CMS Finalizes Underwhelming Payment Adjustment For Medicare Advantage Plans

The Centers for Medicare & Medicaid Services (CMS) finalized a rule that will result in a 3.7% positive payment adjustment for Medicare Advantage (MA) plans in 2025.

According to an analysis done by the private investment banking company Stephens, rates are expected to remain virtually unchanged, with a slight decrease of 0.16%. This marks the second consecutive year of a cut to real “core” MA rates.

Although expected, the news worried some post-acute stakeholders who believe plans will pass cost concerns down onto providers.


“These inadequate rates paid by the MA plans destabilize the financial health of provider organizations more broadly,” LeadingAge President and CEO Katie Smith Sloan said in a statement shared with Home Health Care News. “Policymakers must act before we find few providers remaining to serve the more than 65 million Medicare beneficiaries, including the nearly 33 million who now receive their Medicare benefits via an MA plan.”

Under the new guidance, payments from the government to MA plans are expected to increase, on average, by 3.7% — or over $16 billion — from 2024 to 2025.

In previous years, CMS has bumped up the rate by 3.32% for 2024 and 8.5% in 2023.


“The finalized policies in the rate announcement will make improvements to keep Medicare Advantage payments up-to-date and accurate, lower prescription drug costs and ensure that people with Medicare have access to robust and affordable health care options,” CMS Administrator Chiquita Brooks-LaSure said in a statement.

The federal government is projected to pay between $500 and $600 billion to private health plans in 2025.

The final core 2025 rate update is well below expectations, Scott Fidel, an analyst with Stephens, wrote in the report.

As a result, Stephens projects the potential for slower enrollment growth for the MA industry in 2025 as MA plans look to adjust member premiums and benefits to preserve margins.

“Bottom line, we see the final core 2025 MA rate update of -0.16% as reflecting a ‘highly adverse’ outcome for the industry, inclusive of the additional industry headwind of higher utilization trends currently observed,” Stephens wrote in its report. “The final 2025 rates largely reflect a continuation of the negative CMS rate cycle — now denoted as ’Year 2’ — of a much more constrained annual MA reimbursement trend as compared to the significantly more favorable rate outcomes in 2022 and 2023.”

Generally, home health agencies have expressed dissatisfaction with payment rates and reimbursement policies set by managed care companies.

For that reason, health care firms like ATI Advisory have encouraged providers to develop a value-based care strategy as a way to minimize the dependency on MCOs and other private payers.

“You don’t want a managed care strategy, you want a value-based care strategy,” Anne Tumlinson, founder and CEO of ATI Advisory, said during Aging Media Network’s Continuum conference. “Managed care is just a financial tool. But to move from delivering units of service to delivering value is really, really difficult. Changing what it is that you sell and how you get paid to do it is a huge undertaking.”

In her statement, Sloan mentioned the group of 46 U.S. House Representatives who sent a letter to CMS arguing the rate adjustments would result in a reduction to MA insurers’ reimbursement in 2025.

“Given the record of success, it is baffling that CMS has proposed a nearly 0.2% cut to the Medicare Advantage insurer reimbursement rate for 2025,” lawmakers wrote in March. “Insurers are already signaling that plan benefits may be cut, which will undermine the program and hurt seniors. These consecutive cuts raise questions about the future viability of the robust choices and options available to seniors in MA. Without necessary support, these options will wither and seniors will be left with fewer benefits, less access to affordable coverage and higher out-of-pocket costs.”

In MedPAC’s status report from January, it was found that CMS pays about 20% more for Medicare coverage provided to beneficiaries through MA plans compared to fee-for-service Medicare.

“Plans are viewing this as a cut,” Mollie Gurian, vice president of home-based and HCBS policy at LeadingAge, told HHCN in an email. “We are concerned that this perspective will trickle down and negatively impact our mission-driven, nonprofit home health members. If MA plans feel financially squeezed, they may cut rates paid to providers. Home health agencies already report inadequate reimbursement from Medicare Advantage plans so any downward pressure on rates is only going to put more strain on our members.”

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