Medicare Equity

The Health Equity Index was the most consequential equity incentive ever embedded in Medicare Advantage Star Ratings. It was finalized in 2024, renamed in April 2025, and proposed for elimination in November 2025. Before it ever produced a payment adjustment for the populations it was designed to benefit, the current CMS administration proposed to scrap it. The reversal is not a technical adjustment to the Star Ratings methodology. It is a signal about the direction of equity-focused policy in Medicare, and reading that signal accurately requires understanding what the HEI actually was, why the administration gave for removing it, and what the structural equity picture in Medicare looks like independent of any explicit policy framework.

What the HEI Was and Why It Was Scrapped

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The Health Equity Index was finalized in the CY 2024 MA and Part D Final Rule as a replacement for the longstanding historical Reward Factor in the Star Ratings program. The Reward Factor, in place since the 2009 Star Ratings, added points to plans with consistently high overall performance. The HEI replaced that broad reward with a targeted one: plans that demonstrated superior performance on selected Star Ratings measures specifically for beneficiaries with social risk factors would earn a reward of up to 0.4 additional points on their final Star Rating, regardless of their overall Star tier.

The social risk factor populations included beneficiaries who were dually eligible for Medicare and Medicaid, those receiving low-income subsidies, and individuals who qualified for Medicare through disability. These three cohorts were the target population because CMS data consistently showed worse outcomes on quality measures for these beneficiaries compared to the broader MA population. The HEI was designed to create a financial incentive for plans to close that gap by rewarding plans that performed well for the hardest-to-serve members, not just across their entire enrollment.

The implementation timeline called for using pooled data from measurement years 2024 and 2025 to calculate HEI scores, with the reward first appearing in the 2027 Star Ratings. Plans had been making operational investments in programs targeted at LIS, dual eligible, and disabled populations in anticipation of the 2027 measurement cycle. Estimates put the value of the reward at roughly $5.13 billion in quality bonus payment implications across the industry, because the Reward Factor it replaced had been a significant component of the financial pathway to 4-star and 5-star ratings.

In November 2025, the CY 2027 MA and Part D Proposed Rule proposed to not implement the HEI reward, retaining the historical Reward Factor instead. CMS’s stated rationale was that it preferred to incentivize improvement across all enrollees and across all measures rather than directing plan attention to a subset of the population included in the HEI. The administration characterized this as simplification and as a preference for rewarding broad clinical and outcome performance. The comment period closed January 26, 2026. The final rule is expected in spring 2026.

What CMS did not say explicitly, but what the timing and policy context make clear, is that the HEI reversal is part of a broader rollback of explicit equity-targeted policy across federal agencies. The same proposed rule eliminated 12 Star Ratings measures, several of which had equity dimensions, and dropped SDOH screening from its position as a required reporting element. The CY 2026 final rule had already declined to finalize a provision requiring annual health equity analyses of MA plans’ utilization management policies. The pattern is consistent: the administration is removing the formal equity architecture from the quality measurement system while leaving intact the underlying clinical measures from which equity disparities can still be observed.

The practical consequence for plans that invested in LIS, dual eligible, and disabled member programs in anticipation of HEI is significant. Programs built to qualify for the equity reward rather than to improve overall Star performance are now competing for resources against programs with higher short-term financial returns. Whether plans maintain that investment in the absence of the financial incentive depends on their underlying strategic commitment to these populations, which varies considerably across the market.

What Remains in the Equity Toolkit

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Removing the HEI does not eliminate the structural equity components that CMS has embedded in MA program requirements through other means.

SDOH screening as a health risk assessment component remains a Star Ratings element in the 2026 cycle. Plans are still required to conduct health risk assessments for enrollees and the integration of social needs screening into those assessments is embedded in contract requirements for D-SNPs and other SNP plan types. The removal of SDOH screening from reporting in later years is proposed but not yet final, and the underlying clinical guidance that informed it remains.

D-SNP integration requirements represent the most structurally significant equity policy still advancing. The CY 2026 final rule finalized requirements for D-SNPs to implement integrated member identification cards and integrated health risk assessments by 2027, consolidating what had been separate Medicare and Medicaid processes into a single workflow. These requirements apply to FIDE SNPs and HIDE SNPs and create a more coherent care coordination pathway for the dual eligible population than previously existed. The dual eligible integration arc, through aligned enrollment, integrated care plans, and combined HRAs, is the de facto equity policy for the most vulnerable and disparity-burdened cohort in Medicare, and it is advancing on its own rulemaking track largely independent of the HEI debate.

C-SNP expansion and the chronic condition special needs plan framework also represent an equity mechanism. Beneficiaries with serious chronic conditions who are concentrated in lower-income populations gain access to targeted care management through C-SNPs without requiring Medicaid enrollment. The CMS RFI on C-SNPs in the CY 2027 proposed rule signals continuing attention to this population segment.

Health-related social needs data collection through MA health risk assessments continues under existing program requirements. Plans that collect Z-codes, conduct social determinants screening, and link members to community-based services are doing so under a regulatory framework that has not been reversed. What has been reversed is the financial incentive to do it better for the populations most at risk. The policy infrastructure for equity data collection exists. The payment signal that made improving it financially attractive does not.

The Structural Disparities

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Removing the HEI does not change the underlying distribution of Medicare coverage and outcomes across demographic and socioeconomic groups. The disparities the HEI was designed to address are structural, persistent, and in many cases widening.

The most fundamental disparity in Medicare is driven by coverage type. A beneficiary’s income, race, and geography predict with considerable accuracy whether they are enrolled in Medicare Advantage, in Original Medicare with Medigap, or in Original Medicare without supplemental coverage. Higher-income beneficiaries are more likely to hold Medigap policies, which provide near-complete cost-sharing protection and unrestricted provider access. Lower-income beneficiaries are disproportionately in MA or in dual eligible programs, where cost-sharing is lower but utilization management, network restrictions, and prior authorization requirements apply. The Medigap underwriting barrier amplifies this disparity: beneficiaries who develop chronic conditions before they can secure a Medigap policy at initial enrollment may be medically underwritten and denied coverage or priced out of the market, leaving them in MA regardless of whether MA serves their clinical needs well.

The dual eligible population represents the highest concentration of health equity challenges in Medicare. These beneficiaries face coverage fragmentation between Medicare and Medicaid, care coordination gaps when providers in each program operate without shared information, inconsistent access to long-term services and supports depending on state Medicaid generosity, and behavioral health access barriers that compound their physical health conditions. Historically, CMMI models and D-SNP integration requirements have been the primary policy vehicles for this population. With OBBBA compressing state Medicaid fiscal capacity, the state partnership required to sustain robust dual eligible integration programs is under pressure precisely as the integration policy requirements are advancing.

The rural-urban equity dimension is structurally distinct from income-based disparities. Geographic benchmarks in the MA rate-setting system create different payment floors in different counties, which produce different supplemental benefit levels and different plan availability across geographies. A beneficiary in a high-benchmark urban county has access to plans with rich supplemental benefits and broad provider networks. A beneficiary in a low-benchmark rural county may have access to a single plan or no MA plans at all, receiving coverage through FFS without the supplemental benefits that have become a central feature of MA. The same Medicare statute produces fundamentally different coverage experiences depending on where someone lives. WISeR in the six pilot states, Geo AHEAD in the six implementation states, and differential MA penetration rates all reflect geography as a primary equity variable.

Rural connectivity compounds the geographic disparity. Telehealth was designed in part as an equity mechanism for rural beneficiaries, but its efficacy depends on broadband infrastructure that is substantially less available in rural areas than in urban ones. A beneficiary in a rural area without broadband has less access to the telehealth modalities that have expanded the care available to urban beneficiaries, and audio-only telehealth, which does reach rural and elderly populations, faces policy uncertainty.

The Measurement Gap

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The underlying problem that made the HEI technically challenging, and that makes equity analysis in Medicare difficult regardless of policy posture, is a data infrastructure gap that has never been fully resolved.

Medicare lacks systematic, real-time data collection on beneficiary race, ethnicity, language, and disability status at the granularity required for equity monitoring. Race and ethnicity data in Medicare enrollment files are incomplete, inconsistently coded, and based on Social Security Administration records that reflect outdated or absent collection methodologies. Plans collect more granular data through health risk assessments and SDOH screening, but that data lives in plan systems rather than CMS administrative data, limiting its use for population-level monitoring.

The consequence is that equity problems in Medicare are documented through periodic studies, research analyses, and OIG investigations rather than through routine monitoring that could trigger real-time policy responses. MedPAC’s equity chapters, KFF’s coverage disparity analyses, and academic research produce the documentation. CMS’s administrative data does not. The result is a measurement lag between when disparities emerge and when they are formally visible to policymakers, and that lag is structural regardless of whether the administration is equity-focused or not.

What the HEI attempted to do, imperfectly, was create a payment signal that would incentivize plans to generate better outcomes data for the disparity-affected populations, because plans would need to demonstrate differential performance to earn the reward. Removing it reduces the incentive to generate that data. The measurement gap that made equity monitoring difficult remains, and the policy tool most likely to narrow it in the short term has been withdrawn.

Related Reading

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MCR-10_02 Racial and Ethnic Health Equity in Medicare: HCC Coding Gaps, Benefit Disparities, and What the Data Shows MCR-04_07 Star Ratings in Transition: The Quality Bonus Payment Battlefield MCR-02_05 CY 2027 Proposed Rule: Star Ratings, C-SNP RFI, and the HEI Reversal