Introduction
The Centers for Medicare & Medicaid Services (CMS) recently released its 2025 Medicare Advantage (MA) star ratings, showing a continued decline in the performance of these plans. In 2025, only 40% of Medicare Advantage prescription drug plans achieved a rating of four stars or higher. This is a significant drop from previous years and marks the third consecutive year of falling ratings. These ratings, which are pivotal to determining the quality of healthcare plans, are based on a wide array of performance measures.
Understanding Medicare Advantage Star Ratings
What Are CMS Star Ratings?
The CMS star ratings system is designed to evaluate the performance and quality of Medicare Advantage (MA) plans, including those offering prescription drug coverage (MA-PD plans). These ratings range from one to five stars, with five representing the highest level of care and service quality. Star ratings are based on several key performance indicators, such as clinical outcomes, member satisfaction, and the ability to keep members healthy.
Importance of Star Ratings for Medicare Advantage Plans
For insurers, achieving a high star rating is crucial. Not only do these ratings impact a plan’s reputation, but they also influence quality bonus payments from CMS. Medicare Advantage plans that earn four stars or more are eligible for these financial bonuses, which can significantly boost their revenues. These funds are often reinvested into plan benefits, making high-star plans more attractive to Medicare beneficiaries.
2025 Medicare Advantage Star Ratings Overview
Declining Star Ratings Over the Years
In 2025, only 40% of MA-PD plans received four stars or higher, continuing a downward trend that started in 2022. That year, 68% of plans achieved this benchmark, which dropped to 42% in 2023, and now 40% in 2025.
Moreover, while 62% of enrollees in 2025 are in plans with at least four stars, this is a notable decrease from the 90% of enrollees in four-star or higher plans just three years ago. The dip in star ratings can have serious financial implications for insurers, as it impacts their eligibility for quality bonus payments in 2026.
Impact on Quality Bonus Payments
CMS uses the star ratings to determine bonus payments to MA plans, with those receiving four or more stars eligible for substantial financial rewards. The 2025 ratings will affect payments for the year 2026, and the ongoing decline in ratings suggests that fewer plans will be eligible for these bonuses. This may lead to a reduction in the additional benefits plans can offer their members, potentially making Medicare Advantage plans less attractive.
Methodological Changes in 2025 Star Ratings
Cut Points and Their Impact
The methodology used by CMS to calculate star ratings remained largely the same in 2025, with a few notable exceptions. CMS adjusted the cut points—the thresholds that determine how well a plan must perform to earn a specific star rating. Most of these cut points increased from 2024 to 2025, making it harder for plans to score highly.
According to an analysis by Wakely Consulting Group, the average star rating dropped from 4.07 in 2024 to 3.92 in 2025. In comparison, the average rating was 4.37 in 2022. This trend underscores the increasing difficulty for plans to maintain high ratings under the current evaluation system.
Tukey Outlier Deletion and its Significance
Another significant methodological change in 2025 is the addition of the Tukey outlier deletion method. This adjustment aims to reduce the influence of extreme outlier performances on the overall results, ensuring that the ratings reflect a more accurate picture of plan performance. According to projections from actuaries at Milliman, this change could save CMS up to $1.5 billion by 2030, providing a financial incentive for the agency to continue refining its evaluation methods.
Performance Highlights in 2025
Breast and Colorectal Cancer Screenings
While some measures saw improved performance, others, such as cancer screenings, showed significant declines. The average star rating for breast cancer and colorectal cancer screenings in 2025 was the lowest in the past four years. This drop highlights a growing disparity in healthcare outcomes, despite an overall trend toward quality improvement.
Contracts with Five-Star Ratings
In 2025, only seven Medicare Advantage contracts, representing 1.79% of all plans, earned a five-star rating, down dramatically from 74 contracts in 2022. However, only 24 contracts received 2.5 stars or lower, showing that most plans still perform relatively well despite the increased difficulty in achieving high ratings.
Reactions from Insurers
Appeals and Lawsuits Over Star Ratings
As CMS continues to raise the bar for star ratings, insurers have expressed increasing frustration with the system. Humana and UnitedHealth are among the companies that have filed legal challenges against CMS, citing concerns over the accuracy and fairness of the ratings. These lawsuits may shape future changes to the CMS star rating methodology, especially as insurers push back against what they perceive as overly stringent evaluation criteria.
Conclusion
The Medicare Advantage star ratings for 2025 mark another year of challenges for insurers, with fewer plans achieving four stars or higher. As CMS continues to refine its methodology and raise performance standards, the competition among insurers to meet these benchmarks will only intensify. For beneficiaries, these changes may influence their decision-making process during open enrollment, as they seek plans that offer both high-quality care and valuable benefits.
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FAQs
1. What are CMS star ratings?
A. CMS star ratings evaluate the quality and performance of Medicare Advantage plans, ranging from one to five stars, based on clinical outcomes and patient satisfaction.
2. Why are star ratings important for Medicare Advantage plans?
A. High star ratings help plans qualify for quality bonus payments from CMS, which can be used to enhance plan benefits and make plans more attractive to enrollees.
3. What changes were made to the 2025 star ratings methodology?
A. CMS increased cut points for various measures and introduced the Tukey outlier deletion method to reduce the impact of extreme outliers on overall results.