What does a star system makeover mean for Medicare Advantage?

The Medicare Advantage (MA) multibillion-dollar rating and rewards system is getting a makeover and a payday.

On April 2, the Centers for Medicare and Medicaid Services (CMS) finalized an update to the five-star performance rating system that impacts rebates and determines which providers receive quality bonus payments.

These changes include removing 11 measures, some focused on administrative processes and others that provided “little useful comparison” of plan quality because most plans score similarly in those areas, CMS said in an April 2 press release.

The agency also added a new Part C depression screening and follow-up measure, dropped a previous proposal that aimed to reward plans for addressing health disparities, and kept a measure in place that rewarded plans for past strong scores. (The measure was previously proposed to end.)

The changes will cost an additional $18.6 billion in federal funding from the Medicare Trust Fund from 2027 through 2036, about 0.21% of total Medicare payments to private health plans during that time, CMS estimates.

Mixed reactions. AHIP said in a January public comment responding to a draft of these changes that, though it preferred the changes be phased in more slowly, they would “streamline” star ratings measures “toward those focused on clinical outcomes.”

But Laura Skopec, a senior research associate at the economic and social think tank Urban Institute, said these changes do not fix what she sees as fundamental problems with this rewards system. For instance, it’s not budget neutral. Plans don’t get fined if they don’t deliver good outcomes; they only get paid if they perform.

“I’ve long been railing against these quality bonuses as being pure upside,” she said.

Show me the money. In June 2025, KFF estimated that Medicare would pay out at least $12.7 billion in quality bonus payments for the year.

The bonus payment system, which took effect in 2012, is intended to reward plans for providing good care to beneficiaries. But several studies, including a 2023 report Skopec coauthored, have found these bonus payments don’t appear to be related to plan quality improvements.

Skopec has previously called to replace the quality bonus payment program with a new system that would have more CMS oversight and enforcement.

The Medicare Payment Advisory Commission, an independent agency that advises Congress on Medicare, also recommended replacing the program back in June 2020, calling the current system “flawed” in a March 2026 report.

In a simulation using data from the 2025 star ratings and changes implemented in the 2026 star ratings, CMS estimates these 2027 changes will mean 4% of MA contracts will gain quality bonus payments and 3% will lose them.

Alongside this star rating system tweak, MA plans are benefiting from a 2.48% increase in how much they’re paid in 2027, a huge jump from a previously proposed 0.09% increase.

“CMS does a lot of tinkering with this quality bonus program in ways that we just think are a lot of wasted effort,” Skopec said. “The bigger picture is really [that] this whole program didn’t work. The research shows that these quality bonuses have not improved quality. So what are we doing here?”

In response to Healthcare Brew’s request for comment on the argument that the quality bonus system should be reformed or replaced, a CMS spokesperson said the agency is always seeking feedback on ways to improve the star ratings and other incentive methodologies.