On April 4, 2024, the Centers for Medicare & Medicaid Services (“CMS”) issued the contract year 2025 Medicare Advantage and Part D final rule. In addition to finalizing its CY 2025 proposed rule, CMS also addressed several key provisions that remained from the CY 2024 proposed rule. Additionally, on April 1, 2024, CMS released the Announcement of CY 2025 Medicare Advantage Capitation Rates and Part C and D Payment Policies. The Rate Announcement is released on an annual basis and includes updates to the capitation and risk adjustment methodologies used to calculate MA plan payments, as well as other payment policies that impact Part D.
Final Rule
The final rule updates CMS’s existing regulations governing the compensation that agents and brokers can receive for enrolling Medicare beneficiaries into MA and Prescription Drug Plans (PDPs). The existing regulations limit the compensation brokers and agents can receive from MA and PDP plans, but permit plans to make additional, uncapped payments to cover administrative costs such as training and operational overhead. CMS has observed that MA and PDP plans are offering bonuses and perks (i.e., golf parties, trips, extra cash) framed as administrative add-ons in exchange for meeting enrollment goals. This practice is anti-competitive in the agency’s view and risks compromising the impartiality of agents and brokers. The final rule closes this perceived loophole by incorporating administrative costs into the compensation limits.
The final rule also prohibits plans from entering into what CMS labels as anti-competitive contracts with agents and brokers. The new regulations specifically prohibit contract terms between plans and agents or brokers that may “directly or indirectly interfere with the agent’s or broker’s ability to objectively assess and recommend the plan which best fits the beneficiary’s health care needs.”
CMS is also limiting the distribution of beneficiary data by third-party marketing organizations (TMPOs). CMS has observed that TMPOs—entities that are compensated for facilitating enrollment in an MA or PDP plan, including agents and brokers—have been distributing and sometimes selling beneficiary contact information to other TPMOs. This information is typically collected at the time a beneficiary initiates contact with a TPMO about potentially enrolling in a plan. As CMS explains in the final rule, some TPMOs, “in quickly read disclaimers or through web or printed material-based disclaimers in very small font, inform the beneficiary that their personal contact information may be sold or distributed to other entities.” CMS had proposed to categorically prohibit TPMOs from selling beneficiary contact information. But the final rule allows TPMOs to sell beneficiary contact information if the TPMO receives express written consent from the beneficiary.
Furthermore, existing CMS regulations require MA plans to establish a Utilization Management (UM) Committee to review and approve all UM policies and procedures at least annually to ensure consistency with traditional Medicare’s national and local coverage decisions and relevant Medicare statutes and regulations. The final rule revises those regulations to specify that at least one member of the UM Committee must have expertise in health equity. The final rule also requires the UM Committee to conduct an annual health equity analysis of prior authorization policies and procedures used by the MA plan. The MA plan will be required to publish the results of that analysis on its website.
CMS is additionally modifying its regulations governing network adequacy standards for MA plans. Under the new regulations, the adequacy evaluations will take into consideration the number of “Outpatient Behavioral Health” providers and facilities that are part of the network. This includes marriage and family therapists, mental health counselors, opioid treatment programs, community mental health centers and other behavioral health and addiction medicine specialists and facilities.
Rate Announcement
The effective growth rate for 2025 MA non-end-stage renal disease (ESRD) rates is 2.33%. Accounting for the impact of the benchmark rate cap, MA rebate and other policies, the net impact on the Medicare trust funds for CY 2025 is expected to be $8.8 billion. Payments from the government to MA organizations (MAOs) will increase by 3.70% on average from 2024 to 2025, as finalized in the Rate Announcement.
Additionally, for CY 2024, CMS implemented several changes to the hierarchical condition category (HCC) risk adjustment model, including restructuring the condition categories using the ICD-10 classification system, updating the underlying fee-for-service (FFS) data years, and revising the denominator year that is used in determining the average per capita predicted expenditures to create relative factors in the HCC model. Risk scores for CY 2024 are deduced using a blend of the risk scores calculated with the 2020 CMS-HCC model and those calculated with the 2024 CMS-HCC model. For CY 2025, CMS will continue this phased-in approach, despite pushback from stakeholders, and will calculate CY 2025 risk scores using 33% of the risk score calculated with the 2020 model and 67% of the risk score calculated with the 2024 model. The CY 2025 impact on MA risk scores of the blended models (compared to the blend in CY 2024) will be -2.45%, representing $9.2 billion in estimated net savings to the Medicare trust fund in 2025.
CMS will use a calculation methodology for normalization factors that more accurately accounts for the impact of the COVID-19 pandemic. The methodology will allow CMS to incorporate recent average FFS risk scores without excluding any years of risk scores and includes using a COVID-19 “indicator flag” to differentiate risk scores that were based on diagnoses from before and after the onset of COVID-19.
The Rate Announcement also includes the list of measures that will be used to calculate the 2025 Star Ratings, as well as a list of the emergency areas that were affected by emergency declarations in 2023 for purposes of making adjustments under the extreme and uncontrollable circumstances policy.