CMS releases proposed payment updates for Medicare Advantage

WASHINGTON – CMS has released a Calendar Year (CY) 2025 Advance Notice for the Medicare Advantage (MA) and Medicare Part D Prescription Drug Programs that would pave the way for payments to MA plans to increase on average by 3.7%, or more than $16 billion, from 2024 to 2025. 

“CMS continues to ensure that Medicare Advantage and Part D prescription drug plans remain strong, stable and affordable offerings,” said CMS Administrator Chiquita Brooks-LaSure. “The Advance Notice upholds robust and stable options for people with Medicare while strengthening payment accuracy so that taxpayer dollars are appropriately spent. The Advance Notice also continues our effective implementation of the Inflation Reduction Act on schedule, including capping out-of-pocket costs at $2,000 for people with Medicare Part D prescription drug plans in 2025. This out-of-pocket cap will be truly life-changing for millions of people.” 

The Advance Notice complements a proposed rule, also for CY 2025, that CMS released in November 2023 that the agency says would, if finalized, strengthen protections for the millions of people who rely on MA and Medicare Part D prescription drug coverage. 

The Advance Notice proposes annual updates to MA payment growth rates and changes to the MA and Part D payment methodologies to improve payment accuracy. Last year, CMS finalized CY 2024 technical and clinical updates to the MA risk adjustment model to keep it up-to-date and improve payment accuracy, as well as updates to the calculation of growth rates to better account for medical education costs. For 2024, MA offerings for people with Medicare remained stable—including premiums, supplemental benefits, and choice. 

The CY 2025 Advance Notice includes the continued phase-in of the updated MA risk adjustment model and updates to the calculation of growth rates related to medical education costs, and other technical improvements. 

“These updates not only ensure payment is higher for enrollees with the most complex needs, they also make Medicare Advantage less susceptible to gaming and protect the long-term stability of the Medicare program,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, MD, Ph.D. “We are also releasing guidance on implementation of vital parts of the president’s drug law, including the $2,000 out-of-pocket cap for 2025, which will provide needed relief for millions of Americans who rely on prescription drugs to stay healthy.” 

CMS will accept comments on the Advance Notice through 6:00 PM ET March 1, 2024. The CY 2025 Rate Announcement and the CY 2025 Part D Redesign Program Instructions will be published no later than April 1, 2024. 

The CY 2025 Advance Notice may be viewed by going here and selecting “2025 Advance Notice.” 

A fact sheet discussing the provisions of the CY 2025 Advance Notice, as well as frequently asked questions, can be viewed here.