Why higher Medicare Advantage utilization wasn't reflected in 2025 rates

CMS has finalized a slight decrease in Medicare Advantage benchmark payments for 2025, despite large insurers reporting rising costs and utilization among MA members.

"We are aware of numerous reports from MA organizations and stakeholders stating that MA organizations’ trends, especially for fourth quarter 2023, are inconsistent with [Medicare FFS cost trends]," CMS wrote April 1. "We are not aware of all of the specific drivers accounting for the experience of these MA organizations. We have reviewed incomplete fourth quarter 2023 Medicare FFS incurred experience and it is consistent with our projections." 

The final rate 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 MA market.

"There was a notable decrease in outpatient utilization during 2020, which is primarily attributed to the COVID-19 pandemic," CMS wrote. "Utilization has increased since 2020, but the actual 2023 utilization remains below the 2023 level reflected in pre-2020 projected baselines. Recent annual trends have returned to levels projected prior to the pandemic."

CMS noted that D-SNP enrollment has risen in the MA market over the last several years, thereby decreasing the average FFS per capita cost for some services and possibly contributing to higher costs for some MA carriers.

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