CMS finalizes 5.06% Medicare Advantage benchmark increase
Read Article: Fierce Healthcare
Article Summary: CMS finalized a 5.06% increase in benchmark payments to Medicare Advantage (MA) plans for 2025—significantly higher than the previously proposed 2.23% increase. This reflects updated data on fee-for-service (FFS) expenditures. The decision is favorable to payers and managed care companies, as it means greater federal funding—about $25 billion more. Stocks for major insurers surged in response.
CMS will also complete the phase-in of its updated MA risk adjustment model, despite payer requests for delays. This model aims to reduce overpayments tied to coding intensity and improve fairness in risk scoring. Meanwhile, provider groups are frustrated, citing continued physician pay cuts while insurers receive boosts. The updated health equity index, renamed EHO4all, will focus on improving outcomes for underserved populations in MA.
The Risk:
Widening Payer-Provider Tension: The boost to Medicare Advantage payments intensifies longstanding frustration from providers, especially as physician payments continue to be cut. This imbalance could further strain negotiations between providers and MA plans, creating operational and financial stress for provider organizations.
Market Power Consolidation Among MA Insurers: Increased benchmark payments give large insurers more financial flexibility to offer attractive plans and expand market share. This could make it harder for smaller or regional health systems and provider-led MA plans to compete, potentially affecting patient volume and referral patterns.
Inadequate Oversight of Risk Adjustment and Coding Practices: Despite ongoing concerns about overpayments due to upcoding, the finalized risk adjustment changes remain favorable to insurers. If overpayments continue unchecked, they could lead to policy backlash, future payment clawbacks, or reforms that indirectly affect provider reimbursement.
Ongoing Uncertainty Around Future MA Regulations: While the 2026 final rule avoided aggressive reforms (e.g., on AI use or marketing rules), it signals potential future changes in MA policy. This uncertainty can make it harder for health systems to plan for contracting, population health investments, and technology partnerships with MA plans.
Increased Regulatory Complexity Around Health Equity Incentives: The transition to the EHO4all metric and potential additions (e.g., geography-based criteria) may complicate quality reporting and require significant operational investment. Organizations may need to adapt care models, data capture, and performance tracking to meet these evolving benchmarks.