The Centers for Medicare and Medicaid Services (CMS) published the Calendar Year (CY) 2025 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies on April 1, 2024. CMS’s stated goals in the Announcement for MA and Part D are to mirror their vision for the agency’s programs as a whole, including advancing health equity, driving comprehensive, person-centered care, and promoting affordability and the sustainability of the Medicare program. Key takeaways from this CY 2025 Rate Announcement are as follows.
Growth and Revenue
CMS finalized an effective growth rate of 2.33% (down from the 2.44% in the Advance Notice) and plans can expect to see an average 3.7% increase in payment (no change from the Advance Notice). The growth rate change between the advance notice and this final rate announcement are due to CMS incorporating updated data and assumptions; primarily, the incorporation of additional FFS payment data through the fourth quarter of 2023.
Part C Risk Adjustment
For CY 2025, CMS will continue to phase in the updated risk adjustment model as proposed by blending 67% of the risk score calculated using the updated 2024 MA risk adjustment model with 33% of the risk score calculated using the 2020 MA risk adjustment model. Additionally, CMS will adopt a more sophisticated methodology for how it normalizes risk scores to address the impacts of the COVID-19 pandemic more accurately without excluding data years.
Part D Risk Adjustment and the Inflation Reduction Act
CMS is finalizing updates to the Part D risk adjustment model to reflect the redesign of the Part D benefit as required by the Inflation Reduction Act (IRA), including the increase in plan liability given the $2,000 cap on annual true out-of-pocket (TrOOP) spending for CY 2025 and the new Manufacturer Discount Program. These updates to the Part D risk adjustment model are essential for plan sponsors to develop accurate bids for CY 2025.
The IRA made several amendments and additions to the standard Part D drug benefit for CY 2023 and subsequent years. Part D benefit-related IRA updates described in the Rate Announcement include the elimination of the coverage gap phase, resulting in a three-phase benefit (deductible, initial coverage, and catastrophic) and a cap on TrOOP costs at $2,000 for CY 2025. Other previously implemented IRA benefits will continue, including no cost sharing for enrollees in the catastrophic phase, a $35 month supply cap on enrollee cost sharing for each covered insulin product, and no cost-sharing for adult vaccines recommended by the Advisory Committee on Immunization Practices that are covered under Part D. Rebellis Group has provided some additional analysis on this CMS issued CY 2025 Part D Redesign Program.
Puerto Rico
For CY 2025, finalized CMS policies will continue to provide stability for the MA program for Puerto Ricans. These policies include basing the MA county rates in Puerto Rico on relatively higher costs of individuals in Fee-for-Service (FFS) who have both Medicare Parts A and B and applying an adjustment regarding the propensity of individuals with zero claims. Note, the proportion of people with Medicare who receive benefits through MA (as opposed to FFS) is far greater in Puerto Rico than in any other state or territory.
Star Ratings
Star Ratings updates finalized in the CY 2025 Rate Announcement were significantly toned down from prior years, but still included the list of eligible disasters for adjustment, non-substantive measure specification updates, and the list of measures included in the Part C and D Improvement measures and Categorical Adjustment Index for the 2025 Star Ratings.
CMS also announced a deadline of June 28, 2024 for MA and Part D organizations to request that CMS or the Independent Review Entity (IRE) review its Part C appeals data or CMS review its Complaints Tracking Module (CTM) data for their 2025 Star Ratings.
You can read the full announcement here. As a reminder, policies in the Advance Notice that were not modified or retracted in the Rate Announcement become effective for CY 2025.
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