Medicare Advantage Plan ratings: An important district court opinion

On Oct. 13, U.S. District Court Judge Reed O’Conner issued a Memorandum and Opinion in Humana Inc., et al. v. U.S. Department of Health and Human Services, et al., Case No. 4:25-cv-0079 (N.D. Tex.), upholding the Centers for Medicare and Medicaid Services (CMS) statutory authority. Specifically, the Court addressed CMS’ authority to issue a poor rating through its star ratings system for the overall quality of Medicare Advantage Plans.

There are multiple criteria (approximately 36) that CMS utilizes when issuing a rating, including the availability of interpreters and not receiving a return phone call. Humana argued that it received a poor score on a rating scale of 1-5 because CMS has an invalid no-call back rule. Judge O’Connor blatantly refuted the notion indicating that “Humana is incorrect [because] [t]he no-callback policy is lawful.”

Why is this lawful and why is Humana incorrect? First, the CMS Star Ratings system for Medicare Part C (aka Medicare Advantage or “MAO”) is found at 42 U.S.C. §§ 1395w-22(e); 1395w-23(o)(4)(A). CMS assigns a score for each of the nearly 36 metrics and then averages the scores across all ratings for an average. In turn, every October, a list of MAO Plans and their related Star Rating is published by CMS so that prospective Medicare enrollees can make an informed decision when choosing a plan.

If a plan scores below a 2.5-star rating on multiple contracts, then pursuant to 42 CFR § 422.502(b)(1)(i)(D). The “Technical Notes” guidance is published annually on the CMS website to assist MAO plans in interpreting the measures, which comprise a particular year’s Star Ratings. Prior to the Technical Notes being finalized, pursuant to 42 U.S.C. § 1395w-23(b)(2) and 42 CFR § 422.164(c), a notice and comment period ensues, giving MAO plans the opportunity to comment.

As to the availability of interpreters, the metric specifically, “ensure[s] that interpreters are available within 8 minutes of the caller reaching a customer service representative.” There are safeguards in place, for example, if a call from CMS is the wrong number or a time zone difference causes a non-response because it occurs outside of regular business hours, then CMS may void the test call as “unsuccessful” and therefore, not affect any Star Rating. Barring any exceptions, “[i]n order for an MAO to receive a 5.0 Star Rating for its interpreter availability measure, 100% of the non-invalidated foreign-language tests calls must be successful.”

Humana challenged its 3.5 star-rating it received for its inadequate response time. Interestingly, Judge O’Connor focused on the Administrative Procedures Act (APA) to address Humana’s challenge to agency action instead of June 2024 U.S. Supreme Court Opinion in Loper Bright. “The district court applies the APA’s ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ standard to determine whether ‘the evidence in the administrative record permitted the agency to make the decision it did.” 5 U.S.C. § 706(2); MRC Energy Co. v. U.S. Citizenship & Immigr. Servs., No. 3:19-cv-2003-K, 2021 WL 1209188, at *3 (N.D. Tex. Mar. 31, 2021) (citation omitted).

So, what are some key take-aways that lawyers, compliance departments, MAOs and providers alike should consider from the Humana Opinion, which favors CMS? First, providers have a separate requirement to provide interpreters to patients and failing to do so can be problematic. Second, while Judge O’Connor refers to “guidance” it is not the type that is perched atop unstable ground – it is derived from Congress, which gave CMS express authority to issue the Technical Notes. Lastly, this case emphasizes the focus on single words, which may lead to the potential application of the Dictionary Act of 1871 and gives CMS great deference. In sum, each case is different and this 14-page Opinion offers a roadmap for how certain challenges may play out.

Rachel V. Rose, JD, MBA, advises clients on compliance, transactions, government administrative actions, and litigation involving healthcare, cybersecurity, corporate and securities law, as well as False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.