Medicare Advantage: 2025 and Beyond

Apr 3, 2025
{alt=GettyImages-1329277245-Doctor_Talking_to-Patient-RET-1, height=4579, max_height=1333.2362789343426, max_width=2000, size_type=auto_custom_max, src=https://5014803.fs1.hubspotusercontent-na1.net/hubfs/5014803/GettyImages-1329277245-Doctor_Talking_to-Patient-RET-1.jpg, width=6869} GettyImages-1329277245-Doctor_Talking_to-Patient-RET-1

April 3, 2025  |  Maureen Hennessey, PhD, CPCC, CPHQ

Presently, questions abound about the evolution of the Medicare Advantage (MA) program during the second Trump administration and the 119th Congress. The Director of the Office of Management and Budget (OMB), Russell Vought, has been confirmed by the Senate. Mr. Vought was a chapter author and key adviser to the Heritage Foundation’s controversial Project 2025, providing a blueprint for President Trump’s second term. As such, it is anticipated that he will have a pivotal role in White House policymaking and budgeting, favoring the loosening or elimination of government regulations and reductions in Medicare spending. Subsequently, Robert F. Kennedy, Jr. was confirmed by the Senate as Department of Health and Human Services (HHS) Secretary. Mr. Kennedy is widely known for his skepticism of vaccines, and his support for addressing chronic disease causes has also been noted. Himself a MA enrollee, Mr. Kennedy has commented on the appeal of MA plans but has also referred to affordability barriers for potential beneficiaries. On April 3, 2025, Mehmet Oz was confirmed by the Senate as administrator for the Centers for Medicare and Medicaid Services (CMS). In that role, Dr. Oz will provide oversight for multiple programs, including Medicare, encompassing both traditional Medicare and Medicare Advantage offerings.

Given what could be a very fluid and contentious landscape, the following comments are cautiously offered with a high degree of uncertainty. Pertinent to MA, here are a few events I’m closely watching.

 

CMS Administrator

Speculation exists that Dr. Mehmet Oz will support privatization initiatives favorable to MA plans (vs traditional Medicare). Conventionally, this could include autoenrollment within MA plans of Medicare beneficiaries, at inception of eligibility. However, looming on the horizon are MedPAC concerns about coding intensity and favorable selection, which Seema Verma, former CMS administrator during President Trump’s first administration, believes may lead to changes in risk adjustment payments. Indeed, during his confirmation hearing, Dr. Oz indicated an intention to address coding intensity sometimes called “upcoding,” if confirmed.

Combined with bipartisan concerns about insurance claims denials and unnecessary care delays, CMS may have to further address risk adjustment, claims denials, and care delay concerns before autoenrollment initiatives garner additional support. Depending on how these concerns are approached, Medicare Advantage Prescription Drug (MA-PD) plans may be searching further for reductions to maintain their margins.

 

Health Equity Index (HEI)

Some MA plans are advocating through their trade association for the elimination or postponement of the Medicare HEI and restoration of the MA Stars Reward Factor. The HEI measures MA plan performance on a select set of Star measures for a subset of beneficiaries: those with disabilities; those who qualify for low-income subsidies; and those who qualify for dual Medicare and Medicaid eligibility. While emphasizing the importance of closing care gaps leading to poor outcomes for beneficiaries adversely impacted by social risk factors, concern has been expressed that the HEI specifications exclude many beneficiaries with social risk factors and may disadvantage plans serving rural communities from qualifying for the HEI reward. They assert that some health plans, particularly those covering rural communities, may lack sufficient numbers to meet the minimum threshold eligible for the reward. They are calling on CMS to remove the enrollment threshold to permit all health plans to compete in all communities.

From another perspective, CMS has estimated that replacing the current reward factor with the HEI will yield a $5.12B saving over 10 years. Non-governmental entities, such as Deloitte, have estimated that addressing health equity gaps nationally could add US $2.8 trillion to the US GDP by 2040. Given that population health management methods have long emphasized decreasing health care costs, “health for all,” geographic health access, and patient engagement, MA incentives may well align with those emphases in the future. Dr. Oz, reportedly a champion of incentives to promote patient engagement and decrease chronic illness, may join forces with bipartisan rural health legislators (concerned about geographic health access), and re-calibration of Stars Rating methodologies may be forthcoming.

 

Drug Price Negotiations

The gravitational pull surrounding the Inflation Reduction Act (IRA) price negotiations in 2025 has raised considerable questions about its direction. As of January, 9 pharmaceutical manufacturers have filed legal challenges against the program, and most of the suits are in the appellate or briefing stages. The extent to which the new administration will legally defend this negotiation program remains to be seen and may offer clues to the intentions of the new administration regarding future negotiations. Yet another gravitational force exists within bipartisan support for negotiating Medicare drug prices, particularly among Medicare beneficiaries, and some politicians are seeking to decrease federal costs. However, it’s noteworthy that Project 2025 has advocated for the repeal of the IRA negotiation program, and for manufacturers to assume more of the costs for medications within the catastrophic tier, thus reducing the government burden. On January 29, 2025, CMS weighed in with a brief statement signaling a commitment to reducing drug costs, with an intention to offer stakeholders opportunities for input on ways to improve negotiations, with the dual goals of increasing beneficiary value and supporting innovation.

 

Conclusion

Stakeholders should monitor how value-based care and market-based bidding will be defined and implemented in the new administration. With CMS recently advocating for “value” and Dr. Oz a proponent of CMS’ value-based reimbursement program (Medicare Advantage), stakeholders should expect that value-based reimbursement, focusing on performance on quality, cost, and consumer experience, will continue. The question remains, though, regarding how those performance factors will be defined and weighted in the second Trump administration.

The new administration may offer greater flexibility in models, and Project 2025 has called for replacing the current MA formula-based payment model with a competitive bidding model. For example, a standard benefit plan could be developed, with all MA plans offering that benefit design, and competing on cost. The government would pay plans only for the actual market price for coverage. If reduced regulation and straight market-based bidding are in the future, competition could lead to narrower networks and formularies as plans scramble to compete on costs.

In summary, there are a considerable number of convictions, interests, and paradigms that are vying for adoption within the MA landscape, and manufacturers should be prepared with strategies to address an array of contingencies. Manufacturers should closely monitor present IRA negotiation legal challenges and revised or eliminated negotiation processes, prepare for further privatization presenting opportunities for MA plans, and anticipate ways that the Trump administration and 119th Congress will define and drive value and approaches to competitive bidding.

Discover the New Blueprint for Empowering Access with Precision AQ.