Average 2025 Payment Rates for Medicare Advantage Plans Should Be Higher Than Currently Projected, America’s Physician Groups Says

March 1, 2024

WASHINGTON, DC — The Centers for Medicare & Medicaid Services’ (CMS) scheduled review of fourth-quarter 2023 spending in the traditional Medicare program could bode well for Medicare Advantage (MA) plans worried about a projected 2025 fall in their government payments, America’s Physician Groups (APG) noted in a comment letter to the agency this week. In fact, if that review shows higher-than-expected spending for the quarter in the traditional program, MA plans could see their average revenue in 2025 rise by more than the average 3.7 percent revenue increase originally projected in the Calendar Year 2025 Advance Notice for the Medicare Advantage and Medicare Part D Prescription Drug Programs, which was issued in January.

CMS is required by law to base projected payments to MA organizations on spending in the traditional Medicare program. However, a gap opened up in 2023 between spending in traditional Medicare versus the higher spending and utilization seen in multiple large MA plans. It is not clear why this gap occurred, although it could be linked to a rebound in MA enrollees needing health care services after postponing care during the COVID-19 pandemic. As a result, both MA plans and many APG groups have worried that the resulting 2025 payment rates to MA plans would be based on lower 2023 spending and utilization of services by beneficiaries in traditional Medicare than some large MA plans actually experienced. With CMS now scheduled to update its estimates by including fourth-quarter 2023 spending in the traditional program, it is possible, if not likely, that the problem will be addressed.

“We appreciate CMS’s careful stewardship of the Medicare Trust Funds, even as the agency strives to improve the Medicare Advantage program for the growing number of beneficiaries who choose this enrollment option,” said Susan Dentzer, APG President and Chief Executive Officer. “However, some APG members have raised concerns about potential negative impact — including reduced or eliminated benefits for MA enrollees, increased premiums and cost sharing, and reduced provider payments — as a result of CMS’s initial estimates and proposed payment rates to MA plans. APG looks forward to the likely positive effect of CMS’s planned incorporation of claims data for the final quarter of 2023 on the expected average revenue change that will be included in the final Rate Announcement. In addition, we will work with Congress to advocate for the consideration of appropriate alternatives to using spending in the traditional fee-for-service Medicare program to construct MA payment benchmarks.”

In other elements of its comment letter to CMS, APG said the following:

  • It is appropriate for CMS to adjust the artificially low MA benchmarks for Puerto Rico, where APG has member physician groups, to effectively raise payments for MA plans operating in the territory. More than 70 percent of Medicare beneficiaries in Puerto Rico are enrolled in MA, which makes spending in traditional Medicare an increasingly unreliable measure of what appropriate spending on MA plans should be. What’s more, many people enrolled in traditional Medicare in Puerto Rico are enrolled in Part A of the program only and experience no Medicare claims in a given year — an unexplained phenomenon given the relatively poorer health of much of the local population. Thus, APG concurred with CMS’s plan to (1) base benchmarks on the higher cost of people in traditional Medicare in Puerto Rico who have both Parts A and B, making them more representative of those enrolled in MA plans; and (2) increase benchmarks by at least 4.4 percent to compensate for the high share of beneficiaries in Puerto Rico with zero claims.

  • CMS’s continued adoption of so-called Universal Foundation measures, including in MA, is an important step to streamline and unify quality measurement across all Medicare programs. APG also welcomes the agency’s efforts to improve the accuracy of measurement through technical changes to measures, and its decision to test substantive changes to quality measures by displaying them online for at least two years before any new measures will have any impact on quality scores. At the same time, APG cautioned that the proposed expansion of some Star Ratings measures seems to be at odds with moving toward a Universal Foundation of fewer measures across multiple CMS programs. APG urges CMS to consider from a cost-benefit standpoint — and to publish its analysis of — the relative value of adding more specific measures in the future that will increase the reporting burden for patients, providers, and plans.

CMS will release its final Rate Announcement for MA plans by April 1, after which APG will conduct an educational forum to educate its members about the final set of policies. More information about the schedule for the forum will be forthcoming.

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About America’s Physician Groups
APG’s approximately 360 physician groups comprise 170,000 physicians, as well as thousands of other clinicians, providing care to nearly 90 million patients. APG’s motto, ‘Taking Responsibility for America’s Health,’ represents our members’ commitment to clinically integrated, coordinated, value-based health care in which physician groups are accountable for the costs and quality of patient care. Visit us at www.apg.org.

Contact: Greg Phillips, APG Director of Communications, 202-770-1901