CMS finalizes 2025 Medicare Advantage rates

CMS finalized a slight decrease in Medicare Advantage benchmark payments for 2025. 

The agency published its final rate notice for 2025 April 1. The final rule was largely similar to CMS' proposed payment rates issued in January. The agency will cut benchmark payments by 0.16% from 2024 to 2025.

CMS estimated plans will see 3.7% higher revenue overall in 2025. MA risk score trend of 3.86% — the average increase in risk adjustment payments year over year — will offset risk model revisions that will lead to a 2.45% decline in revenue and a projected decline in star rating bonuses, according to the agency.  

Payer industry executives had decried the proposed rates, saying they were insufficient to cover rising costs in the Medicare Advantage market. Share prices for some major insurers fell more than 4% following CMS's final rate announcement, Bloomberg reported April 1. 

Some insurers said they would likely cut back on supplemental benefits if the proposed growth rate payments were not adjusted. 

In an April 1 news release, AHIP President Mike Tuffin said the rates will "put even more pressure on the benefits and premiums" of Medicare Advantage beneficiaries. 

"It is important to note that the Medicare Advantage and Part D programs are already undergoing a number of significant regulatory and legislative changes," Mr. Tuffin said. "Moreover, the cost of caring for Medicare Advantage beneficiaries is steadily rising."

On a Feb. 7 investor call, CVS Health CEO Karen Lynch said the company believed the proposed rate notice was insufficient to cover costs but was in line with the company's expectations. 

"However, we do not believe it covers overall cost trends that have been emerging in Medicare Advantage," Ms. Lynch said. "We also know that there's complexity around the risk model, so we'll be contemplating that as we think about our [2025] bids." 

Berkeley Research Group estimated MA beneficiaries would see their benefits reduced or cost sharing increased by $33 per month on average. The analysis was funded by the pro-MA Better Medicare Alliance. 

CMS is continuing to phase in coding adjustment changes the agency announced last year. The changes are shifting MA's diagnosing coding from ICD-9 to ICD-10 and removing certain codes from the Hierarchical Condition Categories model. It will be phased in between 2024 and 2026. 

In a April 1 news release, CMS Administrator Chiquita Brooks-LaSure said finalized rates will maintain stability for the Medicare Advantage program. 

"The finalized policies in the Rate Announcement and the Part D Redesign Program Instructions will make improvements to keep Medicare Advantage payments up-to-date and accurate, lower prescription drug costs, and ensure that people with Medicare have access to robust and affordable healthcare options," Ms. Brooks-LaSure said. 

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