where are we weak, what do we want as an industry—so that we can drive this change. Because the one thing we can all agree on is that it is going to change in the next three years.