Forecasting 2025? It's a challenge!
Please bear with me as this newsletter gets somewhat technical; however, my goal is to attempt to explain the forces at play with our plans as we look to 2025.
I have two items of concern – recent news about Federal reimbursements to Medicare Advantage insurers and, going back to my last newsletter, the $2000 annual cap on out-of-pocket prescription costs. I will close with a brief update on negotiations between the Federal government and drug manufacturers - check out Katie Porter and her Famous Whiteboard.
CMS Announces Base Rate Cut for 2025
In early April, CMS announced a final decision on reimbursements to Medicare Advantage insurers for 2025, which included a small base rate cut. This is the second year in a row of base rate reductions.
Health insurers’ core gripe with this decision — which amounts to a 0.16% reduction in the benchmark rate — is that regulators based it on a measure of Medicare spending payers say is lower than spending in reality.
However, critics of the Medicare Advantage industry say the rates will barely touch insurers’ profits, while making an important step toward curbing overpayments in the privately managed alternative to traditional Medicare. “The extremely high margins made by MA plans will barely be touched,” the critics wrote.
The base pay decrease is also a result of the continued phase-in of changes to how regulators calculate risk adjustments, meant to make payments more accurate.
Medicare Advantage insurers have warned they could cut benefits, exit markets or raise premiums — or a combination of all three — if 2025 MA rates are too low. However, CMS said such actions shouldn’t be a result of the rates. It’s a modest base rate cut, though regulators stressed that insurers will still get billions of dollars more in 2025 than they will this year after coding for members’ medical conditions.
Under the finalized policies, “CMS anticipates adequate payment to MA and Part D plans to ensure stable premiums and benefits and plan options,” a CMS fact sheet reads.
Commentary: So, the Federal government and the Medicare Advantage insurers have two very different points of view on 2025 reimbursements. I believe that the reimbursement reduction, for a second year in a row, will have some effect the insurers, who then will be faced with a business decision. Accept lower margins, maintain benefits and keep growing membership? Or, reduce benefits to maintain margins and possibly lose some membership? All of these insurers are in this business for the long term, so only time will tell.
2025 Medicare D Benefit Improvement
Beginning in 2025, Part D enrollees’ out-of-pocket drug costs will be capped at $2,000.This amount will be indexed to rise each year after 2025 at the rate of growth in per capita Part D costs. (This cap does not apply to out-of-pocket spending on Part B drugs.)
Approximately 10 – 20% of my clients exceed the Initial Coverage phase, enter the Coverage Gap (aka Donut Hole), and spend more than $2,000 in copays and coinsurance each year. The above changes will be a huge help for these people.
Commentary – Definitely an excellent improvement for those in the greatest need. Again, what are the financial implications of this improvement? The insurers will want more money from the Federal government to pay for this benefit improvement. If they don’t get more money from the government, they may raise premiums charged to seniors to make up the difference.
Looming large over 2025 benefit and premium decisions by the insurers is the growing use and coverage of weight loss drugs. These prescriptions are expensive, and, to date, coverage has been limited to individuals who have diabetes. A recently published study at Brigham and Women’s Hospital showed that patients with overweight or obesity who have a history of heart disease, but no diabetes, had a clear benefit from taking weight loss drugs. This research will probably require the insurers to expand coverage of the drugs. Again, new costs....
Federal Government Negotiations with Drug Manufacturers - Update
In my last newsletter, I covered negotiations between the Federal government and drug manufacturers. Here is an update:
On February 1 of this year, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), sent initial offers to the participating drug companies of the first 10 prescription drugs selected for negotiation in the first cycle of the Medicare Drug Price Negotiation Program. Negotiations are continuing.
Katie Porter and Her Famous White Board
Many believe that this type of negotiation with the drug manufacturers will benefit consumers, but there are those who argue that squeezing the drug manufacturers will suppress research and development of new drugs.
Let’s look at the argument that price negotiations will suppress drug company research and development. Katie Porter is an American politician and lawyer who has been the U.S. representative from California. Katie is no slouch – raised on a farm in Iowa, graduated from Yale University and Harvard Law School. She uses her famous Whiteboard to grill Pharma CEO’s, and hits the Research and Development issue directly. Check out this video:
What Does Mean for 2025 Plans?
The proverbial rubber hits the road when you receive the 2025 Annual Notice of Changes from your carrier before Annual Enrollment Period (AEP) starts on October 15. If you have a stand-alone Prescription Drug Plan, will the insurers offset the new cost of the $2,000 annual out-of-pocket maximum to you in some form of higher premiums? If you are enrolled in a Medicare Advantage plan, will your benefits be reduced?
My view is that Medicare Advantage insurers are over-stating consequences to soften the impact on membership if they decide to make minor benefit reductions. (I call this “hanging crepe”.) For example, we may see reductions in Additional Benefits, such as dental, vision and OTC.
If your Medicare Advantage Plan/Prescription Drug Plan changes for 2025, we will review the changes together and decide what is the best choice for 2025. I am not an advocate of switching plans each year to get the best deal, but, it depends. As stated earlier, the Medicare Advantage insurers are in this business for the long term, and they will strive to stay competitive in this growing market.
All that said, I hope you have had a good Spring, and have been staying active. Summer is a time that more people get outside, so remember to be careful with the sun. Sunscreen is your friend!
If you have questions about any of this information, please do not hesitate to call or e-mail me.
Yours in good health,
Jeff
Jeffrey W. Werner
OTL Benefits – “On The Level”