CMS proposes Medicare Advantage rate cut

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

The agency issued its proposed 2025 rate notice Jan. 31, cutting benchmark payments by 0.2% on average. Risk model revision will amount to a 2.45% decline in revenue, according to a fact sheet issued by the agency. 

Plans should expect to see 3.7% higher revenue overall, with an MA risk score trend of 3.86% — the average increase in risk adjustment payments year over year — offsetting risk model revisions and a projected decline in star rating bonuses. 

"CMS continues to ensure that Medicare Advantage and Part D prescription drug plans remain strong, stable, and affordable offerings," CMS Administrator Chiquita Brooks-LaSure said in a news release. "The Advance Notice upholds robust and stable options for people with Medicare while strengthening payment accuracy so that taxpayer dollars are appropriately spent." 

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. 

Executives at large insurers were expecting a cut from CMS, while CMS maintains they equate to a slight increase in pay for plans. On a Jan. 25 call with investors, Humana CFO Susan Diamond said the company expected the rate notice to have a negative impact. 

The decline in benchmark payments could add to payers' financial woes, as medical utilization in MA continues to climb. 

In a statement, Mary Beth Donahue, president of the insurer-backed Better Medicare Alliance, said the group is studying the proposed changes to "assess their impact on beneficiaries' coverage, care and affordability." 

"We look forward to a thoughtful discussion with policymakers on these proposals," Ms. Donahue said. 

The proposed notice is open for comment until March 1. CMS will publish its final rate announcement on or before April 1.

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