The Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2025 Advance Notice for the Medicare Advantage (MA) and Medicare Part D Prescription Drug Programs that would update payment policies for these programs. The Advance Notice complements a proposed rule, also for CY 2025, that CMS released in November 2023 that would, if finalized, strengthen protections for the millions of people who rely on MA and Medicare Part D prescription drug coverage. MA payments from the government to MA plans are expected to increase on average by 3.70 percent, or over $16 billion, from 2024 to 2025, as proposed.  

CMS is also detailing improvements to the structure of the Medicare Part D drug benefit for CY 2025 that will result in lower drug costs for millions of people with Medicare through the concurrent release of the Draft CY 2025 Part D Redesign Program Instructions. Thanks to the Inflation Reduction Act, in 2025, annual out-of-pocket costs will be capped at $2,000 for people with Medicare Part D. 

“Prescription drugs should be affordable. Today, 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 HHS Secretary Xavier Becerra. “The Biden-Harris Administration is committed to making sure the millions of people who have managed care plans called Medicare Advantage get the best care possible, and that taxpayer dollars are used efficiently.” 

“CMS continues to ensure that Medicare Advantage and Part D prescription drug plans remain strong, stable, and affordable offerings,” said CMS Administrator Chiquita Brooks-LaSure. “The Advance Notice upholds robust and stable options for people with Medicare while strengthening payment accuracy so that taxpayer dollars are appropriately spent. The Advance Notice also continues our effective implementation of the Inflation Reduction Act on schedule, including capping out-of-pocket costs at $2,000 for people with Medicare Part D prescription drug plans in 2025. This out-of-pocket cap will be truly life-changing for millions of people.”

The Advance Notice proposes annual updates to MA payment growth rates and changes to the MA and Part D payment methodologies to improve payment accuracy. Last year, CMS finalized CY 2024 technical and clinical updates to the MA risk adjustment model to keep it up-to-date and improve payment accuracy, as well as updates to the calculation of growth rates to better account for medical education costs. For 2024, MA offerings for people with Medicare remained stable—including premiums, supplemental benefits, and choice. The CY 2025 Advance Notice includes the continued phase-in of the updated MA risk adjustment model and updates to the calculation of growth rates related to medical education costs, and other technical improvements. 

“Today’s release on the Medicare Advantage payment system proposes the continued phase-in of commonsense technical updates that ensure payments accurately reflect individuals’ costs. These updates not only ensure payment is higher for enrollees with the most complex needs, they also make Medicare Advantage less susceptible to gaming and protect the long-term stability of the Medicare program,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, MD, Ph.D. “We are also releasing guidance on implementation of vital parts of the President’s drug law, including the $2,000 out-of-pocket cap for 2025, which will provide needed relief for millions of Americans who rely on prescription drugs to stay healthy.”

The Advance Notice and the Draft CY 2025 Part D Redesign Program Instructions are open for public comment, and CMS will accept comments through 6:00 PM Eastern Time on Friday, March 1, 2024. The CY 2025 Rate Announcement and the CY 2025 Part D Redesign Program Instructions will be published no later than April 1, 2024. 

The CY 2025 Advance Notice may be viewed by going to: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents and selecting “2025 Advance Notice.”

A fact sheet discussing the provisions of the CY 2025 Advance Notice, as well as frequently asked questions, can be viewed here: https://www.cms.gov/newsroom/fact-sheets/2025-medicare-advantage-and-part-d-advance-notice-fact-sheet.

The Draft CY 2025 Part D Redesign Program Instructions can be found at https://www.cms.gov/files/document/draft-cy-2025-part-d-redesign-program-instruction.pdf.

A fact sheet discussing the provisions of the Draft CY 2025 Part D Redesign Program Instructions can be viewed here: https://www.cms.gov/files/document/draft-cy2025-part-d-redesign-program-instruction-fact-sheet.pdf.

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CMS Releases Final Evaluation Report on Comprehensive Primary Care Plus Model

December 15: CMS released the final report on the evaluation of the Comprehensive Primary Care Plus (CPC+) Model. CPC+ was a primary care practice transformation model, supporting practices at varying levels of readiness in two tracks. The report found that during the five performance years of the model, participating practices transformed the way they provided many aspects of care. This transformation led to reduced outpatient emergency department visits, acute inpatient hospitalizations, and acute inpatient expenditures. However, these reductions were insufficient in either track to reduce total Medicare expenditures or achieve net savings, after accounting for increased expenditures in other areas and enhanced CPC+ payments. In both tracks, CPC+ practices that also participated in the Medicare Shared Savings Program at baseline successfully reduced acute inpatient expenditures and total expenditures.

CMS Takes Major Actions on Federal Independent Dispute Resolution (IDR) Process  

December 15: The Departments of Health and Human Services, Treasury, and Labor, including CMS representing HHS, (The Departments) reopened the Federal IDR portal for all dispute types, including previously initiated batched disputes, new batched disputes, and new single disputes involving air ambulance services. The Federal IDR process protects consumers against out-of-network balance billing by providing a process whereby providers (including air ambulance providers), facilities, and health plans can resolve payment disputes for certain out-of-network charges. Since August 2023, parts of the portal to submit Federal IDR disputes were closed due to recent court orders and opinions. The portal is now fully operational.

December 18: The Departments, including CMS representing HHS, issued a final rule on Federal IDR Process Administrative Fee and Certified IDR Entity Fee Ranges. This final rule amends existing regulations to provide that the administrative fees charged by the Departments to participate in the Federal IDR process, and the ranges for certified IDR entity fees for single and batched determinations, will be established by the Departments in notice and comment rulemaking, rather than in guidance. This rule also finalizes an administrative fee of $115 per party for disputes initiated on or after the effective date of this rule. It also finalizes a certified IDR entity fee range of $200-$840 for single determinations and $268-$1,173 for batched determinations for disputes initiated on or after the rule’s effective date. This rule and its associated fees are also effective for disputes initiated on or after January 22, 2024. Information is available on this fact sheet.

December 22: The Departments, including CMS representing HHS, posted a notification on the No Surprises Act website that the Departments intend to reopen the comment period for submitting comments on the proposed rule Federal Independent Dispute Resolution Operations. The Departments intend to publish a notice in the Federal Register with further details on reopening the comment period.

CMS Posts Reports on the Medicare-Medicaid Financial Alignment Initiative

December 20: CMS posted four reports on the Medicare-Medicaid Financial Alignment Initiative (FAI). This initiative is designed to integrate financing and service delivery for Medicare-Medicaid enrollees. CMS is partnering with states to test models intended to achieve those goals. CMS released the third evaluation report for the Rhode Island and South Carolina demonstrations and the third preliminary evaluation report for the Texas demonstration. CMS also released the third brief report for the New York Integrated Appeals and Grievances demonstration. Rhode Island and South Carolina show some improvements in utilization and quality results. Texas shows mixed utilization and quality results. The Rhode Island and South Carolina reports show increases in Medicare spending, while Texas shows no change. The New York Integrated Appeals and Grievances demonstration is described by plans, advocates, and the state as a key benefit for people with both Medicare and Medicaid.

CMS Issues Proposed Rule Establishing Appeal Processes for Certain People with Medicare

December 21: CMS issued a proposed rule that would establish appeal processes for certain people with Traditional Medicare who are admitted to a hospital as an inpatient but subsequently reclassified by the hospital as an outpatient receiving observation services. Additional information can be found on this fact sheet.

New Laboratory Regulation Adjusts Fees, Revises Requirements & Permitted Sanctions 

December 22: CMS, in collaboration with the CDC, released a final rule titled Clinical Laboratory Improvement Amendments of 1988 (CLIA) Fees; Histocompatibility, Personnel, and Alternative Sanctions for Certificate of Waiver Laboratories. The final rule adjusts laboratory fees to provide sustainable funding for the user-fee-funded CLIA program; revises certain requirements for clinical laboratories certified under CLIA; and provides additional discretion to CMS to impose alternative sanctions against non-compliant laboratories.

ICYMI: Comments Due Soon on Notice of Marketplace Benefit and Payment Parameters for 2025 Proposed Rule 

Comments are due January 8, 2024, on the Notice of Benefit and Payment Parameters for 2025 Proposed Rule. The rule proposes standards for issuers and Marketplaces and requirements for agents, brokers, web brokers, direct enrollment entities, and assisters that help Marketplace consumers. This proposed rule also includes several proposals impacting the Medicaid program, Children’s Health Insurance Program (CHIP), and the Basic Health Program (BHP). Information on the proposed rule can be found here. 

Other Recent Releases: 

December 15: HHS to Improve Maternal Health Outcomes with New CMS Care Model that Expands Access to Services, Other Proven Maternal Health Approaches

December 18: Biden-Harris Administration Releases New Medicaid and CHIP Renewal Data Showing the Role State Policy Choices Play in Keeping Kids Covered 

December 20: HealthCare.gov Enrollment Exceeds 15 Million, Surpassing Previous Years’ Milestones

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CMS Approves Mobile Crisis Intervention Services for People with Medicaid in the States of Washington and Montana

CMS recently approved mobile crisis state plan amendments (SPAs) for both Washington and Montana. Authorized under President Biden’s American Rescue Plan (ARP), mobile crisis intervention services provide rapid, critical services to people experiencing mental health or substance use crises by connecting them to a behavioral health specialist 24 hours per day, 365 days a year. This option will help states integrate these services into their Medicaid programs, a critical component in establishing a sustainable, public health-focused support network. The Washington SPA was approved October 10, and the Montana SPA was approved October 17.

CMS Releases Second Evaluation Report for the Medicare Advantage Value-Based Insurance Design (VBID) Model, Phase II

October 10: CMS released an evaluation report for implementation years 2020-2022 of the Medicare Advantage (MA) Value-Based Insurance Design (VBID) model. The model tested various changes put in place to improve the delivery and quality of care for Medicare Advantage enrollees, including how to reach more effectively those with low socioeconomic status. Two key findings are that model participation is growing, including for the hospice benefit, and that interventions like supplemental benefits and Part D cost-sharing reductions are increasingly focused on addressing the needs of those with low socioeconomic status. The model is part of CMS efforts to address patients’ health-related social needs, increase prescription drug affordability, and advance health equity.

CMS Publishes Update on the Executive Order to Lower Prescription Drug Costs

October 11: CMS published a blog highlighting the first anniversary of the Executive Order on Lowering Prescription Drug Costs for Americans. The blog provides a progress report on the three models being developed to improve prescription drug affordability and access for Medicare and Medicaid beneficiaries: the Medicare $2 Drug List Model, the Cell and Gene Therapy Access Model, and the Accelerating Clinical Evidence Model. Addressing drug affordability and accessibility for Americans remains a top priority for CMS and the Biden-Harris Administration.

CMS Releases Information on Three National Coverage Determinations:

CMS continues its commitment, through national coverage determinations (NCDs), to ensure that people with Medicare have access to emerging treatments and technologies that will improve health outcomes.

October 10: CMS announced that the final NCD on Preexposure Prophylaxis (PrEP) Using Antiretroviral Therapy to Prevent Human Immunodeficiency Virus (HIV) Infection would not be posted by the expected date of October 10. CMS received comments on the proposed NCD that expressed concern over the potentially complex transition of coverage of these preventive drugs from Part D to Part B.  CMS will work with Part D plans and pharmacies to facilitate an orderly transition as we work towards finalizing the NCD. A final NCD will be forthcoming. Information on the proposed NCD is found here.

October 11:  CMS issued a final NCD for Percutaneous Transluminal Angioplasty (PTA) of the Carotid Artery Concurrent with Stenting. This NCD resulted from a request from the Multispecialty Carotid Alliance (MSCA) for a reconsideration of a former NCD. The procedure restores blood flow when arteries are clogged due to peripheral artery disease. In the final NCD, CMS expanded coverage of PTA of the carotid artery with stenting for a broader population and allowed Medicare Administrative Contractors (MACs) to make reasonable and necessary determinations for any other beneficiary seeking coverage.  

October 13: CMS announced a final decision to remove the NCD for Beta Amyloid Positron Emission Tomography (PET) in Dementia and Neurodegenerative Disease, permitting Medicare coverage determinations to be made by the MACs. Removing the NCD also removes the current limitation of one PET beta-amyloid scan per lifetime from the coverage requirements.

CMS Releases Tools and Resources  as Annual Medicare Open Enrollment Period Begins

October 15: The annual Medicare Open Enrollment period began October 15, 2023, and ends December 7, 2023, with coverage changes taking effect January 1, 2024. During this time, people with Medicare can compare coverage options, like Traditional Medicare and Medicare Advantage, choose health and drug plans for 2024, and learn about extra help available to those with limited income and resources to pay for Medicare drug coverage. Tools and resources are available at Medicare.gov.

CMS Approves Montana’s Expansion of Postpartum Coverage for a Full Year to People with Medicaid

October 16: CMS approved a state plan amendment for Montana to extend postpartum coverage for a full year for individuals enrolled in Medicaid. The opportunity to extend postpartum coverage was made possible under the American Rescue Plan and made permanent in the Consolidated Appropriations Act, 2023. Montana’s approval marks 38 states, D.C., and the U.S. Virgin Islands that have extended postpartum Medicaid coverage for an entire year. This approval supports the CMS Maternity Care Action Plan and Biden-Harris Maternal Health Blueprint.    

CMS Releases Million Hearts Cardiovascular Disease Risk Reduction Model Final Evaluation

October 17: CMS released the final evaluation report of the Million Hearts Cardiovascular Disease Risk Reduction Model. The report describes the model’s implementation and includes estimates of the model’s impact on heart attacks, strokes, survival, and spending. Over five years, the model reduced the incidence of first-time heart attacks and strokes by 3 to 4 percent in all-cause mortality among high- and medium-risk beneficiaries but did not measurably impact Medicare fee-for-service spending.

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Palmetto, a Medicare Administrative Contractor, developed the Molecular Testing for Solid Organ Allograft Rejection LCD in accordance with applicable statute and CMS rules, which include a comment and notice period. MACs are organizations that have statutory authority to develop local coverage decisions (LCDs) for their individual jurisdictions.

The Molecular Testing for Solid Organ Allograft Rejection LCD became effective on June 6, 2021. Historically, the standard for assessing transplant rejection or injury has been a biopsy in conjunction with serologic criteria. However, given the invasive nature and risks associated with a biopsy, this LCD covers tests that can potentially negate the need for a biopsy by providing clinicians with actionable information that can be used to help optimize immunosuppressive therapy. This means the test can be used instead of a biopsy when clinically appropriate and meeting the reasonable and necessary guidelines laid out by the MACs. This LCD coverage criteria was developed based on the available evidence and a rigorous public comment process.

Under the Molecular Diagnostic Services Program (MolDX), a program developed by the Palmetto MAC, the MAC focuses on determining coverage for molecular diagnostic tests and other molecular pathology services. Several other MACs have implemented Palmetto’s MolDX program as part of their operations. In the MolDX program, the MACs review all evidence that a manufacturer produces to determine whether an item or service meets the standards for Medicare coverage under the reasonable and necessary standard. 

Over time, the MACs became aware of improper billing and overutilization of these tests. In response, the MACs issued revised billing instructions to providers on March 31, 2023. Billing and coding articles provide additional educational content to help providers, suppliers, and other interested parties better understand the intent of the existing LCD criteria language.

In addition, based on interested parties’ feedback, on August 10, 2023, the MACs released a new proposed LCD, seeking comment and evidence from the public pertaining to proposed changes made for clarity. In this proposed LCD, the coverage criteria remain intact. When ordered by a doctor, these tests continue to be covered for patients in place of a more invasive biopsy.

Now that the comment period on this proposed LCD has closed, the MACs will review the comments, including any clinical evidence received, to inform future decisions about coverage criteria for these tests. Under the existing coverage policies, patients with Medicare can continue to access blood tests for organ transplantation rejection when medically appropriate and ordered by their physicians. CMS remains committed to ensuring transplant patients with Medicare can access the coverage, care, and services they need.

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CMS Releases Tools for Partners to Use to Reach Children and Families on Medicaid Renewals  — Including Strategies for Keeping Them Covered

August 11: CMS is leading a call to action to every federal and state agency that works with children and families to get the word out about Medicaid renewals and help people maintain health coverage. The all-hands-on-deck effort by the Department of Health and Human Services (HHS) shares resources and information that external partners (health plans, health care providers, advocates, employers, as well as civil rights, faith-based, health industry, and other community organizations) can use to help spread the word and help keep kids covered as states return to regular Medicaid renewals.

CMS Approves Vermont Postpartum Medicaid State Plan Amendment Coverage Extension

August 11: CMS marked another important maternal health milestone by approving a postpartum coverage extension for Vermont. This approval, made possible by the American Rescue Plan, marks 36 states, the District of Columbia, and the U.S. Virgin Islands that have extended postpartum Medicaid coverage to a full year. Postpartum coverage extensions form one of the cornerstones of CMS’ Maternity Care Action Plan — part of the Biden-Harris Administration’s Blueprint for Addressing the Maternal Health Crisis.

CMS Releases Early 2023 Snapshot Report and Full Year 2022 Effectuated Enrollment Data for Affordable Care Act Marketplaces, Showing Increases in Health Insurance Coverage, Premium Assistance, and Cost Sharing Reductions

August 11: CMS released the Early 2023 Snapshot Report and Full Year 2022 Effectuated Enrollment and Financial Assistance Data for the individual market federal and state-based Marketplaces. Effectuated enrollment reflects the total number of people who selected a plan and who also paid their premium, if applicable. Key findings from this report show 15.7 million effectuated enrollees for February 2023, which is a 13% increase from 13.8 million consumers who had effectuated coverage in February 2022. The increased coverage over this period reflects continued impacts of the advance payments of the premium tax credit (APTC) expansion provided by the American Rescue Plan (ARP) and the Inflation Reduction Act (IRA). In February 2023, 14.3 million Marketplace enrollees, or 91% of total Marketplace enrollees, received APTC, a 15% increase from the 12.5 million enrollees who received APTC in February 2022. Additionally, cost-sharing reduction (CSR) assistance enrollment increased by 11% from 6.8 million consumers in February 2022 to 7.6 million consumers in February 2023. Both APTCs and CSR assistance support the growth of effectuated enrollment by helping to make health insurance coverage affordable for millions of Americans.

CMS Releases Request for Applications for the Making Care Primary Model

August 14: CMS released the Request for Applications for the Making Care Primary (MCP) Model,  which is a new voluntary primary care model that will be tested in eight states: Colorado, North Carolina, New Jersey, New Mexico, New York, Minnesota, Massachusetts and Washington. Launching July 1, 2024, the MCP model’s goals are to improve care management and care coordination, equip primary care clinicians with tools to form partnerships with health care specialists, and leverage community-based connections to address patients’ health needs as well as their health-related social needs, such as housing and nutrition. The Request for Applications (RFA) details model eligibility, payment, care delivery, quality, and other policies.

CMS Issues Bulletin Advising that Mandatory Spousal Impoverishment Provisions for Home- and Community-Based Services (HCBS) in Medicaid are Extended through September 2027

August 15: CMS released an informational bulletin notifying states that mandatory financial eligibility rules (spousal impoverishment provisions) for  married applicants and beneficiaries eligible for home- and community-based services (HCBS) in Medicaid are extended to September 30, 2027, consistent with the Consolidated Appropriations Act, 2023. Under the Medicaid spousal impoverishment provisions, a certain amount of the couple’s combined resources is protected for the spouse living in the community. The extension helps married individuals seek coverage of certain long-term services and supports they need to stay healthy.

CMS Approves New Jersey’s Application of its State Innovation Waiver for an Additional Five Years — Lowering Individual Market Premiums and Resulting in More Consumers Being Covered 

August 15: HHS and the U.S. Department of the Treasury approved New Jersey’s State Innovation waiver extension, known as the Health Insurance Premium Security Plan, for an additional five years from Plan Years (PY) 2024 through 2028. The Departments have determined that New Jersey’s Section 1332 waiver extension plan meets the requirements outlined in Section 1332(b)(1) of the ACA. Actuarial analysis performed on behalf of New Jersey projected that in PY 2024, with the extension of the enhanced Premium Tax Credit (PTC) from the Inflation Reduction Act of 2022, statewide premiums will be on average 15.8% lower for individual health insurance coverage compared to the without-waiver baseline.  

CMS Highlights Hospice Program Integrity Actions and Strategies to Combat Fraudulent Billing

August 22: CMS published a blog summarizing the actions that CMS is taking related to fraudulent activity by some hospice care providers. CMS revisited and revitalized our hospice program integrity strategy, focusing on identifying bad actors and addressing fraudulent activity to minimize impacts to beneficiaries in the Medicare program. For example, as of mid-August, CMS has made unannounced site visits to over 7,000 hospices, as part of our nationwide project to visit every Medicare-enrolled hospice, to make sure that each hospice is operational at the address listed on the enrollment form. If a hospice was not operational at the address listed on their Medicare enrollment form, CMS exercised or will exercise its authority to either deactivate or revoke the hospice’s Medicare billing privileges. As of mid-August, nearly 400 hospices are being considered for potential administrative action. Our goal is to protect patients and their families from engaging with fraudulent actors. Please read the blog for additional strategies CMS is implementing to combat hospice billing fraud.

Other Recent Releases:

August 21: CMS Issues Draft Guidance on New Program to Allow People with Medicare to Pay Out-of-Pocket Prescription Drug Costs in Monthly Payments

August 24: CMS Releases PY 2022 Medicare Shared Savings Program Financial and Quality  Performance Results — Accountable Care Organizations (ACOs) Saved Medicare Money While Continuing to Deliver High-Quality Care

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The Centers for Medicare & Medicaid Services (CMS) today approved proposals from California and Kentucky for community-based mobile crisis intervention teams to provide Medicaid crisis services. This marks six states that have expanded access to community-based mental health and substance use crisis care through President Biden’s American Rescue Plan. California and Kentucky will be able to provide Medicaid services through mobile crisis teams by connecting eligible individuals in crisis to a behavioral health provider 24 hours per day, 365 days a year.

“Everyone should have access to behavioral health support where they are, when they need it – especially those who are in crisis,” said Health & Human Services Secretary Xavier Becerra. “This decision ensures that Californians and Kentuckians will have access to mobile crisis and other community-based supports. These resources will help to improve and save lives.”

“California and Kentucky recognize the vital importance of breaking down barriers to meet people in crisis with the care they need,” said CMS Administrator Chiquita Brooks-LaSure. “With these approvals, California and Kentucky join a growing number of states in helping connect people to qualified health professionals as the first point of care during a crisis. This ensures people can get the care they need when and where they need it.”

The Biden-Harris Administration has made addressing the nation’s mental health crisis a top priority, and this new option gives states an opportunity to support community-based mobile crisis intervention teams to provide services for individuals with Medicaid. Mobile crisis intervention teams aim to provide rapid response, individual assessment, and crisis de-escalation by trained behavioral health professionals and paraprofessionals. The multidisciplinary team provides screening and assessment; stabilization and de-escalation; and coordination with and referrals to health, social, and other services, as needed. This helps states better integrate behavioral health services into their Medicaid programs – a cornerstone of the sustainable, public health-focused support networks our communities need.

Providing fast, appropriate care to someone in crisis may reduce the need for costly inpatient services, and this new option will help California and Kentucky expand access to behavioral health professionals as the initial contact for someone in crisis. California’s and Kentucky’s state plan amendments add mobile crisis response crisis planning; facilitation of a warm handoff; referrals to ongoing supports; and follow up check-ins for individuals experiencing a mental health or substance use disorder crisis. Kentucky is also adding other services to the crisis continuum, including stabilization services beyond those provided by mobile crisis teams, which are delivered in the community following a crisis event.

Additionally, to help further address behavioral health needs, this month Health & Human Services and its 988 Lifeline partners announced the addition of Spanish text and chat services. Specialized services for LGBTQI+ youth and young adults were also added earlier this month, following a successful pilot test earlier this year. The 988 Lifeline is part of the Biden-Harris Administration’s comprehensive strategy to address the nation’s mental health crisis, and to-date, the Administration has invested nearly $1 billion into this life-saving initiative. This investment is driving an increase in calls, texts, and chats, with nearly 5 million contacts answered in the past year – and helped millions of people in crisis.

Today’s announcement is the latest in Health & Human Services’ ongoing efforts to support President Biden’s whole-of-government strategy to transform mental health services for all Americans – a key part of the President’s Unity Agenda. For more information on California’s and Kentucky’s approval, visit Medicaid.gov.

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The Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary released projections of National Health Expenditures (NHE) and health insurance enrollment for the years 2022-2031. The report contains expected impacts from the Inflation Reduction Act (IRA), including that people with Medicare prescription drug coverage (Part D) are projected to experience lower out-of-pocket spending on prescription drugs for 2024 and beyond as several provisions from the law begin to take effect.

CMS projects that over 2022-2031, average annual growth in NHE (5.4%) will outpace average annual growth in gross domestic product (GDP) (4.6%), resulting in an increase in the health spending share of GDP from 18.3% in 2021 to 19.6% in 2031. The insured percentage of the population is projected to have reached a historic high of 92.3% in 2022 (due to high Medicaid enrollment and gains in Marketplace coverage). It is expected to remain at that rate through 2023. Given the expiration of the Medicaid continuous enrollment condition on March 31, 2023 and the resumption of Medicaid redeterminations, Medicaid enrollment is projected to fall over 2023-2025, most notably in 2024, with an expected net loss in enrollment of 8 million beneficiaries. If current law provisions in the Affordable Care Act are allowed to expire at the end of 2025, the insured share of the population is projected to be 91.2%.  In 2031, the insured share of the population is projected to be 90.5%, similar to pre-pandemic levels.

The NHE is published annually and is often referred to as the “official” estimates of U.S. health spending and health insurance enrollment. The historical and projected estimates of NHE measure total annual U.S. spending for the delivery of health care goods and services by type of good or service (hospital, physician, prescription drugs, etc.) and by payer (private health insurance (PHI), Medicare, Medicaid, etc.).

Selected highlights on the IRA as well as NHE spending by major payer include:

Inflation Reduction Act (IRA) on Medicare Part D Enrollees: Several provisions from the IRA are expected to result in out-of-pocket savings for individuals enrolled in Medicare Part D.  Those include: i) limitations on price increases for Part D drugs beginning in 2023, ii) elimination of the cost-sharing requirement in the Part D catastrophic phase (typically 5% beneficiary coinsurance) starting in 2024, iii) implementation of a $2,000 annual cap on out-of-pocket spending on drugs under Part D beginning in 2025, and iv) reduced prices for certain high-cost drugs through negotiation resulting in lower out-of-pocket payments beginning in 2026. These provisions have notable effects on the growth rates for total out-of-pocket spending for prescription drugs, which are projected to decline by 5.9% in 2024, 4.2% in 2025, and 0.2% in 2026.

Medicare: Average annual expenditure growth of 7.5% is projected for Medicare over 2022-2031. In 2022, the combination of fee-for-service beneficiaries utilizing emergent hospital care at lower rates and the reinstatement of payment rate cuts associated with the Medicare Sequester Relief Act of 2022 resulted in slower Medicare spending growth of 4.8% (down from 8.4% in 2021). In 2025, Medicare spending is projected to grow 8.9%, reflecting the effect of the IRA’s cap ($2,000 in 2025) on out-of-pocket spending for Part D enrollees and the associated shift in responsibility for those payments that exceed the cap from the beneficiaries to the program. Projected Medicare spending growth slows to 6.8% in 2030 and 2031, associated with the IRA’s provisions related to drug price negotiations and inflation rebates, as well as slower enrollment growth as the last of the demographic cohort known as the baby boomer generation (those born between 1946-1964) enrolls in 2029.  

Medicaid:  On average, over 2022-2031, Medicaid expenditures are projected to grow by 5.0%. With the end of the continuous enrollment condition in 2023, Medicaid enrollment is projected to decline over 2023-2025, with most of the net loss in enrollment (8 million) occurring in 2024 as states resume annual Medicaid redeterminations. Medicaid enrollment is expected to increase and average less than 1% through 2031, with average expenditure growth of 5.6% over 2025-2031.  

Private Health Insurance: Over 2022-2031, private health insurance spending growth is projected to average 5.4%. Despite faster growth in private health insurance enrollment in 2022 (led by increases in Marketplace enrollment related to the American Rescue Plan Act’s subsidies), private health insurance expenditures are expected to have risen 3.0% (compared to 5.8% in 2021) due to lower utilization growth, especially for hospital services. Faster projected growth in utilization and health care prices in 2023 leads to a 7.7% increase in private health insurance spending. In 2026, private health insurance spending is expected to be impacted by the expiration of enhanced subsidies for Marketplace plans and the associated 10% decline for those enrolled in directly-purchased insurance that year.    

Selected highlights in NHE for the three largest goods and services categories include:

Overview of Hospital Trends: Over 2022-2031, hospital spending growth is expected to average 5.8% annually. In 2022, hospital spending is projected to have increased 0.8%, reflecting declines in PHI and out-of-pocket spending and low growth for Medicare, as growth in the use of hospital services slowed from higher rates in 2021. In 2023, faster growth in hospital utilization rates and accelerating growth in hospital prices (related to economywide inflation and rising labor costs) are expected to lead to faster hospital spending growth of 9.3%.  For 2025-2031, hospital spending trends are expected to normalize (with projected average annual growth of 6.1%) as there is a transition away from pandemic public health emergency funding impacts on spending.

Overview of Physician and Clinical Services Trends: Growth in physician and clinical services spending is projected to average 5.3% over 2022-2031. An expected deceleration in growth in 2022, to 2.4% from 5.6% in 2021, reflects slowing growth in the use of services following the pandemic-driven rebound in use in 2021. For 2025-2031, average spending growth for physician and clinical services is projected to be 5.7%, with an expectation that average Medicare spending growth (8.1%) for these services will exceed that of average Private Health Insurance growth (4.6%) partly as a result of comparatively faster growth in Medicare enrollment.

Overview of Retail Prescription Drugs Trends: Total expenditures for retail prescription drugs are projected to grow at an average annual rate of 4.6% over 2022-2031. Drug spending growth is projected to have slowed from 7.8% in 2021 to 5.1% in 2022, partly due to a decline in private health insurance spending, particularly on newly introduced drugs. Expenditure growth for prescription drugs in 2024 (3.7%) is similar to 2023 (3.6%). It reflects the net impacts from: i) the elimination of 5% coinsurance in the catastrophic phase in Part D, lowering out-of-pocket spending), ii) higher Medicare spending as the program absorbs a portion of out-of-pocket costs formerly paid by beneficiaries, and iii) a decline in Medicaid prescription drug spending due to 8 million in net enrollment losses. For 2025-2031, total spending growth on prescription drugs is projected to average 4.8%, reflecting the net effects of key IRA provisions: i) Part D benefit enhancements (putting upward pressure on Medicare spending growth) and ii) price negotiations/inflation rebates (putting downward pressure on Medicare and out-of-pocket spending growth). 

The Office of the Actuary’s 2022-2031 projections will be published at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html

A Health Affairs journal article from CMS’ Office of the Actuary is available here: https://www.healthaffairs.org/. To view the Health Affairs’ study on these projections, you can do so at: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2023.00403.

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The Centers for Medicare & Medicaid Services (CMS) announced a new primary care model – the Making Care Primary (MCP) Model – that will be tested under the Center for Medicare and Medicaid Innovation in eight states. Access to high-quality primary care is associated with better health outcomes and equity for people and communities. MCP is an important step in strengthening the primary care infrastructure in the country, especially for safety net and smaller or independent primary care organizations. The model seeks to improve care for patients by expanding and enhancing care management and care coordination, equipping primary care clinicians with tools to form partnerships with health care specialists, and leveraging community-based connections to address patients’ health needs as well as their health-related social needs.

The goals of MCP are to 1) ensure patients receive primary care that is integrated, coordinated, person-centered and accountable; 2) create a pathway for primary care organizations and practices – especially small, independent, rural, and safety net organizations – to enter into value-based care arrangements; and 3) to improve the quality of care and health outcomes of patients while reducing program expenditures.

The MCP Model will provide participants with additional revenue to build infrastructure, make primary care services more accessible, as well as better coordinate care with specialists. CMS expects this work to lead to downstream savings over time through better preventive care and reducing potentially avoidable costs, such as repeat hospitalizations. MCP will run for 10.5 years, from July 1, 2024, to December 31, 2034. The model will build upon previous primary care models, such as the Comprehensive Primary Care (CPC), CPC+, Primary Care First models, and the Maryland Primary Care Program (MDPCP).

CMS will test this advanced primary care model in Colorado, Massachusetts, Minnesota, New Jersey, New Mexico, New York, North Carolina, and Washington. CMS will work with model participants to address priorities specific to their communities, including care management for chronic conditions, behavioral health services, and health care access for rural residents. CMS is working with State Medicaid Agencies in the eight states to engage in full care transformation across public programs, with plans to engage private payers in the coming months. The model’s flexible multi-payer alignment strategy allows CMS to build on existing state innovations and for all patients served by participating primary care clinicians to benefit from improvements in care delivery, financial investments in primary care, and learning tools and supports under the model.

“The goal of the Making Care Primary Model is to improve care for people with Medicaid and Medicare,” said CMS Administrator Chiquita Brooks-LaSure. “This model is one more pathway CMS is taking to improve access to care and quality of care, especially to those in rural areas and other underserved populations. This model focuses on improving care management and care coordination, equipping primary care clinicians with tools to form partnerships with health care specialists, and partnering with community-based organizations, which will help the people we serve with better managing their health conditions and reaching their health goals.”

Strong relationships with primary care teams are essential for patients’ overall health. Primary care clinicians provide preventive services, help manage chronic conditions, and coordinate care with other clinicians. By investing in care integration and care management capabilities, primary care teams will be better equipped to address chronic disease and lessen the likelihood of emergency department visits and acute care stays, ultimately lowering costs of care. This model will support participants with varying levels of experience with value-based care, including Federally Qualified Health Centers (FQHCs) and physician practices with limited experience in value-based care, as CMS continues to work to reduce disparities in care and drive better patient experience and outcomes.

“Ensuring stability, resiliency, and access to primary care will only improve the health care system,” said CMS Deputy Administrator and Center for Medicare and Medicaid Innovation Director Liz Fowler. “The Making Care Primary Model represents an unprecedented investment in our nation’s primary care network and brings us closer to our goal of reaching 100% of Traditional Medicare beneficiaries and the vast majority of Medicaid beneficiaries in accountable care arrangements, including advanced primary care, by 2030.”

The model includes a progressive three-track approach based on participants’ experience level with value-based care and alternative payment models. Participants, which include FQHCs, Indian Health Service facilities, and Tribal clinics, among others, in all three tracks will receive enhanced payments, with participants in Track One focusing on building infrastructure to support care transformation. In Tracks Two and Three, the model will include certain advance payments and will offer more opportunities for bonus payments based on participant performance. This approach will support clinicians across the readiness continuum in their transition to value-based care, furthering CMS’s goal to ensure 100% of traditional Medicare beneficiaries are in a care relationship with accountability for quality and total cost of care.

Primary care organizations within participating states may apply when the application opens in late summer 2023. The model will launch on July 1, 2024.

To view the MCP webpage, visit: https://innovation.cms.gov/innovation-models/making-care-primary

To view a model key highlights video, visit: https://youtu.be/8vy3PHHlCe4 

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The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule for inpatient and long-term care hospitals that builds on the Biden-Harris Administration’s key priorities to advance health equity and support underserved communities. As required by statute, the fiscal year (FY) 2024 inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS) rule updates Medicare payments and policies for hospitals. The rule would also adopt hospital quality measures to foster safety, equity, and reduce preventable harm in the hospital setting. CMS is proposing to recognize homelessness as an indicator of increased resource utilization in the acute inpatient hospital setting, which may result in higher payment for certain hospital stays. This action aligns with the Administration’s goal of providing support to historically underserved and under-resourced communities.

“CMS is helping to build a resilient health care system that promotes good outcomes, patient safety, equity, and accessibility for everyone,” said CMS Administrator Chiquita Brooks-LaSure. “This proposed rule reflects our person-centric approach to better measure health care quality and safety in hospitals to reduce preventable harm and our commitment to ensure that people with Medicare in rural and underserved areas have improved access to high-quality health care.”

For acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful electronic health record users, the proposed increase in operating payment rates for FY 2024 is projected to be 2.8%. This reflects an FY 2024 projected hospital market basket update of 3.0%, reduced by a projected 0.2 percentage point productivity adjustment. For FY 2024, CMS expects the proposed increase in operating and capital IPPS payment rates would generally increase hospital payments by $3.3 billion. For LTCHs, CMS proposes to increase the LTCH PPS standard Federal payment rate by 2.9%.  Overall, CMS expects LTCH payments under the dual-rate payment system to decrease by 0.9%, or $24 million, primarily due to a projected decrease in high-cost outlier payments in FY 2024 compared to FY 2023. 

“With this proposed rule, CMS is more accurately paying hospitals and recognizing for the first time that homelessness, as a social determinant of health, also impacts resource utilization,” said CMS Deputy Administrator Dr. Meena Seshamani. “Creating incentives for hospitals to provide excellent care for underserved populations lays the foundation for a health system that delivers higher-quality, more equitable, and safer care for everyone.”

Advancing Health Equity

CMS is proposing to make health equity adjustments in the Hospital Value-Based Purchasing Program by providing incentives to hospitals to perform well on existing measures and to those who care for high proportions of underserved individuals, as defined by dual eligibility status.  This builds on previous efforts to advance health equity through the finalized health equity adjustment in the Medicare Shared Savings Program and finalized policies in Medicare Advantage and Part D Star Ratings Program. CMS also proposes to recognize the higher costs that hospitals incur when treating people experiencing homelessness, when hospitals report social determinants of health codes on claims. In addition, CMS is requesting comment on how to further support safety-net hospitals.

CMS is also proposing that rural emergency hospitals could be designated as graduate medical education training sites. As a result, more medical residents would be able to train in rural settings, which can help address workforce shortages in these communities. This proposal builds on other policies to support access to care in rural and other underserved communities.   

Promoting Patient Safety

Consistent with the CMS National Quality Strategy and the HHS National Healthcare System Action Alliance to Advance Patient Safety goals to promote the highest quality outcomes and safest care for all individuals, the proposed set of quality measures aims to foster safety and equity and to reduce preventable harm in hospital settings. Among this set is a proposal to measure the rate of patients and residents in long-term care hospitals who are up to date on their COVID-19 vaccinations and new, additional measures for screenings for cancer and social drivers of health.

For a fact sheet on the proposed payment rule, visit: https://www.cms.gov/newsroom/fact-sheets/fy-2024-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective.

The FY 2024 IPPS/LTCH PPS proposed rule has a 60-day comment period. The proposed rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/2023-07389/medicare-program-proposed-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals

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CMS Releases Guidance for the End of the COVID-19 Public Health Emergency on May 11 — Information on What You Need to Know

February 27:  CMS is preparing the public for the transition forward from the COVID-19 public health emergency (PHE) and has outlined what to expect after this period ends. In a new fact sheet, CMS discusses COVID-19 testing, vaccines and treatments; telehealth services; continuing flexibilities for health care providers and inpatient hospital care at home. The Biden-Harris Administration and CMS will continue to provide guidance to the public to ensure a smooth and predictable transition as May 11 approaches.

CMS Updates Drug Spending Dashboard with 2021 Data

March 1: CMS released a blog highlighting the addition of 2021 data to the Drug Spending Dashboards, interactive online tools that allow consumers, researchers, policy-makers, and other stakeholders to understand changes in spending on prescription drugs in the Medicare and Medicaid programs. This update comes as CMS is implementing the Inflation Reduction Act, the new prescription drug law that will bring extensive changes to lower the cost of prescription drugs for millions of Americans. The blog outlines that, while CMS is leveraging data in its implementation of the new prescription drug law, the time period of data to be used for the Medicare Drug Price Negotiation Program differs from that used in the Drug Spending Dashboards, and the exclusions and exemptions of drugs from the Medicare Drug Price Negotiation Program are not applied to the Drug Spending Dashboards.

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CMS, an agency within the U.S. Department of Health and Human Services, serves the public as a trusted partner and steward, dedicated to advancing health equity, expanding coverage, and improving health outcomes. The agency protects  public health by administering the Medicare program and working in partnership with state governments to administer Medicaid, CHIP, and health insurance portability standards.

Get CMS news at cms.gov/newsroom, sign up for CMS news via email, and follow CMS on Twitter @CMSgov

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