CMS Killed the Health Equity Index. Here's What It Would Have Done.

What CMS built - and then unbuilt

The HEI was established by CMS-4201-F (April 12, 2023, 88 FR 22120) as a methodological enhancement to the Part C and Part D Star Ratings program. It was designed to replace the reward factor - the up-to-0.4-star bonus for consistently high performance that dates to the 2009 Star Ratings - starting with the 2027 ratings, published in October 2026. The rationale was straightforward: program-wide performance had risen and stabilized to the point where paying extra for consistency no longer bought improvement, and no adjustment specifically rewarded closing the gap for enrollees with social risk factors.

CMS-4208-F3 (April 6, 2026, 91 FR 17384) killed it. The final rule states the decision without ambiguity:

“We are also finalizing that we will not move forward with the implementation of the Health Equity Index (also called Excellent Health Outcomes for All) reward at § 422.166(f)(3) and 423.186(f)(3) and will continue to include the historical reward factor in the Star Ratings methodology at § 422.166(f)(1) and 423.186(f)(1).”

The CMS Fact Sheet released alongside the rule put it even more plainly: “CMS is not implementing the Excellent Health Outcomes for All reward.” The reward factor - a bonus the industry had learned to count on - survives. The current eCFR (§ 422.166) still contains only the reward factor at paragraph (f)(1). The HEI provisions were codified by CMS-4201-F at §§ 422.166(f)(3) and 423.186(f)(3), but CMS-4208-F3 stripped them from the CFR before they ever took effect.

How the index was designed to work

For each Star Ratings measure that qualified, CMS would have isolated the contract’s enrollees with social risk factors - those receiving the low-income subsidy, dually eligible (LIS/DE), or living with a disability - and asked how the contract’s performance for that subset compared with every other contract’s. Rank in the top third and the measure would have contributed +1; the middle third, 0; the bottom third, -1. Each contribution would have been multiplied by the measure’s Star Ratings weight, summed, and divided by the total weight of eligible measures, yielding an index between -1 and 1.

A measure only would have counted if it was statistically reliable for the subset (reliability of at least 0.7 across two years of data, with denominator minimums met). A contract only would have received an index at all with at least 500 enrollees and half its measures eligible.

The reward then would have passed through an enrollment gate. A contract whose SRF share sat at or above the contract-level median would have earned the full scale, up to 0.4 stars at an index of 1. Between half the median and the median, the scale would have been capped at 0.2. Below half the median, there would have been no reward at any score. The increment would have been added after the categorical adjustment index and improvement measures but before rounding to the nearest half star.

Two design choices drove much of the industry commentary during the rulemaking. Tercile ranking made the HEI a tournament rather than a test: a contract would have been graded against other contracts, not against a fixed bar, so industry-wide improvement would have moved the terciles and bought no one anything. And the enrollment gate made membership mix a ratings input for the first time, which quietly rewarded serving the populations the index was designed to protect.

Where the money was supposed to move

CMS scored the swap in its regulatory impact analysis for CMS-4201-F. Replacing the reward factor with the HEI was projected to save the Medicare Trust Funds $670 million in 2028, the first payment year it would have touched, rising to $1.05 billion in 2033 - $5.12 billion across the decade. Savings to the Trust Funds were, read from the industry’s side of the ledger, quality-bonus dollars leaving the program.

Simulating the change on 2020 and 2021 ratings data, CMS found 7 MA-PD contracts (1.7%) would have gained half a star while 54 (13.4%) would have lost one, and contracts serving the most dual-eligible members would have fared comparatively better: 17% of D-SNP contracts would have seen their overall rating fall, against 22% of contracts generally. The median SRF share in that simulation was 41.6%. High-performing contracts with affluent, healthy membership - the reward factor’s most reliable beneficiaries - were the design’s intended payers.

None of these savings will now materialize. The $5.12 billion stays in the program.

Why it matters even now

The HEI is dead, but the underlying insight that animated it survives. CMS built the HEI because the data showed persistent within-contract disparities in performance between enrollees with and without social risk factors. Those disparities haven’t gone anywhere. The CAI - the categorical adjustment index that adjusts summary and overall ratings for a contract’s SRF composition - remains in place. And the reward factor continues to pay on aggregate performance, which means plans that perform well on average while underserving their poorest and most disabled enrollees will continue to collect the same bonus they always have.

But the strategic pressure to track stratified performance hasn’t disappeared. CMS explicitly left the door open in CMS-4208-F3, noting it “appreciate[s] commenters’ suggestions on ways to further simplify and modify the Star Ratings program to further drive improved quality of care.” An HEI variant, a reweighted CAI, or a new equity measure is a matter of when, not if. The plans that spent the last two years building SRF-stratified reporting infrastructure aren’t sitting on sunk cost - they’re sitting on a head start for the next round.

Our quality portal builds that view: measure-level performance stratified by LIS/DE and disability status, tracked continuously. Whether the scoring mechanism is an HEI reward, a reweighted CAI, or a standalone equity measure, the ability to see stratified performance before it becomes a ratings input is the durable strategic advantage.

Sources

• CMS-4208-F3, “Medicare Program; Contract Year 2027 and Certain Contract Year 2026 Policy and Technical Changes” (April 6, 2026, 91 FR 17384). federalregister.gov
• CMS Fact Sheet, “Contract Year 2027 Medicare Advantage and Part D Final Rule” (April 2, 2026). cms.gov
• CMS-4201-F, “Medicare Program; Contract Year 2024 Policy and Technical Changes” (April 12, 2023, 88 FR 22120). federalregister.gov
• 42 CFR 422.166(f)(3) and 423.186(f)(3) (as finalized in CMS-4201-F; removed by CMS-4208-F3). ecfr.gov