WASHINGTON, D.C. — In a move designed to provide relief for millions of Americans grappling with high prescription drug costs and to strengthen the Medicare system, the Centers for Medicare & Medicaid Services (CMS) recently announced a series of proposed changes for 2025. This announcement comes on the heels of a proposed rule released by CMS in November 2023, aimed at fortifying protections for those who rely on Medicare Advantage (MA) and Medicare Part D prescription drug coverage.
One of the most significant changes involves an average increase of 3.70 percent, or over $16 billion, in payments from the government to MA plans from 2024 to 2025. This marks a substantial financial commitment by the government to ensure that managed care plans, like Medicare Advantage, continue to provide comprehensive, high-quality care for their members.
In addition to this, CMS has spotlighted improvements to the structure of the Medicare Part D drug benefit for 2025, which are expected to result in lower drug costs for millions of Medicare beneficiaries. Thanks to the Inflation Reduction Act, annual out-of-pocket costs will be capped at $2,000 for people with Medicare Part D in 2025.
“Prescription drugs should be affordable. [We] are continuing to take steps to lower prescription drug costs so that no one must choose between feeding their family and taking their medicine,” said Health and Human Services Secretary Xavier Becerra. He emphasized the Biden-Harris Administration’s commitment to ensuring that the millions of people who depend on managed care plans receive the best possible care and that taxpayer dollars are used efficiently.
These planned updates also include changes to the MA and Part D payment methodologies to improve payment accuracy. In 2024, CMS had already updated the MA risk adjustment model to improve its accuracy and included updates to the calculation of growth rates to better account for medical education costs. These updates have allowed MA offerings for people with Medicare to remain stable, including premiums, supplemental benefits, and choice.
The 2025 Advance Notice continues this trend, proposing the continued phase-in of the updated MA risk adjustment model and further updates to the calculation of growth rates related to medical education costs, among other technical improvements.
“[The] release on the Medicare Advantage payment system proposes the continued phase-in of commonsense technical updates that ensure payments accurately reflect individuals’ costs,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, MD, Ph.D. She added that these updates “make Medicare Advantage less susceptible to gaming and protect the long-term stability of the Medicare program.”
The Advance Notice and the Draft CY 2025 Part D Redesign Program Instructions are open for public comment until 6:00 PM Eastern Time on Friday, March 1, 2024. The final CY 2025 Rate Announcement and the CY 2025 Part D Redesign Program Instructions will be published no later than April 1, 2024. As we move forward, it’s clear that the focus remains on ensuring that America’s seniors receive affordable, high-quality care and prescription drug coverage.
The CY 2025 Advance Notice may be viewed by clicking here and selecting “2025 Advance Notice.”
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