On October 10, the Centers for Medicare and Medicaid Services (CMS) released its Medicare Advantage (MA) and Medicare Part D star ratings for 2025. As the figure shows, MA prescription drug (MA-PD) plans next year will have lower star ratings on average and fewer enrollees will be in highly rated plans. Average star ratings (weighted by enrollment) peaked at 4.37 in 2022 and declined to 3.92 in 2025, while the share of enrollees in a plan with 4 or more stars fell from a peak of 90 percent to 62 percent. For those same years, the number of contracts earning 4 or more stars fell from 68 to 40 percent, and those earning a perfect 5-star rating fell from 16 percent (74 contracts) to 1 percent (7 contracts).
Star ratings measure overall quality for MA and Part D contracts based on metrics related to enrollee health outcomes, patient experience, and adherence to certain clinical processes. Plans prioritize getting high star ratings to attract enrollees and earn performance-based rewards from the government. MA plans get higher benchmarks and larger rebates for high star ratings, leading to more payments and the ability to offer more supplemental benefits.
Does this mean that plan quality is declining in 2025? Not necessarily – technical changes to how CMS calculates star ratings are likely a bigger factor.
Star ratings peaked in 2022 and began to fall after COVID-19 protections expired in 2023. CMS has also changed how it treats outliers when calculating the threshold between each star rating, called “cut points.” Rising cut points will make it harder for plans to earn more stars (although changes to these cut points are capped at 5 percent per year). These changes were first applied to this year’s star ratings but, notably, CMS recalculated its 2024 star ratings earlier this year in response to legal challenges from plans.
A higher bar for star ratings may prevent excessive “grade inflation” that allows many plans to easily earn the best ratings. However, despite star ratings purportedly reflecting the quality of Medicare coverage, researchers have questioned their usefulness. For example, the stars rely on a large number of measures that do not meaningfully assess the quality of health outcomes and do not capture the performance of contracts in local markets.
Despite these flaws, the star ratings distort plans’ business practices because the bonuses associated with them encourage a focus on maximizing performance against government-selected metrics rather than accountability to enrollees directly. As a result, the cost of quality bonuses has increased over the past decade. For these reasons, Paragon has recommended eliminating quality bonuses to plan benchmarks alongside numerous other policies to improve MA while achieving reasonable taxpayer savings.
