Rebecca Pifer | February 1, 2024
The CMS proposed a 0.2% dip in MA rates. However, analysts said regulators will likely improve the payment rate in the final notice.
Health insurers in Medicare Advantage will see their payment rates drop slightly in 2025 if a new proposed regulation is finalized.
The CMS on Wednesday released preliminary reimbursement rates for privately run Medicare plans that increases overall reimbursement by about 3.7%, but includes a 3.9% adjustment for risk coding.
All together, that amounts to a 0.2% payment decrease — though, the government estimated MA plans should still receive $16 billion more in payments than this year.
The rate change is modestly disappointing for insurers, but there’s a good chance the reimbursement rate could improve in the final notice, analysts said.
Rate cut but reason for optimism
In MA, the government pays private insurers a flat per-member per-month fee to cover the care of Medicare seniors. The program has ballooned in popularity, and now covers more than half of all Medicare beneficiaries.
As more seniors have elected for MA over traditional Medicare, health insurers have flocked to the program, expanding their market presence and benefits as they jockey for members.
However, MA insurers are struggling with a number of headwinds in the program, including seniors utilizing more care than anticipated. The trend, which started last year, is expected to continue in 2024 and winnow how much in premiums plans can keep as profit.
As such, the 2025 rate cut is unlikely to receive a warm welcome from insurers. MA lobby the Better Medicare Alliance and insurer association AHIP both released statements on Wednesday saying they were still digesting the rule, but stressing the importance of stability in MA.
If the 2025 rates are finalized as proposed, it will represent the second straight year of payment decreases for MA plans as regulators try to get a handle on ballooning costs in the program.
However, analysts noted that regulators will probably improve the rates before the rule is finalized.
The CMS assumed a lighter effective growth rate for 2025 than expected, which likely didn’t include the effects of utilization rising through the end of last year, according to J.P. Morgan analyst Lisa Gill. The effective growth rate represents how much costs are increasing in traditional Medicare, and is a major factor in calculating the overall MA reimbursement rate.
“We believe there is a strong possibility that the effective growth rate and overall payments should improve when the Final Notice is published,” Gill wrote in a Wednesday note on the rate release.
Final rates have come in above the preliminary rate in 9 out of the last 10 years, Gill said.
Rates will probably end up closer to the 1% rate increase that investors expected due to pressure on regulators, according to a note from Leerink Partners analyst Whit Mayo.
Source: Healthcare Dive
https://www.healthcaredive.com/news/medicare-advantage-rate-notice-proposed-2025/706261/