On April 1, the Centers for Medicare and Medicaid Services (CMS) issued the CY 2025 Medicare Advantage (MA) Rate Announcement. The Rate Announcement is the finalized policies by which CMS calculates MA plan payments and Part D policies. The policies finalized were essentially those proposed in the Advance Notice released in January 2024. CMS is estimating that MA plans will experience (on average) a 3.7% increase ($16 billion) in revenue next year – similar to the 3.70% in the Advance Notice. The 3.7% includes a blended MA risk score trend (risk adjusted payments) of 3.86%. However, risk score trends vary by plan. In addition, the final rate includes a decrease in benchmark rates for 2025 of 0.16%.
As expected, CMS is continuing its three-year phase in of the risk adjustment model changes initiated in 2024. Some of these changes include clinical reclassification of the Hierarchical Condition Categories (HCCs; MA diagnoses coding) using the ICD-10 codes instead of ICD-9 and constraining several HCCs by the removal of several codes to reduce the effect of MA coding variation from fee-for-service on risk scores. The benchmark calculation also incorporates a 52% phase in of the technical adjustment to direct and indirect graduate medical education expenses.
The rate announcement also contains significant changes to Part D policies to reflect the benefit redesign required by the Inflation Reduction Act (IRA). One of these changes includes the finalization of a new Part D risk adjustment methodology.
As a result of the IRA, beneficiaries will spend less out of pocket on Part D as some of the policies include:
- Capping of out-of-pocket costs at $2,000 for 2025
- Elimination of the coverage gap phase leaving only the deductible, initial coverage, and catastrophic phases, through which beneficiaries move as they incur more drug costs
- No cost sharing for enrollees in the catastrophic phase
- A $35 monthly cap on enrollee cost sharing for each covered insulin product and eliminates all cost-sharing for most covered vaccines
For more details on the risk adjustment policies and Part D changes, see CMS’
Fact Sheet. AHCA/NCAL also anticipates the CY 2025 MA final rule soon. The proposed rule contained the provisions on fast track appeals for denied services and a new network adequacy exception request for facility-based I-SNPs.