Are you ready for major changes impacting your healthcare costs in 2025?
Even though it’s several months off, Medicare is already gearing up for the future.
The Centers for Medicare & Medicaid Services (CMS) that oversees the MA program has recently unveiled significant changes for next year. This is the biggest update to Medicare Advantage since the passage of the Affordable Care Act.
Executive Summary
With the 2025 Final Rule, CMS released a comprehensive 1,327-page dossier outlining big changes for Medicare Advantage plans starting next year. This new rule will update how Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicare cost plans, and the Programs of All-Inclusive Care for the Elderly (PACE) work.
Key changes include updates to Star Ratings, marketing and communication guidelines, agent/broker compensation, health equity, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other areas. It also officially incorporates some of the existing guidelines for the Part C and Part D programs.
Health Plans are monitoring this new culmination closely to understand the odds and challenges being reviewed by the industry, which are discussed below.
Interestingly, the Final Rule highlights the tough conditions for health insurers and might mean ongoing rate pressures in the future. According to CMS, insurers must submit their proposed prices and plan details for 2025 to Medicare for approval by June.
What remains to be seen is how health plans might respond to these challenges by adopting a conservative approach toward benefits or adjusting premiums.
MAOs Facing the Odds – Dealing with new regulations & policies
The new rule incorporates major changes to MA plans, including a new risk adjustment model, updates to Medicare Advantage benefits, and changes to Medicare Part D.
Experts are concerned that the 2.44% growth rate won’t meet the needs of Medicare Advantage users. The final rate notice reduced this growth rate to 2.33%. CMS expects star ratings to drop by 0.11% due to these changes, while average risk scores will rise by 3.86%.
Despite the lower growth rate, CMS projects a 3.7% increase in Medicare Advantage revenue, expecting to pay more than $16 billion in 2025. However, the proposal doesn’t fully consider rising healthcare costs and increased use of care by seniors, which could affect the stability of care for the program’s over 32 million beneficiaries.
Final Rule 2025: Impact Areas & concerns for MA Organizations
Health Equity: New Utilization Management Requirements
This rule includes all MAOs offering Part D benefits. It will most directly impact formulary development and annual bid submissions, as findings from the annual equity analysis may warrant changes to utilization management criteria.
As MAOs evaluate their formulary and utilization management criteria in the coming years, plans will need to consider the impact to beneficiaries (population health) with social risk factors and ensure that their utilization management criteria is not discriminatory.
Impact:
MAs must ensure criteria are non-discriminatory and consider the impact on beneficiaries with social risk factors. MAOs may need to hire or outsource health equity and CMS data analysis specialists.
MAOs must include at least one health equity expert on their UM committee.
Plans must review prior authorization policies annually and publish findings on their website. MAOs must add new parameters to reporting to monitor equitable determinations. MAs must add additional parameters to prior authorization reporting and visualizations to identify and monitor equitable determinations.
Rebasing/Re-pricing:
It is dependent on the average geographic adjustment index, which is not yet available. Because of geographic variation, MA plans in more than half of all states will receive benchmark changes that are below the national average.
Impact:
Due to differences in geographic costs, Medicare Advantage (MA) plans in many states will see their funding change less than the national average. Insurers are also concerned that payments to healthcare providers in some areas could increase significantly because of wage adjustments, as happened in 2024. These payment changes will be decided in August, and since there won’t be an increase in MA funding to match, plans might have to rationalize their benefits.
Health equity measures in Star Ratings:
All MAOs are included in this rule, though only MAOs meeting the minimum threshold of beneficiaries with social risk factors are eligible for rewards. Star Ratings are critical to MAO strategy because they directly impact plan revenue. Based on a simulation, CMS expects about 2% of contracts to gain one-half Star and 13% of contracts to lose one-half Star as a result of the health equity index replacing the current system.
Potential new measure concepts and methodological enhancements CMS is requesting that stakeholders provide input on the below-proposed concepts when they are formally introduced in future rulemaking.
Impact:
- MAOs should enroll better to serve dual-eligible, low-income, & disabled populations.
- Work with care management teams and PBMs to improve medical and pharmacy outcomes.
- Stakeholders should provide input on proposed measure concepts for future rulemaking.
- Assess chronic pain and follow-up for Medicare enrollees aged 65 and older.
- Ensure inclusivity and gender affirmation align with measure intent.
- Simplify identification of chronic conditions.
- Review program changes, update HEDIS and PQA measure logic, and monitor provider performance.
Physician Payment Rule Advancing Health Equity:
All MAOs offering a medical benefit using the Medicare Physician Fee Schedule as a basis for physician reimbursement are impacted. Up-to-date SDOH risk assessments will assist these individuals and others involved in the patient’s care by more efficiently identifying and mitigating potential social risk factors.
Impact:
MAOs will need to better understand the parameters for the changes to coding and payment. For example, the SDOH risk assessment added to the annual wellness visit will more than likely be reimbursed once per year, but it is still to be determined how often beyond this the risk assessment can be performed and reimbursed.
MA brokers, agents, & marketing organizations:
The limits on compensation, restrictions on Medicare Advantage marketing tactics, and enhanced enrollee transparency protections may reduce revenues for many third-party marketing organizations that provide services to the plans, potentially leading to a significant industry shakeout.
Impact:
The 2025 CMS Final Rule could also negatively impact agents, as insurance carriers and Field Marketing Organizations (FMOs) will no longer be permitted to cover various administrative tools and support activities that have traditionally been provided to agents. The limits on compensation, constraints on MA marketing tactics, and enrollee protections around transparency may reduce revenues for many third-party marketing organizations that sell their services to the plans. A shakeout is likely.
Cost Rationalization:
Hospitals and physicians are set to experience the effects of CMS cuts to Medicare Advantage (MA) plans, as these reductions will translate into decreased reimbursements for healthcare providers. Smaller and rural providers in communities with significant MA enrollment will be particularly affected by these cuts.
Impact:
While the rule introduces enhancements such as behavioral health benefits, strengthened data privacy protections, and equity considerations in utilization management decisions made by the plans, the anticipated consequence of the rate reduction is a reduction in plan choices for enrollees and an increase in premiums. Margin compression for Medicare Advantage (MA) plans will significantly impact larger plans, which may adapt to the changes, but smaller plans may have to do better to sustain.
|340B| Drug Pricing Program remains unresolved:
The rate announcement offered little detail on an MA-based solution for providers in the program. Previously, providers were granted a $9 billion remedy for a 340B payment shortfall covering over 4.5 years in Medicare Fee-For-Service (FFS) and were expected to receive those payments by early 2024.
Impact:
Regarding the remedy’s effect on 2025 Medicare Advantage (MA) benchmarks, CMS stated that the amount was not considered since plan payments are based on projected Medicare FFS per capita costs through Q4 2023. CMS indicated that they plan to address how aspects of the 340B remedy rule might impact MA rates for future years in upcoming policy decisions.
Risk Adjustment (Coding):
Another important aspect for MAOs to note is the new three-step appeals process for Risk Adjustment Data Validation (RADV) medical record reviews and payment calculations. This process, outlined in the final rule, provides a clear path for MAOs to challenge and appeal decisions regarding their risk adjustment data.
Impact:
As MAOs transition from the V24 to the V28 HCC models, it’s vital to understand how these changes will impact payments. This involves identifying and correcting common coding errors to ensure compliance with the new model, which may necessitate the removal of certain HCCs.”Ongoing education and training are essential to ensure that coding practices align with the new model requirements. Training will need to remain a focus for risk adjustment teams.
MAOs should implement HCC’s advanced risk adjustment solution to maximize recapture rates and identify risk score discrepancies. Risk adjustment teams will need to evaluate required changes to internal appeals processes and conduct training to educate internal stakeholders on the new requirements.
Access to Behavioral Health Services:
CMS has introduced new network adequacy requirements for Outpatient Behavioral Health, expanding covered benefits to include family/marriage therapy and mental health counseling. The new policy mandates proof that clinicians have provided or will provide qualifying services to at least 20 members over 12 months. Networks that include at least one telehealth provider receive a 10% credit on time and distance requirements.
Impact:
Medicare Advantage Organizations (MAOs) must review network adequacy reports, focusing on time and distance requirements. They should identify areas that are out of compliance and seek opportunities to contract with additional providers and facilities to enhance service availability.
Unused Supplemental Benefits:
Providers of supplemental services are facing reduced payments from CMS, prompting some to consider scaling back or eliminating less valued benefits for enrollees. While dental and prescription drug benefits seem secure, other services, such as fitness programs, may be at risk of being cut by certain providers.
Federal funds amounting to millions of dollars are disbursed as rebates to Medicare Advantage Organizations (MAOs) to bolster supplemental benefits and tackle social risks. CMS aims to ensure that members are informed about the benefits personally accessible to them and understand how to utilize them.
Impact:
MAOs are obligated to directly inform members annually about unused supplemental benefits such as dental, fitness, vision, and more. This notification must occur between June 30 and July 31 of each benefit year. Recommendation: Automate letter workflows.
Dual Eligible Special Needs Plans (D-SNP):
Medicare Advantage (MA) Organizations should anticipate an increase in Dual Eligible Special Needs Plan (D-SNP) membership and prepare accordingly by expanding programs and implementing tools for efficient care coordination.
Impact:
Plans are now mandated to send beneficiaries a midyear notice regarding any unused supplemental benefits in their plan.
CMS has also finalized proposals to enhance Dual Eligible Special Needs Plan (D-SNP) enrollment flexibility and reduce lookalike plans, limiting the number of D-SNP plans offered by MA organizations. 6. Risk Adjustment
Given the above challenges, many experts believe that these changes require health plans to adopt new strategies without causing significant disruptions to existing operations. They also emphasized the importance of understanding how the above challenges can be addressed using health-tech solutions to mitigate risks and adapt to a rapidly evolving regulatory environment.
ARE YOU LOOKING FOR SECURED & COMPLIANT RISK ADJUSTMENT CODING SERVICES?
Operational and Pragmatic Considerations
Risk Adjustment Synergizing Regulatory Challenges Into Strategic Solutions.
The final rule, embodying the new risk adjustment model, has the potential to impact population and payer revenue projections making it imperative for stakeholders to strategize for expected reductions affecting their MLR. For instance, expert analysis indicates that the new version 28 risk adjustment model will result in a 6.7% decrease in risk scores impacting D-SNP populations.
The risk-adjusted aspects enumerated below show how risk adjustment allows organizations to compare costs and project revenue and evaluate network performance equitably.
- Risk Adjustment determines Revenue Streams:
Risk adjustment stands as one of the principal sources of revenue for the majority of payers, complementing PMPM, and any quality bonuses or withholds attained for meeting quality objectives. This holds considerable importance for providers engaged. In arrangements involving shared risk adjustment income. - Goes Beyond Basic Reimbursement:
Accurate risk representation benefits population health management, aiding in claims experience and MLR ( Medical Loss ratio) management for payers and risk-bearing providers. - Risk scores aid Utilization Analysis and Referral Patterns:
Managing service utilization and referral patterns is essential for developing. High-performing networks, enabling fair comparisons and informed referrals within networks. - Impact on Coding Patterns:
Risk analysis justifying coding patterns emphasizes the importance of accurate risk representation. - Correlates Historical Claims & Risk Management:
Historical claims indicating population risk inform intelligent negotiations and carve-outs, emphasizing shared risks for provider organizations and payers, crucial for effective risk management and financial planning. - Impacts Network Performance Initiatives:
Risk-adjusted provider report cards enable comparisons for overall spending, ER visits, pharmacy expenses, and readmission rates, driving high performance and sculpting provider networks. - Extended Use of Risk Scores:
Visibility and use of risk scores extend beyond RAF submissions, impacting financial performance, care quality, competitiveness, and program integrity for payers and providers. However, accurately representing the risk in a population or subpopulation cohort can provide benefits beyond basic reimbursement.
In today’s changing regulatory environment, risk adjustment not only enhances your organization’s financial performance but also improves the quality of care for your population, attracts new members, makes you more competitive, helps you negotiate value-based care agreements, ensures fair treatment within your network, and promotes positive competition among peers.
More importantly It ensures program integrity and drives high performance as both a payer and provider.
The RAAPID Advantage – Why Us
Creating an equitable Risk adjustment Proposition for Health Plans
Medicare Advantage (MA) plans are at a pivotal juncture, with opportunities for growth on the rise. Achieving success requires proactive planning and investment, which can significantly reduce costs throughout the lifecycle. Lowering costs initiates a positive feedback loop towards profitability.
By cutting expenses, payers can provide additional benefits or reduce premiums for members.
This, in turn, increases the likelihood of achieving high star ratings and helps increase provider enrollments.
High star ratings result in greater payments and rebates from Medicare, allowing payers to offer even more value.
Our Solution facilitates prompt leveraging of data-driven insights, enabling seamless integration and automating workflow processes across the entire enterprise also payers can free up resources to enhance the quality of care, improve customer service, and boost their plan’s performance.
AI-Analytics, Seamless Workflows, and Automation at Every Stage
Here’s how Raapid’s AI-powered Risk adjustment Solution Space contributes to achieving higher Compliant ROI for health plans.
Remember when health plans were bogged down by legacy systems and inefficient workflows?
Those days are over. RAAPID’s cutting-edge AI solution is here to help MA Health Plans streamline past coding for maximum accuracy, uncover missed revenue opportunities, and proactively prepare for external audits like RADV and OIG. This approach ensures both financial integrity and long-term compliance.
Our AI systems take compliance to the next level by efficiently analyzing vast amounts of clinical data to identify billing discrepancies and missed diagnoses. They also automatically update in line with regulatory changes for real-time compliance.
At RAAPID, our AI Assistant identifies Care Gaps and emerging conditions using the MEAT (evidence) framework to ensure accuracy, consistency, efficacy, and compliance. It presents these for review and can suppress inappropriate suggested conditions (HCC). Our powerful Clinical Natural Language Processing (cNLP) engine processes, normalizes, and renders accurate and complete workflows, converting and merging both structured and unstructured data.
This delivers evidence-backed findings to various stakeholders, such as HCC Coders, Auditors, Care Teams, and Providers. In every scenario and role, our technology acts as a “Trusted AI Assistant,” helping deliver complete, accurate, and compliant outputs ready for submission to Payers, Health Plans, and CMS.
Proven Technology with Proven Performance
Getting it right the first time, or “First Time Right,” feeds compliant ROI. Over 75% of documents reviewed by Coding, Auditors, Care Teams, and Providers are unstructured and not easily machine-readable, creating a significant data conversion and cost burden. Our AI algorithms, in collaboration with third-party applications like Optical Character Recognition (OCR), offer an integrated approach that converts unstructured clinical texts, often handwritten or scanned, into machine-readable formats for further processing by our AI risk adjustment solution.
RAAPID Technology: Offerings & Benefits
Our AI-infused Full Stack Risk Adjustment Space offers comprehensive solutions.
- Accurate HCC Coding >> Offers Optimized RAF Score and Better Care Quality.
- Chase List Prioritization >> For High-Risk Patient Identification.
- Chart Retrieval >> Facilitates HIE and EHR Connectors.
- Prospective Solutions>> Offers Pre-visit, Point of Care, & Post-visit Review solutions.
- Retrospective Solutions >> Offers Retrospective Review & Retrospective Audit Tools.
- Data deidentification >> PHI & PII Deidentification specific to offshore coding operations.
- AI-Powered Tech >> Industry’s leading Knowledge Graph infused cNLP- Neuro-Symbolic AI
- Support >>Training as part of Payer & Provider Education pertaining to Compliance regulations.
Conclusion
The 2025 Final Rule indeed serves as a crucial reminder to create a level playing field for stakeholders falling under federally sponsored healthcare programs. This is particularly relevant for Medicare Advantage programs, which have experienced payment imbalances due to improper coding, and suspecting is a significant concern.
Moreover, chart review and suspecting can violate RADV rules, undermining risk adjustment calculations’ integrity.
It is crucial to tackle these challenges by adopting stricter auditing procedures, improving education and training on precise coding practices, and investing in modern risk adjustment solutions and advanced analytical tools tailored to meet health plans’ operational needs and goals. This approach will protect the integrity and long-term sustainability of MAOs, ensuring they continue to offer affordable and high-quality care to those who need it most while achieving better ROI.
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