Medicare Advantage payment debate targets quality ratings

• There's growing interest in making sure plans are paid appropriately, said Jeannie Fuglesten Biniek, deputy director of KFF's program on Medicare policy.
• "I see continued conversations about how to make changes ... along a number of dimensions," she said. The star ratings system is "just one of them."

Driving the news: Last week, the Trump administration appealed a federal judge's decision that invalidated the quality rating for insurer Clover Health's contract.

• Clover Health sued the federal government over its 2026 rating in April, arguing that Medicare administrators used unlawful metrics that caused its rating to drop. The favorable court decision will win the company about $120 million, if it stands.
• The Centers for Medicare and Medicaid Services has already voluntarily recalculated all Medicare Advantage star ratings for 2026 in the wake of the initial court decision, which has increased bonuses for behemoths UnitedHealth Group and Aetna, per a Modern Healthcare analysis.
• No insurers will lose money as a result of the recalculations this year.

How it works: Medicare Advantage insurers get bonus payments for contracts that earn at least four stars from CMS, which they can use to offer extra benefits popular with seniors.

• The rating calculations involve dozens of metrics and have become increasingly complex. Insurers have been taking CMS to court to boost their star ratings for years.
• Clover's case goes further by challenging the administration's legal authority to consider certain metrics, said Erica Socker, co-director of the Medicare Policy Initiative at Georgetown's Center on Health Insurance Reforms.

Zoom out: Momentum has been building to reform the ratings system. There's mounting evidence that it hasn't improved plan quality, and experts say it doesn't provide the right information to seniors deciding where to enroll.

• Right-leaning think tank Paragon Health in 2024 proposed getting rid of quality bonuses and focusing star ratings on health outcomes and patient experience measures. Advocates and lawmakers on the left have also pushed to end the quality bonus program altogether.
• The Trump administration itself implemented major changes to reduce complexity in star ratings this year — though it said those changes will increase payments by $18.6 billion over the next decade.

The conversation is part of a broader debate over payment to Medicare Advantage plans, which cover about half of U.S. seniors.

• A key advisory commission to Congress has long argued that Medicare Advantage plans are overpaid relative to the traditional, government-managed program, and it estimates overpayments to plans will reach $76 billion this year.
• The Trump administration has said it wants to crack down on ways insurers game the Medicare Advantage payment system. It planned to freeze Medicare Advantage payment rates for 2027, but then reversed course and boosted rates 5%.

The other side: Health insurers maintain that Medicare Advantage offers seniors better care for lower costs.

• "As health plans incorporate and navigate new Star Ratings policies, they will continue to focus on keeping coverage and care as affordable as possible during this time of sharply rising medical costs," Chris Bond, AHIP spokesperson, told Axios in a statement.

What we're watching: A proposed rule on changes to Medicare Advantage for 2028 has been sent to the White House for review ahead of schedule, suggesting big shifts may be ahead — including to star ratings, Chris Meekins, managing director at Raymond James, wrote in an analyst note last week.

• Bigger changes to Medicare Advantage payment or quality rating structure would have to go through Congress.