SCAN Health Plan, a prominent name in Medicare Advantage, has recently secured a significant legal win against the Department of Health and Human Services (HHS). This victory revolves around a dispute over the calculation of Medicare Advantage Star Ratings for 2024, and the outcome could have ripple effects across the healthcare landscape, particularly for consumers relying on Scan Health Care Reviews to make informed decisions.
The court ruling mandates that SCAN Health Plan receive a substantial $250 million bonus that was initially denied. More broadly, this decision could pave the way for other Medicare Advantage plans to reclaim federal funds that were withheld due to unexpectedly low star ratings.
Medicare Advantage plans are keenly aware of the importance of Star Ratings. The Centers for Medicare & Medicaid Services (CMS) uses these ratings to evaluate plan performance, and higher ratings translate to bonus funding. Plans with better ratings can then reinvest these funds to enhance benefits, reduce costs for members, and attract new enrollees. Star ratings are typically released in October and are a critical benchmark for the industry and consumers alike.
As U.S. District Court Judge Carl Nichols aptly stated in his ruling, “star ratings are quite important for private Medicare plans.” This statement underscores the weight these ratings carry, not just for the financial health of plans, but also for their reputation and attractiveness to beneficiaries who actively seek scan health care reviews and ratings when choosing their coverage.
Why This Lawsuit Matters for Medicare Advantage and Consumer Reviews
SCAN Health Plan, a non-profit health plan based in California, contested the methodology CMS employed to calculate its 2024 star ratings. The core of the dispute was SCAN’s assertion that CMS had incorrectly applied certain rules in the calculation process.
Judge Nichols sided with SCAN, agreeing that CMS had indeed made an error in its 2024 star rating calculations. The court’s judgment explicitly stated that the only reasonable interpretation of the existing regulations necessitates a different calculation method than what CMS used. Consequently, the court granted summary judgment in favor of SCAN.
This ruling effectively invalidates SCAN’s 3.5-star rating for 2024. CMS is now prohibited from using this “unlawful” rating to determine SCAN’s eligibility for the $250 million quality bonus payment. Instead, SCAN’s star rating is retroactively restored to 4 stars.
This legal outcome extends beyond just SCAN. Regulators may now be compelled to recalculate star scores for all Medicare Advantage carriers for the 2024 plan year. This recalculation could potentially impact the scan health care reviews landscape as consumers reassess plan quality based on revised ratings.
Delving into the Nuances of Star Rating Calculations
Understanding the intricacies of CMS’s star rating calculations is crucial to grasping the significance of this lawsuit. CMS assigns star ratings based on a variety of quality measures, which are then converted into an overall star score on a five-star scale. The system operates on a curve, using statistical analysis to cluster data and establish performance benchmarks.
These benchmarks are known as “cut points,” which define the boundaries between different star rating levels. CMS calculates a plan’s overall star rating by averaging weighted scores across all measured categories, resulting in a rating in half-star increments.
SCAN’s lawsuit specifically targeted two recent modifications in CMS’s star rating methodology: the Guardrail Rule and the Tukey Outlier Rule.
The Guardrail Rule, introduced to enhance the predictability of cut points, placed a 5% annual cap on how much cut points could fluctuate from year to year. This rule, implemented in October 2022 for the 2023 star ratings, aimed to stabilize the system and make it more predictable for plans striving for high ratings, which are often reflected in positive scan health care reviews.
The second change, the Tukey Outlier Rule, concerns the handling of extreme values within a data set. Implemented in October 2023 for the 2024 star ratings, this rule removed outliers—both high and low extremes—from the raw data before calculating cut points.
While both rules aimed to improve the stability and predictability of star ratings, their sequential implementation created an unintended consequence. Because the Guardrail Rule was implemented before the Tukey Outlier Rule, and because lower-end outliers are more common in data sets, removing outliers through the Tukey rule tended to increase certain cut points beyond the 5% limit set by the Guardrail Rule.
To mitigate this, CMS opted to waive the Guardrail Rule for a single year. Instead of applying the 5% cap to the actual cut points from the previous year, CMS applied it to hypothetical cut points—those calculated using the previous year’s data but with Tukey outliers removed.
The court highlighted that “the problem is CMS never amended its regulations to reflect that decision, at least not expressly.” This deviation from formally documented regulations formed the basis of SCAN’s successful legal challenge.
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The Path to Lawsuit and the Court’s Decision
Between 2019 and 2023, SCAN consistently achieved a 4.5-star rating, entitling it to significant bonus funding. However, in September 2023, CMS informed SCAN that its 2024 star rating would drop to 3.5 stars. SCAN attributed this decline, in part, to CMS’s decision to apply the Guardrail Rule to hypothetical rather than actual previous-year cut points.
SCAN argued that had CMS adhered to its regulations and applied the Guardrail Rule to the previous year’s actual cut points, it would have received higher ratings on two specific measures, resulting in an overall 4-star rating. This 4-star rating would have made SCAN eligible for approximately $250 million in federal bonus funding.
After CMS rejected SCAN’s request for a review, maintaining that its calculation was consistent with regulations, SCAN filed a lawsuit in December 2023. The legal argument centered on CMS’s failure to follow its own regulations in calculating the star ratings. Following a hearing in May 2024, the court ultimately sided with SCAN.
Broader Implications for Medicare Advantage and Consumer Choice
The outcome of this lawsuit has wider implications for the Medicare Advantage landscape. For the 2024 rating year, fewer Medicare Advantage plans achieved the coveted 5-star rating, and many plans attributed this decline to the regulatory changes, particularly the Tukey Outlier Rule.
Star ratings are not merely an internal metric for health plans; they directly influence federal bonus payments. Furthermore, consumers actively use star ratings and scan health care reviews as key determinants when selecting a Medicare Advantage plan. These ratings serve as a readily accessible indicator of a plan’s quality and performance, empowering both beneficiaries and CMS to evaluate plan effectiveness.
This legal victory for SCAN underscores the importance of regulatory transparency and adherence in the complex world of Medicare Advantage Star Ratings. It also highlights the significant financial and reputational stakes tied to these ratings, which in turn shape consumer perceptions and choices in the competitive Medicare Advantage market. The potential recalculation of star ratings across the industry could lead to a reassessment of plan quality, impacting how consumers view and utilize scan health care reviews in their healthcare decisions.
