Key Insights from the 2025 Medicare Advantage Proposals: A Cautious Approach in an Election Year

February 5, 2024

The 2025 Medicare Advantage (MA) proposals introduced by CMS indicate a cautious approach by the Biden administration, with an average benchmark payment decrease of 0.2%. This decrease is not expected to result in actual payment reductions to MA plans due to the industry’s practice of intensive coding, which could lead to an additional $16 billion in payments compared to the current year.

Key points from the proposal include:

  • Introducing a new risk adjustment coding system in its second year contributed to the slight decrease in benchmark payment.
  • An “effective growth rate” lower than anticipated affects MA payments, though final rates will consider more recent data.
  • The industry anticipates rate adjustments and focuses on profit growth over membership expansion.
  • Implementing the “two-midnight rule” for MA plans, aligning them with traditional Medicare, and potentially increasing hospital revenues while raising insurers’ claims costs.
  • A significant premium hike for Delaware state employees highlights concerns about the impact of high healthcare prices on wages.
  • Devoted Health’s financial challenges showcase startups’ difficulties in achieving profitability in the MA market.
  • Biogen’s discontinuation of Aduhelm, an Alzheimer’s drug, due to controversies and lack of evidence of efficacy.
  • Industry transactions and legal challenges, including Cigna’s divestiture of its MA plans and debates over Medicare’s drug price negotiation authority.
  • These proposals and changes reflect ongoing efforts to balance cost containment with providing quality care in the MA program amidst broader healthcare industry challenges such as rising costs, regulatory scrutiny, and cybersecurity threats.

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[Source: STAT, February 5th, 2024]

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