In 2025, Medicare Advantage (MA) payments anticipate a marginal dip as federal authorities implement substantial risk adjustment changes. The Centers for Medicare & Medicaid Services (CMS) projects a 0.2% average decline in benchmark payments amid overhauls. Despite this, CMS foresees a 3.7% increase in payments, totaling $16 billion in 2025. The final rate, subject to change by April 1, hinges on risk adjustment modifications. CMS defends the changes, emphasizing the predictive accuracy enhancements for dually eligible enrollees. Insurers face profitability challenges, reflecting a dynamic landscape. MA’s stability in 2024 counters industry skepticism and Part D benefits may see amendments in 2025.
In 2025, Medicare Advantage (MA) payments are poised to experience a slight decrease as federal authorities implement significant alterations to the risk adjustment framework. The Centers for Medicare & Medicaid Services (CMS) has released an advance notice indicating an anticipated average decline of 0.2% in benchmark payments due to these overhauls. Despite this, CMS asserts that MA plan payments are expected to see a 3.7% increase in 2025, translating to a substantial $16 billion rise compared to 2024. However, the final rate announcement, expected no later than April 1, may still undergo modifications.
Risk Adjustment Changes and Payment Rate:
As the risk adjustment model undergoes modifications, CMS predicts a decrease in benchmark payments. Nevertheless, the agency emphasizes that health plans are expected to adapt, and the increase in payments is justified by the guidance and analysis conducted by CMS actuaries based on past risk score trends. The coding intensity adjustment will remain at the statutory minimum of 5.9%, with CMS opting not to raise the rate.
Addressing Concerns:
In response to concerns that the risk adjustment model changes might adversely impact dually eligible enrollees, special needs plans (SNPs) enrollees, and vulnerable populations, CMS defends the new model as “necessary and appropriate.” The agency contends that the new model enhances predictive accuracy for these individuals, with risk scores being 4.33 percentage points higher than for non-dually eligible individuals. CMS expresses confidence in its recent regulatory policies, citing data from the first year of implementing the updated model.
Market Stability and Growth:
CMS asserts that despite industry pushback, the MA market remained stable for beneficiaries in 2024. The updated risk adjustment model is reported to have benefited individuals on SNPs, resulting in increased supplemental benefits and SNP plans projecting a 13% enrollment growth in the current year. This data indicates that MA remains a robust and stable market for eligible beneficiaries.
Challenges for Insurers:
While MA programs continue to grow as more individuals become eligible, insurers are grappling with diminishing profitability in this segment. Notably, major players like UnitedHealthcare and Humana have reported increased utilization levels, and Cigna has sold its MA and Part D business in a multi-billion-dollar deal. These challenges underscore the evolving landscape for insurers in the MA market.
Potential Changes in Part D Benefits:
The Inflation Reduction Act amendments could lead to changes in Part D benefits for 2025. CMS’s CY 2025 Part D Redesign Program outlines updates, including lowering the out-of-pocket cap to $2,000, eliminating cost-sharing for certain adult vaccines, limiting cost-sharing for insulin products, and implementing the Manufacturer Discount Program while sunsetting the Coverage Gap Discount Program.
Public Input and Comment Period:
CMS has opened a public comment period for the Part D Redesign Program and Advance Notice, providing stakeholders an opportunity to weigh in on the proposed changes. The comment period is set to remain open until March 1, allowing interested parties to contribute their perspectives on the potential impact of these modifications.
Analysis of MA Payment Rates:
Looking back at the previous year, CMS initially proposed a 1.03% increase in MA and Part D plan payments for 2024. However, after factoring in the MA risk score trend statistic and accounting for changes to the risk adjustment model, CMS ultimately raised MA payments by 3.32%. This decision followed pressure from insurers, highlighting the complexities of balancing policy decisions with industry concerns.
Debates Over MA Overpayments:
Debates surrounding MA plans have intensified in recent months, with policymakers and experts deliberating on necessary reforms to address the system’s weaknesses. Proponents highlight the popularity of MA plans and their ability to offer robust benefits, cap out-of-pocket expenses, and provide savings on premiums and cost-sharing. However, critics argue that MA plans can trap individuals in limited provider networks and subject them to convoluted prior authorization processes.
Bipartisan Support and Stakeholder Involvement:
Bipartisan support for MA plans is evident, with 61 senators signing a letter urging CMS to ensure payment and policy stability for the program. The involvement of policymakers, advocacy groups, and the Biden administration reflects a multifaceted approach to addressing the challenges and opportunities within the MA landscape.
Navigating a delicate balance, Medicare Advantage payments face a marginal dip in 2025 amidst substantial risk adjustment changes. As federal authorities implement modifications, CMS anticipates nuanced shifts in benchmark payments. The $16 billion increase in 2025 payments, despite a projected 0.2% decline in benchmarks, underscores the resilience of MA plans. Insurers grapple with profitability challenges, while regulatory efforts seek to strike a balance between stability and necessary reforms. The dynamic landscape, coupled with bipartisan support and stakeholder involvement, underscores the complex nature of decisions shaping the future of Medicare Advantage. Ongoing transparency and equity initiatives remain pivotal in addressing the evolving challenges and opportunities within the MA landscape.
