On Wednesday, the Centers for Medicare & Medicaid Services (CMS) released its 2025 proposed payment updates for the Medicare Advantage (MA) and Medicare Part D Prescription Drug Programs.
These updates to the payment policies come at a time when MA enrollment continues to skyrocket.
Under the proposal, MA plans would see a 3.70% — or over $16 billion — increase, on average, in MA payments from the government from 2024 to 2025.
“This expected increase includes consideration of the various elements that impact MA payment, such as growth rates of underlying costs, 2024 Star Ratings for 2025 quality bonus payments, continued phase-in of risk adjustment model updates that were implemented in CY 2024, and increases to risk scores because of MA risk score trend, which can be driven by a number of factors including MA demographics and coding patterns,” CMS wrote in a fact sheet.
Last year, USC Schaeffer Center researchers found that overpayments to MA plans exceed 20%, or $75 billion annually. One takeaway from this finding was that reform efforts were necessary.
“The current Medicare Advantage payment structure results in overpayments markedly higher than previously understood,” Paul Ginsburg, senior fellow at the USC Schaeffer Center and professor of the practice at the USC Price School of Public Policy, said in a press release statement. “Our analysis highlights how Medicare Advantage currently operates and the need to reform how the plans are paid.”
Nearly 31 million people are enrolled in private MA plans. This is more than half of the eligible Medicare population, according to data from KFF.
KFF identified a number of reasons why MA enrollment keeps growing. One of the factors contributing to this growth is the extra benefits offered through MA plans, such as dental coverage, debit cards for medical supplies, lowered cost-sharing and more.
Some other reasons MA enrollment is seeing continued growth are that plans are required to provide an annual out-of-pocket limit, and insurers are bullish when it comes to MA marketing and promotion.
Additionally, some employers are moving their Medicare-age retirees into MA plans. Beneficiaries don’t usually have to pay a separate premium for additional coverage, and beneficiaries might not be well-informed about some of the tradeoffs that come with picking MA in lieu of traditional Medicare, according to KFF.
As MA enrollment continues to increase, it is poised to replace traditional Medicare as the main source of Medicare, KFF noted in its report.
MA plan’s less rosy financial standing is also top of mind for home health providers. Elara Caring, for example, has seen a lot of recent success in the MA space, according to CEO Scott Powers.
Powers believes that payers are starting to see the benefit of entering arrangements with providers, and having more open conversations with them.
“I do see most all of them are coming back to the table with more reasonable expectations, because they see the other thing that’s changed, which is the bar to get star ratings for Medicare Advantage,” he previously told Home Health Care News. “Those have raised substantially, so a lot of plans have lost some of their star ratings, which is a financial problem for them.”