Federal Officials Recalculate 2026 Medicare Advantage Star Ratings Amid Legal Pressure
Federal officials have revised the quality ratings for 2026 Medicare Advantage plans following legal challenges from health insurance companies, according to a newly released government memo. The decision comes after years of litigation over the star rating system, which determines bonus payments to insurers and impacts beneficiary choices.
Why the Recalibration Matters
The Centers for Medicare and Medicaid Services (CMS) adjusted the calculations after courts ruled that previous methodologies contained errors, according to a memo obtained by STAT. Medicare Advantage plans with four or more stars receive bonus payments, which totaled $16 billion in 2024—nearly the entire CDC budget and double the 2020 figure. These bonuses have become a focal point for legal disputes, as insurers argue that lower ratings unfairly reduce their revenue.
Legal Challenges and Financial Implications
Health insurance companies have filed repeated lawsuits challenging their star ratings, claiming the system is biased or opaque. A 2022 court decision forced CMS to redo ratings after judges found flaws in the initial calculations. While most insurers lost their cases, a few secured favorable rulings, prompting the latest recalibration. The changes aim to address procedural issues but may not resolve ongoing tensions between regulators and the industry.
What’s Next for Medicare Beneficiaries?
The revised ratings, set to take effect in 2026, could influence which plans receive higher bonuses and, by extension, which plans remain competitive. Beneficiaries may see shifts in available options as insurers adjust to the new framework. However, the exact impact remains unclear, as CMS has not yet detailed how the recalibration will affect individual plan scores. Advocacy groups warn that the complexity of the system continues to leave beneficiaries confused about their choices.
Broader Context: Medicare Advantage’s Growing Role
Medicare Advantage plans now cover nearly 40% of Medicare beneficiaries, up from 20% a decade ago. The program’s expansion has drawn scrutiny over profit margins, with some insurers reporting executive pay increases amid rising bonuses. A 2023 Kaiser Health News investigation found that top executives at major insurers earned over $10 million annually, raising questions about how bonus funds are allocated.
The latest developments highlight the ongoing tension between regulatory oversight and industry interests in Medicare Advantage. As CMS finalizes the 2026 ratings, stakeholders will closely monitor how the changes affect both insurers and the millions of seniors relying on the program.