On January 31, 2024, the Centers for Medicare & Medicaid Services (CMS) released a draft of the 2025 Advance Notice describing the Methodological Changes for Calendar Year (CY) 2025 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies ahead of the final notice to be published on April 1, 2024. Comments are invited and due by 6 p.m. ET on March 1, 2024. All eyes are on the rate increase in 2025 – 3.7% – after a proposed lowering of the average benchmark payments to Medicare Advantage (MA) plans by an average of 0.2% for 2025. The rate increase represents an additional $16 billion payment in 2025 over 2024.
The announcements in the Advance Notice can be broadly categorized into three areas – Risk Adjustment changes, Part D Updates and STAR Ratings.
- Risk Adjustment for 2025:
CY 2025 will be the second 3-year phase in the CMS Hierarchical Condition Category (CMS-HCC) risk adjustment model – version 28 – rolled out in CY 2024. [1] Version 28 includes changes in the MA capitation rate and risk adjustment methodologies. These changes will significantly impact risk adjustment factor (RAF) scores and how health plans and medical practices manage enrollee risk – an enrollee’s risk scores can be altered with or without a change in the enrollee’s health status. The proposed model is designed to “improve[s] payment accuracy by incorporating recent utilization, coding, and expenditure patterns in the relative weights of HCCs in the model and reclassifying HCCs to reflect clinical cost patterns associated with ICD-10 codes.” [2]
Many relatively common conditions (9,797 in v24 vs 7,770 in v 28) will not map to a payment HCC in v28, indicating that RAF scores will decrease for many enrollees. Only the HCC values (“coefficients”) of the most severe condition in the hierarchy would be used for risk score calculation for that enrollee. For instance, a Type II diabetic member had an HCC coefficient of 19 (diabetes without complications) in April based on a submitted medical claim; another medical claim assigned HCC 18 (diabetes with chronic complications) to the enrollee in September. The risk score (RAF) for HCC 18 would be used once for risk adjustment but not HCC 18 even though values of HCCs are additive; i.e., if this enrollee has chronic systolic congestive heart failure (HCC226), a value of 0.36 would be added to the RAF. Risk scores are reset at the beginning of every calendar year; providers should reassess enrollees’ diagnoses and chronic conditions annually.[3] In doing so, they should be aware of the new rules.
- Risk Adjustment for 2025:
- STAR Rating Measures:
The Advance Notice also updates the 2025 STAR rating measures. A few measures will use 2024 data for the 2025 rating. For Part C:[4]
• Getting Needed Care for Part C
• Getting Appointments and Care Quickly
• Customer Service
• Rating of Health Care Quality
• Rating of Health Plan
• Care Coordination
• Call Center – Foreign Language Interpreter and TTY AvailabilityThe measurement period for the above is 3/2024 to 6/2024; they all have a weight factor of 4 and are also factors in the Improvement measure. MA plans still have time to review their performance for these measures.
- STAR Rating Measures:
- Inflation Reduction Act (IRA 2022) Changes for Part D:
IRA provisions for Part D are factored in prominently in the Advance Notice. CMS provides information on the Part D benefit parameters to be updated or eliminated because of IRA. CMS also provides information on proposed updates to the Medicare Part D (RxHCC) risk adjustment model used to calculate direct subsidy payments for Part D benefits offered by stand-alone Part D prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs).
In 2025, Part D will have a three-phase benefit (deductible, initial coverage, and catastrophic), and the enrollee’s out-of-pocket cost will be capped at $2,000, which will take effect in CY 2025. Other previously implemented IRA benefits will continue, including no cost sharing for enrollees in the catastrophic phase, a $35 monthly cap on enrollee cost sharing for each covered insulin product, and no cost-sharing for adult vaccines recommended by the Advisory Committee on Immunization Practices that are covered under Part D. Read the blog on “Part D Re-Design in 2025“.
The next blog will provide more information on proposed updates to Part D, including the Medicare Part D (RxHCC) risk adjustment model.
Inovaare has Subject Matter Experts who can provide consulting services to help health plans navigate the proposed changes for CY 2025. Inovaare has tools to scrub Medicare data universes so that health plans can spend more time on analytics instead of debugging data. If you have questions regarding the 2025 Advance Notice, call us at 480-850-2235 to prepare for changes in 2025.
- Inflation Reduction Act (IRA 2022) Changes for Part D:
[1] CY 2024 risk scores using 67% of the risk scores under the 2020 risk adjustment model and 33% under the finalized 2024 risk adjustment model. In CY 2025, it will be 67% of the 2024 risk adjustment model and 33% of the 2020 risk adjustment model.
[2] 2025 Medicare Advantage and Part D Advance Notice Fact Sheet January 31, 2024
[3] Risk scores can be refreshed monthly with new data from medical claims.
[4] Advance Notice of Methodological Changes for Calendar Year (CY) 2025 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies