CMS finalizes payment update for 2025 Medicare Advantage, sees payments up 3.7%

The Centers for Medicare & Medicaid Services announces: “Today, the Centers for Medicare & Medicaid Services, or CMS, finalized the Calendar Year (CY) 2025 Rate Announcement for the Medicare Advantage (MA) and Medicare Part D Prescription Drug (Part D) Programs that updates payment policies for these programs and ensures payment accuracy. The Rate Announcement complements policies in the CY 2025 MA and Part D proposed rule that would strengthen protections for the millions of people who rely on MA and Medicare Part D prescription drug coverage, which will be finalized in the coming days. Under this CY 2025 Rate Announcement, payments from the government to MA plans are expected to increase on average by 3.70 percent, or over $16 billion, from 2024 to 2025. The federal government is projected to pay between $500 and $600 billion in Medicare Advantage payments to private health plans in 2025. CMS is also finalizing improvements to the structure of the Medicare Part D drug benefit for CY 2025 that will result in lower drug costs for millions of people with Medicare through the concurrent release of the Final CY 2025 Part D Redesign Program Instructions. Thanks to the Inflation Reduction Act, President Biden’s lower-cost prescription drug law, annual out-of-pocket costs will be capped at $2,000 for people with Medicare Part D in 2025, leading to even more savings for people with Medicare Part D in CY 2025. The Rate Announcement finalizes annual updates to MA payment growth rates and changes to the MA and Part D payment methodologies to improve payment accuracy. The finalized CY 2025 Rate Announcement incorporates the most recent available fee-for-service payment data through quarter 4 of 2023 and includes the continued phase-in of the updated MA risk adjustment model that was first implemented in 2024 and continued phase-in of updates to the calculation of growth rates related to medical education costs, as well as other technical improvements. 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.” Among the publicly traded companies in the space impacted by the announcement are Humana (HUM), Cigna (CI), Agilon Health (AGL), CVS Health (CVS), and Alignment Healthcare, Inc. (ALHC), shares of which are all trading lower afterhours.