CMS finalizes 3.7% payment increase for Medicare Advantage plans
The policies put pressure on benefits and premiums as insurers are already facing regulatory changes and higher utilization, AHIP says.
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Medicare Advantage plans are getting a 3.7% rate increase for 2025, or over $16 billion, from 2024 to 2025.
The federal government is projected to pay between $500 and $600 billion in Medicare Advantage payments to private health plans in 2025, according to the 2025 Advance Notice for the Medicare Advantage and Medicare Part D Prescription Drug Programs released late Monday.
The payment rate is the same as what the Centers for Medicare and Medicaid Services proposed in January and was considered inadequate by insurers.
Insurers are troubled over other key factors to payment, including a 0.16% reduction in the Medicare Advantage benchmark rate for 2025, which represents a 0.2% decrease.
AHIP President and CEO Mike Tuffin said, "These policies will put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall. It is important to note that the Medicare Advantage and Part D programs are already undergoing a number of significant regulatory and legislative changes. Moreover, the cost of caring for Medicare Advantage beneficiaries is steadily rising."
Other insurer concerns were outlined in a letter from Tuffin to CMS leaders in March. Tuffin said the organization was concerned about the 2.44% growth rate in the Advance Notice. That rate was finalized on Monday.
"AHIP has strong concerns that the estimated growth rate in the Advance Notice – an average of 2.44% – will lead to benchmark changes that are insufficient to cover the cost of caring for 33 million MA beneficiaries in 2025," Tuffin said in the letter. "The estimate does not reflect higher utilization and cost trends in the healthcare market that are expected to continue into 2025. Based on a recent AHIP survey, MA plans cost growth in 2023 was more than 7%, on average, in all quarters of the year and spiked above 8% in the fourth quarter."
Utilization of services has been increasing, as has been shown in financial earnings reports for insurance companies and in an AHIP report submitted to CMS.
AHIP also voiced concerns with the approach for estimating fee-for-service coding trends that are used to normalize risk adjustment payments. The new methodology uses data from periods impacted by COVID-19, Tuffin said.
AHIP does support the updated Part D risk adjustment model, Tuffin said.
Margaret A. Murray, CEO of the Association for Community Affiliated Plans, said, "We have substantial concerns with where CMS landed on MA-PD rates in two respects. First, the assumptions CMS used to inform the Part C rate components don't sufficiently take into account the increased utilization associated with high-need, high-risk Medicare beneficiaries served by Safety Net Health Plans. Second, with respect to Part D, we are concerned that the adjustments to the Part D risk adjustment model understate the true cost of the highest need dually eligible individuals enrolled in fully-integrated and highly-integrated D-SNPs offered by Safety Net Health Plans."
Katie Smith Sloan, president and CEO, LeadingAge, took issue with what MA plans pay providers such as skilled nursing facilities and home health agencies while getting a 3.7% payment increase. Providers of elderly services get less from MA plans than they receive to provide the same level of care in Medicare fee-for-service, Sloan said.
The final rate announcement includes the continued phase-in of the updated MA risk adjustment model that was first implemented in 2024.
The MA risk score trend is the average increase in MA risk scores across plans, not accounting for normalization and coding pattern adjustments.
The updated risk adjustment model blends 67% of the risk score calculated using the updated 2024 MA risk adjustment model, with 33% of the risk score calculated using the 2020 MA risk adjustment model. For 2025, the blended risk score trend is 3.86%.
It is a key factor in the level of overall MA payments, CMS said.
CMS said it also made improvements to the structure of the Medicare Part D drug benefit for 2025 that will result in lower drug costs for millions of people with Medicare through the concurrent release of the 2025 Part D Redesign Program Instructions.
Email the writer: SMorse@himss.org
