CMS Announces New Changes to Medicare Advantage Rates and Policies

Insurance advocacy groups say the base payments are insufficient given growing utilization and healthcare costs—and add more uncertainty with additional changes to MA on the way.

Several significant policy changes are coming down the pike for Medicare Advantage plans in the coming years. Most recently, the Centers for Medicare and Medicaid Services (CMS) announced MA payment rates for 2025, which insurance advocacy groups decried as being inadequate. Meanwhile, health plans are preparing for earlier proposed changes to the program, including the way Star ratings are calculated.  

In early April, CMS announced that MA revenues would increase by 3.7% next year, or $16 billion, with $500 to $600 billion in payments to health plans forecasted in 2025. But the agency also announced that benchmark payments—the maximum that the government will pay plans for an average person—would decrease by 0.16%. That was certainly disappointing news for many big health insurers that have reported higher utilization rates and healthcare costs in 2023.  

“These policies will put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall,” said Mike Tuffin, President and CEO of the Association of Health Insurance Plans, in a statement. “It is important to note that the Medicare Advantage and Part D programs are already undergoing a number of significant regulatory and legislative changes. Moreover, the cost of caring for Medicare Advantage beneficiaries is steadily rising.”

An analysis from the Berkeley Research Group found that in 2025, MA plan members could see supplemental benefits reduced or cost-sharing go up by $33 a month on average.  

CMS was apparently not swayed by insurers’ arguments and stuck with the rates proposed in its Advance Notice, with CMS Administrator Chiquita Brooks-LaSure noting that the changes will “make improvements to keep Medicare Advantage payments up-to-date and accurate, lower prescription drug costs, and ensure that people with Medicare have access to robust and affordable health care options.”

Medicare Advantage has now outpaced traditional, fee-for-service Medicare. MA plans offer additional benefits such as dental and vision coverage, non-emergency transportation, remote patient monitoring, and nutrition counseling—and research shows they can deliver better health outcomes.  

Underscoring health insurers’ claims of higher utilization, AHIP reported that utilization rates per 1,000 members rose 8.1% in the last quarter of 2023, according to a survey of 15 payers serving 24 million MA members across the nation. The highest increase in utilization was for outpatient surgery visits, which rose 14.4%; physician visits rose by 6%.

Insurance advocacy groups expressed concern that the CMS rates would ultimately make it harder for members to get affordable and comprehensive benefits, especially those on dual special needs plans. "As our members assess the impact of this rate notice on their 2025 benefit offerings, we will continue to work with CMS to recognize the diversity of plans operating D-SNPs, and the impacts that changes to the rate components have on safety net health plans,” said Margaret Murray, CEO of the Association for Community Affiliated Plans in a statement.  

The news also prompted a drop in the share prices of major insurers, including Humana, CVS Health, and others.  

In addition, CMS issued a new Final Rule for 2025 that aims to “strengthen protections and guardrails, promote healthy competition, and ensure Medicare Advantage and Part D plans best meet the needs of enrollees” while also working to “promote access to behavior health care providers, promote equity in coverage, and improve supplemental benefits.”  

Among other changes, this CMS Final Rule:  

  • Sets limits on broker compensation
  • Adds network adequacy evaluation standards for “Outpatient Behavioral Health” providers and facilities
  • Requires health plans to inform MA members of unused supplemental benefits between June 30 and July 31 of the plan year  
  • Requires plans to conduct an annual health equity analysis
  • Sets new standards for supplemental benefits for the chronically ill
  • Sets new policies to increase the percentage of dual eligible MA enrollees who are in an affiliated Medicaid managed care plan.  

Last year, CMS announced major proposed changes to Medicare Advantage that will change how it determines Star ratings. The agency bases Star ratings on dozens of quality measures, and they are a significant factor for health plans in drawing members and earning bonus payments from CMS. The average 2024 Star rating dropped to 4.04 out of 5 stars, its lowest level since 2017.  

For 2027, instead of the existing reward factor that boosts Star ratings, CMS is adopting a health equity index based on data from 2024 and 2025. The health equity index will reward health plans for improving care for people with increased social risk factors, including low-income, dual eligible, and disabled populations.  

These impending changes mean health plans must focus more than ever on how and if they are reaching their most vulnerable members. They need more transparency, data, and—critically—insights on how they’re serving those populations, said SafeRide Health CEO and Founder Robbins Schrader.  

“Market changes are raising the bar for how health plans and their partners track their efforts to address social determinants of health. We’re excited to partner with the nation’s leading health plans to elevate how we serve members and holistically consider and meet their risk factors,” Robbins said. “We believe that helping members overcome transportation barriers to care is a crucial step in that process.”

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