Although I previously declared January 2024 Medicare Advantage (MA) Month, this week has also been filled with news about the MA program. The Centers for Medicare & Medicaid Services (CMS) released two final regulatory documents related to MA: the final rate announcement that establishes payment rates for calendar year (CY) 2025 and a final reg that determines major MA policies in CY 2025 and beyond. To help me discuss these regs and their implications, I’m bringing in my colleague Kristen O’Brien. Kristen also helped draft a more in-depth summary of the final notice, available here.
Through the final rate notice, CMS announced payment updates that will result in an estimated 3.7% increase in MA revenue in 2025 compared to 2024. This estimate is the same as that included in the advance notice, and CMS notes that this percentage translates to an increase of more than $16 billion in MA plan payments from 2024 to 2025.
Not all stakeholders, however, view the update as CMS does. Another perspective is that the base payment rate (the actual payment update) only encompasses the bolded factors above. If you add up all the bolded factors, you get a 0.16% cut in payments. The argument for not counting the MA risk score trend, or the average increase in MA risk scores across all MA plans, is that risk scores vary among MA plans depending on the specific population that MA plans serve. Therefore, the risk score trend does not represent an actual guaranteed payment increase for MA plans.
CMS calculated the 2025 risk score trend (+3.86%) using a new model that has been phased in over the last few years. This year, CMS calculated 67% of the risk score using the updated 2024 MA risk adjustment model and the remaining 33% using the old 2020 MA risk adjustment model.
The MA coding pattern adjustment is 0% compared to last year. As in previous years, CMS applied the statutory minimum coding pattern difference adjustment (5.9%). Some commenters on the advance notice recommended that CMS implement a higher adjustment factor than the statutory minimum, which they stated is inadequate to adjust for differential patterns of coding between MA and fee for service (FFS). However, CMS continues to believe that the minimum adjustment is sufficient to reflect differences in coding patterns between MA plans and providers under FFS Parts A and B. Why is this important? Well, essentially, CMS could in future notices move away from this minimum policy, which could have broader implications for the MA payment update.
CMS also finalized many other proposals from the advance notice in the final rate announcement, including:
- Part D Redesign. The rate announcement discusses several updates the Inflation Reduction Act made for 2025, including:
- Newly defined Part D benefit design composed of three phases: annual deductible, initial coverage and catastrophic coverage;
- Lower out-of-pocket threshold of $2,000;
- Sunset of the Coverage Gap Discount Program and establishment of the Manufacturer Discount Program; and
- Changes to the liability of enrollees, sponsors, manufacturers and CMS.
- Part C and D Star Ratings. CMS finalized measure specification updates and the list of measures included in the Part C and D improvement measures and the Categorical Adjustment Index for the 2025 Star Ratings. CMS also established a list of disasters eligible for the Extreme and Uncontrollable Circumstances Policy.
In the other regulation, the MA and Part D final reg, CMS finalized proposals to crack down on false or misleading marketing practices that CMS believes steer Medicare beneficiaries towards MA plans that they may not want or completely understand. CMS set a limit on the compensation that third-party agents and brokers can be paid by MA plans, regardless of the plan in which the beneficiary enrolls.
To boost behavioral health services, CMS added a new category under the MA plan network adequacy standard called “Outpatient Behavioral Health.” The new category includes marriage and family therapists and mental health counselors, Opioid Treatment Program providers, Community Mental Health Centers, addiction medicine physicians, and other providers who deliver addiction medicine and behavioral health counseling or therapy services in Medicare. CMS also added this Outpatient Behavioral Health category to the list of specialty types that receive a 10% credit if an MA plan’s contracted network of providers includes one or more telehealth providers.
Other notable final policies in the MA and Part D final reg include:
- Increasing Efforts to Make Beneficiaries Aware of Supplemental Benefits. CMS finalized its proposal to require MA plans to send enrollees annual personalized notices regarding supplemental benefits they have not accessed in the first six months of the year. The notice will include “the scope of the benefit, cost-sharing, instructions on how to access the benefit, any network application information for each available benefit, and a customer service number to call if additional help is needed.”
- Instituting New Standards for Supplemental Benefits for the Chronically Ill. CMS finalized new requirements for MA plans to demonstrate that the special supplemental benefits for the chronically ill services they cover meet the “legal threshold of having a reasonable expectation of improving the health or overall function of chronically ill enrollees and are supported by research.”
- Adding Health Equity Prospective to Prior Authorization Protocols. CMS will require health plans to analyze their prior authorization and other utilization management protocols from a health equity perspective. CMS established specific updates to the composition of, and responsibilities for, each plan’s utilization management committee.
- Enhancing Appeal Rights. CMS finalized proposals that would provide MA enrollees with the same access to Quality Improvement Organization review of fast-track appeals as Traditional Medicare beneficiaries have.
- Increasing the Number of Dually Eligible Managed Care Enrollees Who Receive Integrated Medicare and Medicaid Services. To help align coverage for enrollees who are enrolled in both Medicare and Medicaid, CMS will create a once-per-month special enrollment period to allow dually eligible individuals to elect an integrated dual eligible special needs plan (D-SNP). CMS included additional separate policies related to D-SNPs.
- Standardizing the MA Plan Risk Adjustment Data Validation (RADV) Appeals Process. CMS implemented changes to the RADV appeals process to help address some current operational constraints.
CMS didn’t develop these final payment rates and policies in a vacuum. As the population of Medicare beneficiaries enrolled in MA plans has surpassed 50%, the agency has heard from all sides about what should be done to make sure that MA plans aren’t paid too much, but are paid enough to ensure that MA beneficiaries receive all the benefits they need at a reasonable cost.
Most recently, the Medicare Payment Advisory Commission (MedPAC) wrote a status report on MA payments. According to MedPAC, Medicare spends an estimated 22% more for MA enrollees than it would spend if those beneficiaries were enrolled in FFS Medicare (i.e., 122% of FFS), a difference that translates into a projected $83 billion in 2024. MedPAC acknowledges that a portion of these increased payments to MA plans is used to provide more generous supplemental benefits and better financial protection for MA enrollees.
This estimate reflects higher MA coding intensity, even after the annual CMS coding adjustment; favorable selection of beneficiaries in MA; benchmarks (the maximum amount Medicare will pay an MA plan to provide Part A and Part B benefits) set above FFS spending in low-FFS-spending counties; and payments associated with benchmark increases under the quality bonus program, which MedPAC believes does not effectively promote high-quality care.
Higher MA spending increases Part B premiums for all beneficiaries. MedPAC estimates that those premiums will be about $13 billion higher in 2024 because of higher MA spending.
MedPAC also estimates that in 2022, MA risk scores were about 18% higher than scores for similar FFS beneficiaries due to higher coding intensity. MedPAC projects that in 2024, MA risk scores will be about 20% higher than scores for similar FFS. As referenced above, by law, CMS reduces all MA risk scores by the same amount to make them more consistent with FFS coding. CMS has the authority to impose a larger reduction than the minimum required by law but has never done so. Since the adjustment reduces MA risk scores by the minimum amount (5.9%) each year, MedPAC believes that MA risk scores will remain about 13% higher than they would have been if MA enrollees had been enrolled in FFS Medicare. In 2024, higher scores will result in a projected $50 billion in higher payments to MA plans.
MedPAC does not include a new recommendation on coding intensity, but instead reiterates an old one from 2016. The recommendation, which would replace the existing mandatory minimum coding intensity adjustment (which has reduced MA risk scores by 5.9% since 2018), has three parts:
- Develop a risk-adjustment model that uses two years of FFS and MA diagnostic data.
- Exclude diagnoses that are documented only on health risk assessments from either FFS or MA.
- Apply a coding adjustment that fully accounts for the remaining differences in coding between FFS Medicare and MA plans.
MedPAC’s recommendations are non-binding, and because MedPAC did not present any new recommendations and the old recommendations have not yet been adopted, there is no indication that CMS or Congress will adopt them at this time.
Overall, it is important to consider the different stakeholders that are weighing in with CMS and Congress about the MA program at this time. While MedPAC is calling on CMS and Congress to ratchet down MA “overpayments,” the American Health Insurance Plan (AHIP) believes that the low 2025 payment update will “will put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall.”
CMS has taken its final position with respect to 2025 policies, but it will be interesting to see how MA plans and other stakeholders respond in the months ahead. Will premiums increase and benefits be reduced as AHIP warns, or will they remain stable since MA plans already receive higher payments than FFS (as MedPAC reports)? Only time will tell!
Until next week, this is Jeffrey (and Kristen) saying, enjoy reading regs with your eggs.
[View source.]
