On Wednesday, the Centers for Medicare and Medicaid Services (CMS) proposed an overall increase to MA plans of 3.7%, a $16 billion bump over 2024. At the start of each new year, MA stakeholders wait for CMS to propose next year’s MA capitation rates and Part C & D payment policies. After what is expected to be a vigorous comment period, the final 2025 MA pay rates are scheduled for release this spring.
Early coverage from Modern Healthcare described the proposed rates as a payment cut because the MA benchmark would be -0.16% less in calendar 2025 than under current policy, excluding risk adjustment, and would mark a second consecutive year of a lower benchmark rate. From Modern Healthcare,
The benchmark rate is the difference between the agency’s expected average change in revenue, 3.7%, and the average risk score trend, 3.86%, which amounts to a 0.16% decrease.
The 2025 proposed payment rate is a summation of four factors: the projected effective growth rate, which CMS estimated at 2.44%; plans’ star ratings, which CMS projected would slice rates by a meager -0.15%; the risk model revisions, which CMS forecast at – 2.45%; and the projected MA risk score trend, which the agency expected would increase rates by 3.8% for an expected average change in revenue of +3.7%.
The agency is required to update MA payment rates and regularly conducts technical updates to make improvements needed to keep MA payments current and accurate. Inside Health Policy noted that in the agency’s 2023 MA Advance Notice, CMS proposed a small 1.03% payment bump for 2024, but in the end, the overall payment rate jumped to 3.32%. This year the national conversation around MA has become increasingly raucous.
From Inside Health Policy,
The advance notice caps off a tumultuous year for the MA program. Two heated rounds of regulation, including a risk adjustment data validation rule finalized in January and the controversial March rate notice foisted plans into the spotlight, where they’ve also been plagued by overpayment concerns, administrative burden issues and ongoing criticism around prior authorization use.
The CY 2025 Advance Notice includes the continued phase-in of the updated MA risk adjustment model and updates to the calculation of growth rates related to medical education costs, and other technical improvements. It also includes a reminder about new drug policy as a result of the Inflation Reduction Act (IRA). Part D benefit-related IRA updates will be in place for CY 2025 and are described in the advance notice. Instructions include the elimination of the coverage gap phase to affect a three-phase benefit (deductible, initial coverage, and catastrophic) and cap out-of-pocket costs at $2,000 for CY 2025.
If the 2025 MA payment rates are finalized, CMS expects premiums and benefits to remain stable. The agency also wants to continue the phased-in approach of the Part C risk adjustment model by blending 67% of the risk score using the new model and 33% calculated with the old model.
Get the CMS Fact Sheet