The Centers for Medicare and Medicaid Services (CMS) created a star rating system to help Medicare-eligible individuals and caregivers quickly compare the performance and quality of Medicare Advantage plans and Part D prescription drug plans. This rating system helps Medicare shoppers and caregivers evaluate different plans – an important factor for someone enrolling for the first time or considering a change during the Medicare Annual Enrollment Period.
How are Medicare Plans Rated?
CMS rates Medicare Advantage and Part D plans annually, using a scale from one to five, with more stars equating to better performance and quality. A five-star rating is the highest a Medicare Advantage or Part D plan can receive, and half-ratings also exist (1.5, 2.5, 3.5, 4.5).
Here’s what the star ratings mean:
- 5-star rating: excellent performance
- 4-star rating: above-average performance
- 3-star rating: average performance
- 2-star rating: below-average performance
- 1-star rating: poor performance
Star ratings are released by CMS around early October, just before the Medicare Annual Enrollment Period begins. CMS evaluates and scores three types of Medicare plans each year.
1. Medicare Advantage plans with prescription drug coverage (MA-PD)
2. Medicare Advantage plans without prescription drug coverage (MA only)
3. Standalone Part D prescription drug plans (PDP)
Depending on the type of plan being evaluated, CMS uses anywhere from 12 to 38 quality and performance measures.
Why is the Medicare Star Rating Important?
A Medicare plan’s star rating is important because it can help you when comparing different plans. You should not use a star rating as the only factor when making a final decision though. Some plans that have fewer than five stars may actually be a better fit for you. Use the Medicare star rating as just a single factor of evaluation. Your health, lifestyle, and financial needs should always be the final determining factors, and it’s important to read the details of each plan.