The Star Treatment : Estimating the Impact of Star Ratings on Medicare Advantage Enrollments

Since 2001, the Centers for Medicare and Medicaid Services (CMS) has calculated and disseminated various quality measures for Medicare Advantage (MA) contracts. The rating system evolved over the 2000s, culminating in an overall contract star rating system (from one to five stars) in 2009. In this paper, we study the effect of CMS-reported contract star ratings on MA plan enrollment. We formulate a discrete choice demand model for differentiated MA plans and estimate the model with market-level plan enrollment data. We are able to identify separate enrollment effects for each star level using a regression discontinuity research design that exploits plausibly random variation around star thresholds. By estimating our model with plan level data, we identify a model that is consistent with actual enrollees' decisions. The results suggest that the 2009 published star ratings directed beneficiaries away from low rated plans more than actively toward high rated plans. When we repeat the analysis for 2010 published quality, we find no significant effects. Recent reforms that have partially tied MA contract reimbursement to CMS-assessed quality provide clear incentives for contracts to improve quality, but our results suggest that any additional incentives generated by enrollment effects are small