The Centers for Medicare & Medicaid Services (CMS) announced it will uphold its decision to decrease Medicare Advantage (MA) benchmark payments by 0.16%, a move likely to be met with frustration by the insurance industry.
Despite this decrease, CMS maintains that average payments to MA plans will still increase by 3.7% in 2025. The federal government is projected to spend up to $600 billion on MA payments to private plans that year.
“CMS continues to take steps to maintain the stability of the Medicare Advantage and Part D prescription drug programs,” said CMS Administrator Chiquita Brooks-LaSure in a statement. “The finalized policies aim 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 health care options.”
In January, CMS initially proposed a 0.2% decrease in benchmark payments, along with a $16 billion increase in overall payments compared to 2024. However, this proposal also included keeping the coding intensity adjustment at the minimum of 5.9%, a point of contention for insurers.
This decision to maintain the rate cut comes amid ongoing debate about the profitability of MA plans and the appropriate level of government spending on the program. Critics, including some lawmakers, have argued that increasing payments to already profitable insurers is wasteful.
The Association of Health Insurance Plans (AHIP) voiced its disapproval of the final ruling, expressing concern that rising healthcare costs for MA enrollees would be exacerbated by the cuts. They also highlighted the potential negative impact on Part D programs dealing with a “changing risk adjustment landscape.”
The announcement sent shockwaves through the insurance industry, with after-hours stock prices dropping for major players like UnitedHealth Group, Elevance Health, Centene, and CVS.
Despite the controversy, bipartisan support for the future of the MA program remains. A group of senators, led by both Democrats and Republicans, recently expressed their support (PDF) for MA and called for payment stability.
Furthermore, a blend of the 2024 and previous risk adjustment models will be implemented for Part C, with the final blend weighted towards the 2024 model (67%). The blended risk score trend for the coming year is projected to be 3.86%.
For Puerto Rico, with a high percentage of residents enrolled in MA plans, CMS will base county rates on the costs of traditional Medicare beneficiaries with both Part A and Part B coverage. An additional adjustment will be implemented to account for the “propensity of individuals with zero claims.”
The final rate notice also includes an updated list of extreme disaster circumstances that can impact star ratings, as well as revisions to the star ratings measures themselves.
While the decision is likely to be met with resistance from the insurance industry, the CMS maintains it is necessary to ensure the stability and affordability of the Medicare Advantage program for beneficiaries.
