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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In addition to the payment updates, the Advance Notice outlines several updates and improvements made by the Inflation Reduction Act (IRA) to the Part D program that will go into effect or be in effect on January 1, 2024. These include the continuation of reduced cost-sharing for insulin and eliminated cost-sharing for recommended, preventive vaccines, as well as the elimination of cost-sharing for Part D prescription drugs in the catastrophic phase and expansion of eligibility for full cost-sharing and premium subsidies under the Low-Income Subsidy program. Through these changes to the Part D program for 2024, the new drug law provides meaningful financial relief for millions of people with Medicare by improving access to affordable treatments and strengthening the Medicare program both now and in the longrun.

“Medicare Advantage and Part D prescription drug plans are essential parts of CMS’s vision that all parts of Medicare are working to provide more equitable, high quality, and person-centered care that is affordable and sustainable for the people we serve,” said CMS Administrator Chiquita Brooks-LaSure. “The Advance Notice will maintain strong value and choice for people with Medicare, continue our efforts to improve our programs, and fulfill our mandate to implement the Inflation Reduction Act effectively and efficiently.”

The Advance Notice proposes updates to MA payment growth rates and changes to the MA and Part D payment methodologies. These proposals include technical updates to the MA risk adjustment model to keep the model up to date and improve payment accuracy, such as by fully transitioning to the Internal Classification of Diseases (ICD)-10 system, which has been in use since 2015. In addition, CMS is seeking comment on MA quality measurement under Part C Star Ratings as part of CMS’s overarching efforts to align quality measures across federal programs and with private payers, reduce burden, and improve the effectiveness of quality programs.

“The commonsense proposals in the Advance Notice, coupled with the proposals in the MA and Part D rule released in December, ensure these important programs continue to meet the health care needs of all beneficiaries while improving the quality and long-term stability of the Medicare program,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, MD, Ph.D.

The Advance Notice is open for public comment, and comments must be submitted by March 3, 2023. The Medicare Advantage and Part D payment policies for 2024 will be finalized in the CY 2024 Rate Announcement, which will be published no later than April 3, 2023.

The 2024 Advance Notice may be viewed by going to: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents and selecting “2024 Advance Notice.”

A fact sheet discussing the provisions of the Advance Notice can be viewed here: https://www.cms.gov/newsroom/fact-sheets/2024-medicare-advantage-and-part-d-advance-notice-fact-sheet

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