The Medicare Advantage Star Ratings system has long served as a benchmark for quality and performance. Today, it sits at the center of a legal storm. Major health insurers are suing the Centers for Medicare & Medicaid Services (CMS), claiming that recent changes to rating calculations were inconsistent and lacked transparency.
These CMS lawsuits are more than legal disputes. They signal a turning point for the future of Medicare Advantage. The outcomes could reshape how quality is measured, how benefits are designed, and how revenue is earned. What’s at stake is not only regulatory clarity, but long-term financial predictability, competitive positioning, and the sustainability of growth in one of the nation’s most influential healthcare programs.
The Star Rating system evaluates Medicare Advantage (MA) and Part D plans on preventive care, chronic condition management, member satisfaction, and customer service—but it also drives competition, benefits, and member trust. Higher-rated plans earn Quality Bonus Payments (QBPs) and greater rebate shares, funding richer benefits and lower premiums, while even small rating shifts can move millions in revenue.
Public ratings push plans to improve Consumer Assessment of Healthcare Providers & Systems (CAHPS) scores, medication adherence, and preventive screenings, directly shaping enrollment and member loyalty.
Strong Star Ratings also enhance market positioning, driving better financial results, operational stability, and sustained retention in competitive markets.
Recent research has questioned whether current ratings truly drive better outcomes, highlighting the need for transparency in how performance is measured. With CMS introducing new rules at a rapid pace, payers have little time to adapt—highlighting the importance of testing periods that allow fair evaluation before permanent regulatory changes.
In recent years, several major insurers have taken CMS to court over how Medicare Advantage Star Ratings are determined, arguing that abrupt and inconsistent methodological changes have created financial and operational instability. Another case involved a lawsuit challenging a penalty tied to interpreter-assisted test calls, which CMS ultimately won. In addition, several health plans have pursued legal action over methodological inconsistencies in Star Ratings calculations, reflecting broader tensions between evolving oversight standards and payer accountability.
Under the Social Security Act, CMS holds the authority to establish Star Ratings methodology. However, that authority is limited by the Administrative Procedure Act (APA), which requires clarity, transparency, and sufficient notice before implementing major policy shifts. Health insurers claim that some CMS adjustments, such as changes to cut points, outlier rules, and penalty criteria, were introduced without adequate notice or data support, leading to allegations of arbitrary or inconsistent standards.
While courts often defer to CMS on technical decisions, they have occasionally intervened when the agency’s rationale lacked transparency. Recent disputes, including cases over interpreter-assisted test calls and methodological inconsistencies, have underscored the industry’s demand for a more stable and accountable framework.
As these challenges continue, they may push CMS toward adopting a more formal, transparent process for methodology updates—one that balances regulatory oversight with the operational realities of payers and the beneficiaries they serve.
Rather than signs of dysfunction, the recent CMS lawsuits represent an essential step in refining Medicare Advantage’s regulatory framework. As leading healthcare payers challenge rapid policy shifts, they are prompting industry-wide dialogue that could ultimately strengthen program transparency and predictability. Still, the financial ripple effects of Star Ratings changes remain significant and often unpredictable.
For large national insurers, even a small decline in ratings can translate into hundreds of millions in lost bonus revenue. For instance, one major health plan reported that its 2024 rating drop could cost more than one billion dollars. Smaller and regional plans are often hit harder—a single-star decline can disrupt growth plans or force benefit reductions. Meanwhile, plans with three stars or fewer receive smaller rebates, making it harder to compete on premiums and supplemental offerings.
This volatility also shapes the member experience. Some insurers have scaled back in low-rated regions, leaving seniors with fewer choices and potentially higher costs. Others are doubling down on quality improvement, leveraging high ratings for stronger market visibility and provider relationships. As a result, quality measurement and compliance have evolved into core strategic priorities, influencing both financial performance and member satisfaction.
Rating recalculations also directly affect rebate dollars that determine premiums and benefits, underscoring how operational and financial shifts ripple through to the beneficiary level. While a stronger focus on CAHPS measures and call center responsiveness has improved aspects of member experience, frequent rule changes risk confusion and erode public trust if the system is seen as inconsistent.
The Medicare Advantage Star Rating system is here to stay, but it is expected to evolve toward greater stability, transparency, and fairness. Industry analysts anticipate the introduction of guardrails to limit year-to-year scoring volatility, as noted by the Advisory Board. The system will also continue to expand its focus on member experience, health equity, and access—key factors shaping the next phase of Medicare Advantage performance measurement.
At the same time, tighter data validation and audit requirements are likely to emerge, along with potential regulatory reforms that could formalize the process for appeals and methodology disclosures. Ongoing litigation will also play a role in defining the limits of CMS authority, according to Becker’s Payer.
As the framework matures, predictability and fairness are becoming just as important as accuracy—ensuring that both payers and members can rely on a more stable and transparent evaluation system.
Recent industry experience reveals several lessons and priorities for health insurers navigating the evolving Medicare Advantage Star Ratings landscape.
Create a dedicated Stars Program Management Office (PMO) that connects quality, compliance, pharmacy, provider engagement, member experience, and actuarial teams to improve star ratings. Treat these scores as an enterprise risk, not just a quality metric. Reporting alignment should be at a Senior level where there can be governance and influence over all of the areas that impact the ratings.
Regularly model alternative cut-point scenarios and methodology changes during bid preparation to understand how adjustments could affect rebate levels and benefit designs. Use these insights to build financial and operational flexibility, so plans can adjust quickly when CMS updates or court rulings shift the landscape.
Improve internal controls, documentation, and reporting processes to withstand CMS and Office of Inspector General (OIG) scrutiny. Data accuracy is now a reputational and financial priority.
With CHAPS and access measures carrying greater weight than incremental clinical gains, invest in access, call center responsiveness, complaint resolution, and member navigation support.
When financial pressure increases, operational expenditures (OpEx) become the most immediate path to stability. Focus on controllable costs through process optimization, automation, and selective outsourcing to protect margins without compromising service quality. Used strategically, AI can enhance training accuracy, data integrity, and workflow efficiency—serving as a lever for both short-term resilience and long-term adaptability while preserving the human connection at the core of member experience.
Organizations that treat methodology changes as strategic variables and not compliance burdens will be stronger, more agile, and more trusted by their members. Adapting to Star Ratings volatility requires foresight and operational flexibility.
Healthcare payers that invest in operational efficiency, data integrity, and member experience will be best positioned to maintain stability and growth. In a system where even minor rating shifts can move billions in payments, long-term success will depend on an organization’s ability to anticipate change, adapt quickly, and sustain financial and operational resilience.