After stoking anxiety in the health insurance industry for three years, the controversy that's come to be known as TukeyGate finally came to fruition last month.
TukeyGate refers to an obscure change in how the Centers for Medicare and Medicaid Services assesses quality of care for Medicare Advantage enrollees through the star ratings program. The agency previewed the latest scores last month and, while health insurance companies were steeling themselves for lower ratings and smaller bonuses, the scale of the decline caught them off guard. The final ratings are due this month.
To blame, industry experts say, is a CMS effort to minimize the effects of outliers on the measurements that determine how many stars a Medicare Advantage plan is awarded. According to a McKinsey report, this methodological change, dubbed the Tukey Outer Fence Outlier Deletion Method, will cost insurers an estimated $800 million in lost star ratings bonuses next year.
The health insurance industry further charges that CMS fumbled the rollout of this new factor and left them flatfooted when the preliminary ratings came out.
Three years ago, CMS issued a regulation that would apply Tukey to ratings for the 2024 plan year. In 2022, the Tukey provisions were left out of a new rule. CMS restored them in another regulation published last December and cited an input error for the discrepancy.
This did not satisfy the industry, said Ana Handshuh, a principal at CAT5 Strategies, a Medicare Advantage consultancy. “There's all these technicalities of how things are supposed to be done, and when there's hundreds of millions of dollars at stake, people like everything followed to the letter,” she said.
CMS may face a court fight over how it promulgated the regulations. “We know that stars drive both enrollment and revenue, and so it’s not surprising some health plans are interested in litigation,” said Michael Bagel, associate vice president of public policy at the Alliance of Community Health Plans, a trade group for nonprofit insurers.
Catch a falling star
CMS rates Medicare Advantage plans on a one-to-five scale using 38 measures of enrollee experience, health outcomes and other factors. The agency uses insurer averages to determine the numerical ranges for each measure that correspond with each star rating, which the agency refers to as cut points. Overall scores are also subject to a weighted industry average.
The stakes are considerable. Medicare Advantage insurers that score at least four stars receive 5% payment bonuses, which they use to reduce premiums, enhance benefits or both to entice brokers and customers.
Medicare Advantage insurers opposed Tukey from the start. In 2020, CMS estimated that Tukey would cause at least 16% of plans to lose half a star because it increases the cut point threshold needed to achieve higher ratings. The COVID-19 pandemic disrupted care delivery, patient demand and utilization starting that year, but CMS based its analysis on 2019 data, making it hard for insurers to project the factor's impact on their star ratings, Bagel said.
“It was very difficult for us to know what actually was going to materialize once Tukey was applied nationally, and once CMS was comparing every plan against each other,” Bagel said. “There definitely were some bigger changes here than I think anyone anticipated."
In response to insurer complaints about substantial yearly fluctuations in the cut points, CMS last year introduced star ratings guardrails that limit how much most measures' cut points can change to 5% annually. Many insurers argued that would curb Tukey’s initial impact, said Rex Wallace, a principal at RWC Consulting, a Medicare Advantage advisory firm.
But the preamble to the final Medicare Advantage rule in 2020 stated that CMS would retroactively apply Tukey to 2023 ratings as a way to normalize the comparisons for the 2024 plan year. The agency said it then would implement guardrails to the new, “Tukey-fied” 2024 cut points.
Because the preamble is not published in the Code of Federal Regulations, however, some insurers did not see that language and were surprised by its consequences, Wallace said. This could the basis for a legal case that the preamble should not be legally binding as regulation, he said.
“The pressure of the lost revenue, coupled with the confusion around where it was included in the rule, is making some plans consider legal action against CMS,” Wallace said.
Applying Tukey to star ratings results in dramatic increases in the cut points for measures on call center operations, language translation services, breast cancer screening rates and other factors, said Sean Creighton, a managing director at the consulting company Avalere Health who formerly worked on public policy for Humana and as a CMS official. That alone demonstrates that the Tukey is inappropriate, he said: "It's overkill."
Instead, CMS should scrap Tukey and commit to the guardrails alone, Creighton said.
"Clearly, CMS has a preference for more sophisticated techniques, regardless of whether they make any sense or not,” he said. “Tukey is much more sophisticated than guardrails, but there's really no additional value, or very little additional value, to Tukey."