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What They Are Saying: 2025 Medicare Advantage and Part D Proposed Rate Notice Analysis

Press Release

Tracking discussion from media and financial analytsts

Published Feb 9, 2024 • by AHIP

News Coverage

Modern Healthcare: “Medicare Advantage provider, benefit cuts may follow rate reduction”

“Medicare Advantage insurers are likely to respond to a modest rate cut next year by adjusting premiums, benefits, provider reimbursements and other factors to emphasize profitability, financial analysts said. Although the Centers for Medicare and Medicaid Services has downplayed the effects of its proposed 0.16% reduction in the Medicare Advantage benchmark rate for 2025, the rule issued last Wednesday is the latest in a string of policies that has Medicare insurers and their investors wary about the program. In addition to the cumulative effect of CMS actions under President Joe Biden—such as modifications to the Star Ratings quality program that made top scores and bonus payments harder to obtain—the new draft regulation appeared as Medicare Advantage carriers are reporting unpredicted rises in medical expenses.”

Axios: “Medicare Advantage insurers to see small base pay decrease”

“Insurers who administer private Medicare plans would see their base payments cut slightly next year, by 0.16%, under a federal proposal announced Wednesday…The base pay decrease largely stems from the continued phase-in of controversial changes to the risk adjustment coding system the Biden administration initiated last year to make payments more accurate. Medicare Advantage insurers get more money if their enrollees have more documented health problems. The policy changes aimed to stop abuses of that system. But insurers protested, arguing they amounted to cutting seniors' benefits.”

STAT: “Medicare Advantage insurers face slight proposed cut to 2025 payments”

“The federal government is cutting the average benchmark payments for 2025 Medicare Advantage plans by 0.2%, according to proposed rules released by the Biden administration on Wednesday. The slight proposed cut is mostly the result of the second year of the government’s phased-in changes to the way Medicare Advantage insurers code and report the health conditions of their members — a process known as risk adjustment.”

Modern Healthcare: “Medicare Advantage plans face new rate cut under CMS proposal”

“The Centers for Medicare and Medicaid Services is calling for another reduction in the Medicare Advantage base payment rate, which could further challenge health insurers struggling with rising costs. Under a proposed rule issued Wednesday, the Medicare Advantage benchmark would be -0.16% less in calendar 2025 than under current policy, excluding risk adjustment, and would mark a second consecutive year of a lower benchmark rate. The agency plans to finalize the rule by April 1.”

Healthcare Dive: “Medicare Advantage plans could see rates dip slightly in 2025”

“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.”

Fierce Healthcare: “Payers up against slight decline in 2025 Medicare Advantage payments”

“Medicare Advantage (MA) payments are set to decrease yet again in 2025 as the feds phase in significant changes to risk adjustment. As those overhauls begin to take effect, benchmark payments are set to decline by about 0.2% on average, according to the latest advance notice released by the Centers for Medicare & Medicaid Services (CMS)… Part D benefits could also change for 2025 because of amendments from the Inflation Reduction Act that increases plan liability.”

Medriva: “Proposed Medicare Advantage Payment Cuts by Biden Administration: Impact and Implications”

“The Biden administration has recently announced proposed rules that may lead to a 0.2% reduction in payments to Medicare Advantage insurers for 2025. This move is part of the administration’s ongoing efforts to regulate payments within the healthcare system. This development holds substantial implications for the Medicare Advantage insurers and the overall healthcare industry… The Centers for Medicare and Medicaid Services (CMS) has proposed a decrease in the Medicare Advantage base payment rate for 2025, which would be 0.16% lower than the current policy. This initiative aligns with Biden administration’s broader efforts to constrain Medicare Advantage spending and raise the bar for quality bonuses.”

Financial Analysts

Fitch Ratings

“Recent instability in Medicare Advantage (MA), driven by a convergence of program adjustments and an unexpected increase in utilization, has muddled the outlook for the program.”

TD Cowen

“Unfavorable regulatory changes, medical costs and slowing population growth signal the end of what has been a decade-long rush in Medicare Advantage, said Gary Taylor, managing director and senior equity research analyst at TD Cowen. CMS proposed a modest cut to the benchmark rate for 2025, which is an improvement from last year but not enough to make up escalating costs, he said… ‘Everyone’s going to earn below their MA target margins in ‘24 and some companies will actually lose money in MA…That’s going to be a very specific catalyst to see benefits cut and higher prioritization of margin versus enrollment for ’25.’”

Washington Analysis

“Wednesday’s CY25 Advance Notice for Medicare Advantage and Part D plans met our long-held expectations for a proposed net flat-to-slightly-down national average benchmark rate change MA insurers with the proposal’s net 0.16% reduction YoY.”


“The 2025 Advance Notice shows an ‘all-in’ +3.70% increase in revenue per member. However, when excluding a hypothetical +3.86% increase in risk score trend, (NOT an actual policy item), ‘core’ proposed 2024 MA rates are down -0.16%. Comparatively, the core 2025 rates reflect an insufficient +2.44% per capita growth rate, slightly lower 2023 STARS ratings cut (already known), and second (of three total) haircut from risk model / normalization revisions. The core proposed rates are what we expected to see but are insufficient to improve MA fundamentals. If CMS doesn't provide adequate relief in the final rates, the industry will likely need to cut benefits to stabilize falling margins.”

Compass Point

“CMS tends to only increase payment rates between the proposed and final MA rate notices. As such, we view the [proposed -.16%] year-over-year cut, which equates to about $700mm in aggregate or $20 per member per year, as a worst case scenario.”