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Medicare Advantage Payments to Remain on the Rise in 2025

Last week, the Centers for Medicare & Medicaid Services (CMS) announced the 2025 payment rates for Medicare Advantage (MA) and Part D plans. The final policies largely align with those proposed in the Advance Notice and are expected to increase Medicare payments to MA plans by 3.7%—over $16 billion—next year.

The Medicare Rights Center appreciates the finalization of provisions that would help rein in soaring and unnecessary MA costs, and continues to urge additional, comprehensive reforms. 

The research from independent experts is clear: Medicare overpays MA plans by billions of dollars each year, negatively impacting Medicare’s finances while driving up beneficiary premiums and taxpayer costs. In 2024 alone, the Medicare Payment Advisory Commission (MedPAC) projects that MA plans will be paid 123% of Original Medicare costs, inflating Part B premiums by $13 billion. Curbing this wasteful spending becomes more urgent by the day. Overpayments will only grow as MA plan and enrollment numbers do, and both are surging.

Policymakers must effectively respond to these realities and to the concerns many have about rising Medicare coststhe program’s future, and the need for solutions.

In our comments on the 2025 Advance Notice, we encouraged CMS to do just that. We applaud the agency’s responsiveness through the continued phase-in of planned changes to the MA risk adjustment model. Once fully in place, those modernizations will better align MA with current health care practices and yield more accurate plan payments.

However, as in prior years, we are disappointed that CMS will again apply the 5.9% statutory minimum coding intensity adjustment in 2025, rather than a higher and more effective rate. Unchanged since 2018, this minimum amount is not keeping pace with coding intensity or the resulting excess plan payments. In 2020, risk scores for MA enrollees were already 13% higher than they should have been, generating $16 billion in overpayments. By 2022 scores and additional payments had jumped to 18% and $37 billion, respectively. In 2024 MA coding intensity is expected to be 20% higher than OM, resulting in an extra $54 billion. CMS must meaningfully intervene without delay.

We applaud CMS for finalizing a 2024 Advance Notice that largely recognizes beneficiary priorities and flaws in MA financing. We strongly urge the Biden administration and Congress to build upon these policies to more fully improve payment accuracy, insurer accountability, and access to care.

Read the 2025 rate notice and CMS fact sheet, as well as our comments.

Read more about Medicare Advantage payments and how plans use overpayment to increase enrollment.

Policy Issues: Medicare Advantage
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