April 01, 2024 - Modern Healthcare
Lauren Berryman
Medicare Advantage insurers will get lower payments next year, the Centers for Medicare and Medicaid Services confirmed in a final rule published Monday.
The Medicare Advantage benchmark rate will decline 0.16% in 2025 under the regulation, which is the same amount the agency proposed in January. This marks the second consecutive year CMS reduced the benchmark rate.
Related: Medicare Advantage provider, benefit cuts may follow rate reduction
CMS said payments to Medicare Advantage plans will increase 3.7%, or more than $16 billion, next year. But the health insurance industry contends the core rate, excluding the risk score trend, is a cut compared to 2024. The 2025 benchmark rate is the difference between the 3.7% expected average change in revenue and the 3.86% Medicare Advantage risk score trend.
“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,” CMS Administrator Chiquita Brooks-LaSure said in a news release.
The final rule, which has not formally appeared in the Federal Register, also advances the three-year phase-in of a revised risk-adjustment model, implements a $2,000 out-of-pocket cap for Medicare Part D enrollees and maintains a 5.9% cut to the Medicare Advantage coding pattern adjustment, which aims to reduce risk scores by resolving discrepancies in medical coding between providers and insurers.
CMS expects previous changes to the Star Ratings quality measurement program will reduce payments 0.11% in 2025, versus 0.15% as originally proposed.
A separate final rule related to marketing, prior authorizations and supplemental benefits will appear within days, CMS said in the news release.
When the agency proposed the benchmark cut three months ago, the health insurance industry protested that it failed to recognize rising medical utilization and expenses. Insurers including market leaders UnitedHealth Group subsidiary UnitedHealthcare and Humana have reported financial strain as beneficiaries sought more outpatient care than projected last year.
Health insurance companies such as Centene have warned they may respond to a rate cut by trimming benefits, raising premiums and slashing provider reimbursements.
The health insurance trade group AHIP said the final rule will further squeeze Medicare Advantage carriers.
“These policies will put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall,” AHIP President and CEO Mike Tuffin said in a news release Monday. “It is important to note that the Medicare Advantage and Part D programs are already undergoing a number of significant regulatory and legislative changes."
CMS has enacted a series of policy changes in recent years that have hampered financial growth in Medicare Advantage, such as more stringent marketing rules, limits on prior authorizations, stricter financial audits and modifications to the Star Ratings program.
Medicare Advantage enrollment and expenses continue to outpace fee-for-service Medicare. Medicare Advantage membership was 33.8 million as of March 1, up 6.4% from a year ago, according to the most recent CMS data.