1

April 1, 2024

NOTE: Medicare Advantage Organizations, Prescription Drug Plan Sponsors, and Other
Interested Parties

Announcement of Calendar Year (CY) 2025 Medicare Advantage (MA) Capitation Rates
and Part C and Part D Payment Policies

In accordance with section 1853(b)(1) of the Social Security Act (“the Act”), we are notifying
you of the annual capitation rate for each Medicare Advantage (MA) payment area for CY 2025
and the risk and other factors to be used in adjusting such rates.

In response to our request for comments on the Advance Notice of Methodological Changes for
CY 2025 MA Capitation Rates and Part C and Part D Payment Policies (CY 2025 Advance
Notice), published on January 31, 2024, CMS received submissions from professional
organizations, MA and Part D sponsors, advocacy groups, physicians, state Medicaid agencies,
pharmaceutical manufacturers, pharmacy benefit managers, pharmacies, and interested persons.
The Rate Announcement describes and responds to all of the substantive comments received.

After considering all comments received, we are finalizing policies in the Announcement of CY
2025 MA Capitation Rates and Part C and Part D Payment Policies (CY 2025 Rate
Announcement) that reflect CMS’ commitment to ensuring that people with Medicare receive
equitable, affordable, high quality, and whole person care now and in the future, especially the
most vulnerable. The policies in the CY 2025 Rate Announcement are an important step in our
efforts to make sure the MA and Part D programs meet the health care needs of all beneficiaries
while improving the quality and long-term stability of the Medicare program. For instance, the
CY 2025 Rate Announcement finalizes a new Part D risk adjustment model that reflects the
changes made to the Part D benefit by the Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-
169) that take effect in CY 2025, including a new $2,000 out of pocket cap.

The capitation rate tables for CY 2025 and supporting data are posted on the CMS website at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Ratebooks-and-
Supporting-Data.html. The statutory component of the regional benchmarks, qualifying counties,
and each county’s applicable percentage are also posted on this section of the CMS website.
 2

Attachment I of the Rate Announcement shows the final estimates of the National Per Capita
MA Growth Percentage for CY 2025 and the National Medicare Fee-for-Service (FFS) Growth
Percentage for CY 2025, used to calculate the CY 2025 capitation rates. As discussed in
Attachment I, the final estimate of the National Per Capita MA Growth Percentage for combined
aged and disabled beneficiaries is 2.31 percent, and the final estimate of the FFS Growth
Percentage is 2.33 percent. Attachment II provides a set of tables that summarizes many of the
key Medicare assumptions used in the calculation of the growth percentages.

Section 1853(b)(4) of the Act requires CMS to release county specific per capita FFS
expenditure information on an annual basis, beginning with March 1, 2001. In accordance with
this requirement, FFS data for CY 2022 were posted on the above website with the Advance
Notice.

Attachment II details the key assumptions and financial information behind the growth
percentages presented in Attachment I.

Attachment III presents responses to Part C payment-related comments on the CY 2025 Advance
Notice.

Attachment IV presents responses to Part D payment-related comments on the CY 2025

Advance Notice.

Attachment V provides the final Part D benefit parameters and details how they are updated.

Attachment VI presents responses to comments on updates for MA and Part D Star Ratings.

Attachment VII contains economic information for significant provisions in the CY 2025 Rate
Announcement.

Attachment VIII contains the RxHCC model risk adjustment factors and predictive ratio tables.

Attachment IX contains the 2024 CMS-HCC model predictive ratio tables.

Key Updates from the Advance Notice

Growth Percentages: Attachment I provides the final estimates of the National Per Capita MA
Growth Percentage and the FFS Growth Percentage, upon which the capitation rates are based,
and information on deductibles for Medical Savings Accounts. Each year for the Rate
Announcement, CMS updates the growth rates to be based on the most current estimate of per
capita costs, based on the available historical program experience and projected trend
assumptions at that time. The growth rates change between proposed and final as CMS
incorporates updated data and assumptions. This year, the change in growth rates from the
Advance Notice to the Rate Announcement is due primarily to incorporation of additional
 3

payment data, including through the fourth quarter of 2023. This updated payment data
moderately increased spending for some categories and decreased spending for others.
Additionally, the enrollment base used to calculate 2023 per capita costs was updated for the
Rate Announcement and resulted in greater Part A enrollment.

Technical Update to Medical Education Payments in the Non-End Stage Renal Disease
(ESRD) USPCC Baseline: The Secretary has directed the CMS Office of the Actuary
(OACT) to continue to phase in the technical update that removes MA-related indirect
medical education and direct graduate medical education costs from the historical and
projected expenditures supporting the final estimates (being released in this Rate
Announcement) of the non-ESRD FFS USPCCs, with 52 percent of the medical
education adjustment applied to the USPCCs in 2025.

Policies Adopted as Described

As in past years, policies in the Advance Notice that are not modified or retracted in the Rate
Announcement become effective for the upcoming payment year. Clarifications in the Rate
Announcement supersede information in the Advance Notice and prior Rate Announcements
as they apply for CY 2025.

Calculation of FFS Costs: The Secretary has directed the CMS OACT to adjust the FFS
experience for beneficiaries enrolled in Puerto Rico to reflect the propensity of “zero–dollar”
beneficiaries nationwide.

MA Benchmark, Quality Bonus Payments, and Rebate: We will continue to implement the
methodology, as described in the CY 2025 Advance Notice, used to derive the benchmark
county rates, how the qualifying bonus counties are identified, and the applicability of the Star
Ratings.

Location of Network Areas for Private Fee-for-Service (PFFS) Plans in Plan Year 2026: The list
of network areas for plan year 2026 is available on the CMS website at
https://www.cms.gov/medicare/health-drug-plans/private-fee-for-service-plans/network-
requirements.

Direct Graduate Medical Education (DGME) Carve-out Applied to Average Geographic

Adjustments (AGAs): As in past years, we will continue carving out FFS DGME amounts from
the MA capitation rates. As described in the CY 2025 Advance Notice, we will use a different
data source and methodology to develop the DGME amounts to carve out for hospitals
participating in the Maryland Total Cost of Care (TCOC) Model. (This is different than the
technical update related to medical education payments on behalf of MA enrollees in the non-
ESRD USPCC baseline discussed above.)
 4

Organ Acquisition Costs for Kidney Transplants: We will continue carving out Kidney
Acquisition Costs (KAC) from the MA capitation rates.

Indirect Medical Education (IME) Phase Out Applied to AGAs: We will continue phasing out
FFS IME amounts from the MA capitation rates. As described in the CY 2025 Advance Notice,
we will use a different data source and methodology to develop the IME amounts to phase out
for hospitals participating in the Maryland TCOC Model.

MA ESRD Rates: We will continue to set MA ESRD rates on a state basis.

MA Employer Group Waiver Plans (EGWPs): We will continue to use the payment
methodology as described in the Advance Notice, but with finalized bid-to-benchmark ratios
for CY 2025 MA EGWP Payment rates as indicated in the table below.

Applicable Percentage Bid to Benchmark Ratio

0.95 78.5%
1 76.7%
1.075 76.1%
1.15 76.5%

CMS-Hierarchical Condition Categories (CMS-HCC) Risk Adjustment Model (Non-PACE):

CMS is finalizing the continuation of the phase-in of the 2024 CMS-HCC model as proposed in
the CY 2025 Advance Notice by blending 67 percent of the risk score calculated using the
updated 2024 CMS-HCC risk adjustment model with 33 percent of the risk score calculated
using the 2020 CMS-HCC risk adjustment model.

CMS-HCC Risk Adjustment Model (PACE): For CY 2025, CMS will continue to use the
2017 CMS-HCC risk adjustment model and associated frailty factors to calculate risk scores
for participants in PACE organizations.

CMS-HCC ESRD Risk Adjustment Models:

• For Non-PACE Organizations: For CY 2025, CMS will continue to use the 2023 CMS-
HCC ESRD risk adjustment models to calculate risk scores for beneficiaries in dialysis,
transplant, and post-graft status.

• For PACE Organizations: For CY 2025, CMS will continue to use the 2019 CMS-HCC
ESRD risk adjustment models to calculate risk scores for participants in PACE
organizations with ESRD.

Frailty Adjustment for PACE Organizations: For CY 2025, CMS will continue to use the frailty
factors associated with the 2017 CMS-HCC model (refer to Table II-9 in the CY 2025 Advance
Notice) to calculate frailty scores for PACE organizations.
 5

Frailty Adjustment for Fully Integrated Dual Eligible Special Needs Plans (FIDE SNPs): For CY
2025, CMS will continue to use the frailty factors associated with the 2024 CMS-HCC model
and the 2020 CMS-HCC model (refer to Tables II-7 and II-8 in the CY 2025 Advance Notice) to
calculate frailty scores for FIDE SNPs. Also, consistent with CMS’ proposal to blend risk scores
for CY 2025 (67 percent 2024 CMS-HCC model and 33 percent 2020 CMS-HCC model), a
blended frailty score for FIDE SNPs will be compared with PACE frailty calculated in the same
manner to determine whether that FIDE SNP has a similar average level of frailty as PACE.

MA Coding Pattern Difference Adjustment: For CY 2025, CMS will continue to apply the
statutory minimum MA coding pattern difference adjustment of 5.90 percent.

Final CY 2025 CMS-HCC Risk Adjustment Model Normalization Factors: CMS will finalize the
CY 2025 Normalization Factors as proposed in the CY 2025 Advance Notice.

For CY 2025, for all CMS-HCC risk adjustment models, CMS calculated the normalization
factors using a five-year multiple linear regression methodology and average historical FFS risk
scores from 2019 through 2023.

• 2024 Part C CMS-HCC Model: 1.045

• 2020 Part C CMS-HCC Model: 1.153

• 2017 Part C CMS-HCC Model: 1.157

• 2023 ESRD Dialysis CMS-HCC Model: 1.044

• 2019 ESRD Dialysis CMS-HCC Model: 1.103

• 2023 ESRD Functioning Graft Model: 1.074

• 2019 ESRD Functioning Graft Model: 1.159

Sources of Diagnoses for Risk Scores Calculated with CMS-HCC and CMS-HCC ESRD Risk
Adjustment Models:

• For Non-PACE organizations: CMS will continue the policy first adopted for CY 2022
to calculate all risk scores for payment to MA organizations and certain demonstrations
using only risk adjustment-eligible diagnoses from encounter data and FFS claims.

• For PACE organizations: CMS will continue using the same method of calculating risk
scores that we have been using since CY 2015, which is to pool risk adjustment-
eligible diagnoses from the following sources to calculate a single risk score (with no
weighting): (1) encounter data, (2) Risk Adjustment Processing System (RAPS) data,
and (3) FFS claims.
 6

RxHCC Risk Adjustment Models: For CY 2025, CMS will implement the updated version of the
RxHCC risk adjustment model proposed in the CY 2025 Advance Notice that incorporates
changes made to the Part D benefit for CY 2025 as a result of the IRA.

• For Non-PACE organizations: CMS will implement the model calibrated on 2021
diagnoses and 2022 expenditure data as proposed in the CY 2025 Advance Notice.

• For PACE organizations: CMS will implement the model calibrated on 2018 diagnoses
and 2019 expenditure using specialty-based filtering logic. In addition, the RxHCC
model for PACE organizations incorporates the clinical update proposed in the CY 2025
Advance Notice that aligns the model used for PACE organizations with the model used
for Non-PACE organizations.

Final CY 2025 RxHCC Risk Adjustment Model Normalization Factors: For CY 2025, for the
RxHCC models, CMS calculated separate normalization factors for Medicare Advantage
prescription drug (MA-PD) plans and stand-alone Medicare Part D prescription drug plans
(PDPs), using the long-standing five-year linear slope methodology and average historical risk
scores from 2018 through 2022, excluding 2021 for the RxHCC model being finalized for Non-
PACE organizations, and from 2016 through 2020 for the RxHCC model being finalized for
PACE organizations. We will use the factor that would be used for MA-PD plans for use in
calculating risk scores for PACE organizations.

• 2025 RxHCC model for organizations other than PACE:

o MA-PD plans: 1.073

o PDPs: 0.955

• 2025 RxHCC model for PACE organizations: 1.163

Source of Diagnoses for Risk Scores calculated with the RxHCC Risk Adjustment Models:

• For Non-PACE organizations: CMS will continue the policy first adopted for CY 2022
to calculate all risk scores for payment to MA organizations and certain demonstrations
using only risk adjustment-eligible diagnoses from encounter data and FFS claims.

• For PACE organizations: CMS will continue using the same method of calculating risk
scores that we have been using since CY 2015, which is to pool risk adjustment-
eligible diagnoses from the following sources to calculate a single risk score (with no
weighting): (1) encounter data, (2) RAPS data, and (3) FFS claims.

Annual Adjustments to Medicare Part D Benefit Parameters in 2025: As described in the CY

2025 Advance Notice, we will update the defined standard benefit deductible amount by
 7

multiplying the CY 2023 amounts by the CY 2024 Annual Percentage Increase (API) and
rounding as specified by the statute.

Part D Calendar Year EGWP Prospective Reinsurance Amount: As proposed in the Draft CY
2025 Part D Redesign Program Instructions, and as finalized in the Final CY 2025 Part D
Redesign Program Instructions published concurrently with this Rate Announcement1, we will
update the methodology used to calculate the prospective reinsurance payments to all Part D
Calendar Year EGWPs as described.

Part D Risk Sharing: As discussed in the CY 2025 Advance Notice, we will apply no changes to
the current threshold risk percentages for CY 2025.

Retiree Drug Subsidy Amounts: As discussed in the CY 2025 Advance Notice, we will use the
same methodology as in prior years to update the cost threshold and cost limit for qualified
retiree prescription drug plans.

/s/
Meena Seshamani, M.D., Ph.D.
Director, Center for Medicare

I, Jennifer Wuggazer Lazio, am a Member of the American Academy of Actuaries. I meet the
Qualification Standards of the American Academy of Actuaries to render the actuarial opinion
contained in this Rate Announcement. My opinion is limited to the following sections of this
Rate Announcement: The growth percentages and United States per capita cost estimates
provided and discussed in Attachments I, II and III; the qualifying county determination,
calculations of Fee-for-Service cost, direct graduate medical education carve-out, kidney
acquisition cost carve-out, IME phase out, MA benchmarks, EGWP rates, and ESRD rates
discussed in Attachment III; the Medicare Part D Benefit Parameters: Annual Adjustments for
Defined Standard Benefit in 2025 described in Attachments IV and V; and the economic
information contained in Attachment VII. As described in Attachment III of this Rate
Announcement, the Secretary has directed the CMS Office of the Actuary to phase in the MA-
related medical education technical adjustment to the USPCCs that are used in determining the
growth percentages.

/s/
Jennifer Wuggazer Lazio, F.S.A., M.A.A.A.

1 Refer to CMS’ Draft CY 2025 Part D Redesign Program Instructions and Final CY 2025 Part D Redesign Program Instructions.
 8

Director
Parts C & D Actuarial Group
Office of the Actuary

Attachments
 9

2025 RATE ANNOUNCEMENT

Announcement of Calendar Year (CY) 2025 Medicare Advantage (MA) Capitation Rates
and Part C and Part D Payment Policies ..............................................................................1
Key Updates from the Advance Notice .....................................................................................2
Policies Adopted as Described...................................................................................................3
Attachment I. Final Estimates of the National Per Capita Growth Percentage and the
National Medicare Fee-for-Service Growth Percentage for CY 2025...............................12
Attachment II. Key Assumptions and Financial Information ........................................................14
Attachment III. Responses to Public Comments on Part C Payment Policy .................................32
Section A. General Comments .................................................................................................32
Section B. Estimates of the MA and FFS Growth Percentages for CY 2025 ..........................35
Section C. MA Benchmark, Quality Bonus Payments, and Rebate ........................................49
Section D. Calculation of Fee-for-Service Costs .....................................................................52
Section E. Direct Graduate Medical Education .......................................................................64
Section F. Organ Acquisition Costs for Kidney Transplants ...................................................66
Section G. IME Phase Out .......................................................................................................67
Section H. MA ESRD Rates ....................................................................................................67
Section I. MA EGWPs .............................................................................................................69
Section J. CMS-HCC Risk Adjustment Model for CY 2025 ..................................................72
Section K. ESRD Risk Adjustment Models for CY 2025 .......................................................83
Section L. Frailty Adjustment for PACE Organizations and FIDE SNPs ...............................84
Section M. MA Coding Pattern Difference Adjustment ..........................................................88
Section N. Normalization Factors for the CMS-HCC Risk Adjustment Models ....................91
Attachment IV. Responses to Public Comments on Part D Payment Policy...............................103
Section A. Annual Adjustments to Medicare Part D Benefit Parameters in 2025 ................103
Section B. Sunset of the Coverage Gap Discount Program and Establishment of the
Manufacturer Discount Program ..................................................................................104
Section C. Part D Premium Stabilization ...............................................................................104
Section D. Part D Calendar Year EGWP Prospective Reinsurance Amount ........................104
Section E. Part D Risk Sharing ..............................................................................................105
Section F. Retiree Drug Subsidy Amounts ............................................................................105
Section G. RxHCC Risk Adjustment Model .........................................................................106
Section H. Normalization for the RxHCC Risk Adjustment Models ....................................112
Attachment V. Final Updated Benefit Parameters for the Defined Standard Benefit and
Changes in the Payment Methodology for Medicare Part D for CY 2025 ......................121
Section A. Annual Percentage Increase in Consumer Price Index (CPI) ..............................123
 10

Section B. Calculation Methodology .....................................................................................123

Section C. Annual Percentage Increase in Average Expenditures for Part D Drugs Per
Eligible Beneficiary ......................................................................................................125
Section D. Retiree Drug Subsidy Amounts ...........................................................................126
Attachment VI. Updates for Part C and D Star Ratings ..............................................................128
Part C and D Star Ratings and Future Measurement Concepts .............................................128
Reminders for 2025 Star Ratings ...........................................................................................128
Measure Updates for 2025 Star Ratings ................................................................................129
Extreme and Uncontrollable Circumstances Policy for the 2025 Star Ratings .....................134
Changes to Existing Star Ratings Measures for the 2025 Measurement Year and Beyond ..136
Retirement of Star Ratings Measures ....................................................................................147
Display Measures ...................................................................................................................148
Retirement of Display Measures ............................................................................................153
Potential New Measure Concepts and Methodological Enhancements for Future Years .....154
Attachment VII. Economic Information for the CY 2025 Rate Announcement .........................162
Section A. Changes in the Payment Methodology for Medicare Advantage and PACE
for CY 2025 ..................................................................................................................162
A1. Medicare Advantage and PACE non-ESRD Ratebook ............................................162
A2. Medicare Advantage and PACE ESRD Ratebooks ..................................................162
A3. CMS-HCC Risk Adjustment Model .........................................................................163
A4. ESRD Risk Adjustment Model .................................................................................163
A5. Frailty Adjustment for FIDE SNPs ...........................................................................163
A6. MA Coding Pattern Difference Adjustment .............................................................164
A7. Part C Normalization ................................................................................................164
Section B. Changes in the Payment Methodology for Medicare Part D for CY 2025 ..........164
B1. Annual Percentage Increase for Part D Parameters ..................................................164
B2. Part D Risk Adjustment Model .................................................................................164
B3. Part D Normalization ................................................................................................165
Attachment VIII. RxHCC Risk Adjustment Factors and Predictive Ratio Tables ......................166
Table VIII-1. 2025 RxHCC Model Relative Factors for Continuing Enrollees
(2021/2022 calibration, HCPCS-based filtering logic) ................................................166
Table VIII-2. 2025 RxHCC Model Relative Factors for New Enrollees, Non-Low
Income (2021/2022 calibration, HCPCS-based filtering logic) ...................................171
Table VIII-3. 2025 RxHCC Model Relative Factors for New Enrollees, Low Income
(2021/2022 calibration, HCPCS-based filtering logic) ................................................173
Table VIII-4. 2025 RxHCC Model Relative Factors for New Enrollees, Institutional
(2021/2022 calibration, HCPCS-based filtering logic) ................................................175
 11

Table VIII-5. 2025 RxHCC Model Relative Factors for Continuing Enrollees
(2018/2019 calibration, specialty-based filtering logic)...............................................176
Table VIII-6. 2025 RxHCC Model Relative Factors for New Enrollees, Non-Low
Income (2018/2019 calibration, specialty-based filtering logic) .................................181
Table VIII-7. 2025 RxHCC Model Relative Factors for New Enrollees, Low Income
(2018/2019 calibration, specialty-based filtering logic)...............................................182
Table VIII-8. 2025 RxHCC Model Relative Factors for New Enrollees, Institutional
(2018/2019 calibration, specialty-based filtering logic)...............................................183
Table VIII-9. 2025 RxHCC Model with Disease Hierarchies (previously published in the
2023 Rate Announcement) ...........................................................................................184
Table VIII-10. 2025 RxHCC Model Predictive Ratios by Deciles of Predicted Risk
(sorted low to high): Continuing Enrollee Model Segments, 2021/2022 calibration
sample (HCPCS-filtered diagnoses).............................................................................186
Table VIII-11. 2025 RxHCC Model Predictive Ratios by Deciles of Predicted Risk
(sorted low to high): New Enrollee Model Segments, 2021/2022 calibration
sample (HCPCS-filtered diagnoses).............................................................................187
Attachment IX. 2024 CMS-HCC Model Predictive Ratio Tables ...............................................188
Table IX-1. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Non-
Dual, Aged (Age >=65) Continuing Enrollee ..............................................................188
Table IX-2. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Non-
Dual, Disabled (Age <65) Continuing Enrollee ...........................................................189
Table IX-3. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Full
Benefit Dual, Aged (Age >=65) Continuing Enrollee .................................................190
Table IX-4. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Full
Benefit Dual, Disabled (Age <65) Continuing Enrollee ..............................................191
Table IX-5. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Partial
Benefit Dual, Aged (Age >=65) Continuing Enrollee .................................................192
Table IX-6. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Partial
Benefit Dual, Disabled (Age <65) Continuing Enrollee ..............................................193
Table IX-7. Predictive Ratios by Deciles of Predicted Risk (sorted low to high):
Institutional Continuing Enrollee .................................................................................194
 12

Attachment I. Final Estimates of the National Per Capita Growth Percentage and the
National Medicare Fee-for-Service Growth Percentage for CY 2025

Table I-1 below shows the National Per Capita MA Growth Percentage (NPCMAGP) for CY
2025. An adjustment of -1.29 percent for the combined aged and disabled cohort is included in
the NPCMAGP to account for corrections to prior years’ estimates as required by section
1853(c)(6)(C). The combined aged and disabled change is used in the development of the
ratebook.

Table I-1. Increase in the NPCMAGP for CY 2025

Prior increases Current increases NPCMAGP for 2025
2003 to 2024 2003 to 2024 2024 to 2025 2003 to 2025 with §1853(c)(6)(C)
adjustment1
Aged + Disabled 112.590% 109.843% 3.651% 117.505% 2.31%
1 Current increases for 2003-2025 divided by the prior increases for 2003-2024.

Table I-2 below provides the change in the FFS United States Per Capita Cost (USPCC), which
was used in the development of the county benchmarks. The percentage change in the FFS
USPCC is shown as the current projected FFS USPCC for CY 2025 divided by projected FFS
USPCC for CY 2024 as estimated in the CY 2024 Rate Announcement released on March 31,
2023.

Table I-2. FFS USPCC Growth Percentage for CY 2025

Aged + Disabled Dialysis–only ESRD
Current projected 2025 FFS USPCC $1,130.85 $9,713.00
Prior projected 2024 FFS USPCC 1,105.10 9,544.97
Percent change 2.33% 1.76%

Table I-3 below shows the monthly actuarial value of the Medicare deductible and coinsurance
for CYs 2024 and 2025. In addition, for CY 2025, the actuarial value of deductibles and
coinsurance is being shown for non-ESRD only, since MA plan bids for CY 2025 exclude costs
for ESRD enrollees. These data were furnished by the Office of the Actuary.
 13

Table I-3. Monthly Actuarial Value of Medicare Deductible and Coinsurance for CYs 2024
and 2025
2024 2025 Change 2025 non-ESRD
Part A Benefits $36.62 $36.68 0.2% $34.71
Part B Benefits1 161.71 170.32 5.3 162.29
Total Medicare 198.33 207.00 4.4 197.00
1 Includes the amounts for outpatient psychiatric charges.

Medical Savings Account (MSA) Plans. The maximum deductible for MSA plans for CY 2025
is $16,350.
 14

Attachment II. Key Assumptions and Financial Information

The USPCCs are the basis for the National Per Capita MA Growth Percentage. Below is a table
that compares last year’s estimates of USPCCs with current estimates for 2003 to 2026. In
addition, this table shows the current projections of the USPCCs through 2027. We are also
providing a set of tables that summarize many of the key Medicare assumptions used in the
calculation of the USPCCs. Most of the tables include information for the years 2003 through
2027.

Most of the tables in this attachment present combined aged and disabled non-ESRD data. The
ESRD information presented is for the combined aged-ESRD, disabled-ESRD, and ESRD only.

All of the information provided in this attachment applies to the Medicare Part A and Part B
programs. Caution should be employed in the use of this information. It is based upon
nationwide averages, and local conditions can differ substantially from conditions nationwide.

None of the data presented here pertain to the Medicare Part D prescription drug benefit.

Table II-1. Comparison of Current & Previous Estimates of the Total USPCC – non-ESRD
Part A Part B Part A + Part B
Calendar Current Last year’s Current Last year’s Current Last year’s Ratio
year estimate estimate estimate estimate estimate estimate
2003 $296.18 $296.18 $247.66 $247.66 $543.84 $543.84 1.000
2004 314.08 314.08 271.06 271.06 585.14 585.14 1.000
2005 334.83 334.83 292.86 292.86 627.69 627.69 1.000
2006 345.30 345.30 313.70 313.70 659.00 659.00 1.000
2007 355.44 355.44 330.68 330.68 686.12 686.12 1.000
2008 371.90 371.90 351.04 351.04 722.94 722.94 1.000
2009 383.91 383.91 367.49 367.49 751.40 751.40 1.000
2010 383.93 383.93 376.34 376.34 760.27 760.27 1.000
2011 387.73 387.73 385.30 385.30 773.03 773.03 1.000
2012 377.37 377.37 391.93 391.93 769.30 769.30 1.000
2013 380.03 380.03 398.72 398.72 778.75 778.75 1.000
2014 370.23 370.23 418.20 418.36 788.43 788.59 1.000
2015 373.86 373.86 434.84 435.00 808.70 808.86 1.000
2016 377.61 377.62 444.05 444.28 821.66 821.90 1.000
2017 383.10 383.09 459.01 459.19 842.11 842.28 1.000
2018 388.25 388.12 492.57 489.65 880.82 877.77 1.003
2019 400.79 400.79 525.05 521.89 925.84 922.68 1.003
 15

Part A Part B Part A + Part B

Calendar Current Last year’s Current Last year’s Current Last year’s Ratio
year estimate estimate estimate estimate estimate estimate
2020 404.09 403.90 525.19 522.48 929.28 926.38 1.003
2021 410.03 409.38 572.47 569.14 982.50 978.52 1.004
2022 433.89 431.47 607.46 603.83 1,041.35 1,035.30 1.006
2023 449.85 459.23 657.69 658.56 1,107.54 1,117.79 0.991
2024 458.16 464.05 683.05 692.10 1,141.21 1,156.15 0.987
2025 466.52 480.98 716.36 729.01 1,182.88 1,209.99 0.978
2026 479.63 496.85 760.94 772.41 1,240.57 1,269.26 0.977
2027 503.41 809.11 1,312.52

Table II-2. Comparison of Current & Previous Estimates of the FFS USPCC – non-ESRD
Part A Part B Part A + Part B
Calendar Current Last year’s Current Last year’s Current Last year’s Ratio
year estimate estimate estimate estimate estimate estimate
2010 $371.20 $369.60 $374.30 $374.30 $745.50 $743.90 1.002
2011 371.15 369.45 383.17 383.17 754.32 752.62 1.002
2012 356.97 355.15 390.70 390.70 747.67 745.85 1.002
2013 363.75 361.78 394.49 394.49 758.24 756.27 1.003
2014 364.20 362.07 408.91 409.16 773.11 771.23 1.002
2015 369.31 366.98 427.78 428.06 797.09 795.04 1.003
2016 371.51 369.00 433.28 433.62 804.79 802.62 1.003
2017 373.86 370.97 448.00 448.28 821.86 819.25 1.003
2018 378.12 374.54 479.09 474.15 857.21 848.69 1.010
2019 383.83 380.01 506.20 500.82 890.03 880.83 1.010
2020 375.84 370.93 478.49 473.65 854.33 844.58 1.012
2021 390.92 384.05 557.20 550.73 948.12 934.78 1.014
2022 407.73 398.10 578.70 573.64 986.43 971.74 1.015
2023 419.82 428.63 628.51 629.07 1,048.33 1,057.70 0.991
2024 431.23 440.70 654.25 664.40 1,085.48 1,105.10 0.982
2025 441.68 451.09 689.17 698.89 1,130.85 1,149.98 0.983
2026 446.80 459.88 731.88 739.42 1,178.68 1,199.30 0.983
2027 468.46 777.17 1,245.63
 16

Table II-3. Comparison of Current & Previous Estimates of the ESRD Dialysis-only FFS
USPCC
Part A Part B Part A + Part B
Calendar Current Last year’s Current Last year’s Current Last year’s Ratio
year estimate estimate estimate estimate estimate estimate
2010 $2,952.75 $2,952.75 $3,881.39 $3,881.39 $6,834.14 $6,834.14 1.000
2011 2,862.38 2,862.38 3,908.01 3,908.01 6,770.39 6,770.39 1.000
2012 2,774.49 2,774.49 3,944.59 3,944.59 6,719.08 6,719.08 1.000
2013 2,794.19 2,794.19 4,088.66 4,088.66 6,882.85 6,882.85 1.000
2014 2,784.52 2,784.52 4,115.70 4,115.70 6,900.22 6,900.22 1.000
2015 2,775.84 2,775.84 4,060.87 4,060.87 6,836.71 6,836.71 1.000
2016 2,895.91 2,895.91 4,081.27 4,081.27 6,977.18 6,977.18 1.000
2017 2,883.27 2,883.27 4,102.66 4,102.66 6,985.93 6,985.93 1.000
2018 2,952.21 2,952.21 4,526.09 4,526.09 7,478.30 7,478.30 1.000
2019 3,040.74 3,040.74 4,614.18 4,614.18 7,654.92 7,654.92 1.000
2020 3,082.55 3,082.55 4,542.51 4,542.51 7,625.06 7,625.06 1.000
2021 3,295.54 3,295.54 4,786.27 4,786.27 8,081.81 8,081.81 1.000
2022 3,428.51 3,395.47 4,834.89 4,863.56 8,263.40 8,259.03 1.001
2023 3,576.05 3,632.99 5,146.20 5,296.62 8,722.25 8,929.61 0.977
2024 3,799.72 3,835.56 5,259.82 5,709.41 9,059.54 9,544.97 0.949
2025 3,999.61 4,084.94 5,713.39 6,778.51 9,713.00 10,863.45 0.894
2026 4,254.81 4,347.69 5,986.57 7,309.00 10,241.38 11,656.69 0.879
2027 4,519.44 6,279.35 10,798.79
 17

Table II-4. Basis for ESRD Dialysis-only FFS USPCC Trend

Part A Part B Part A & Part B
All ESRD Adjustment Adjusted All ESRD Adjustment Adjusted All ESRD Adjustment Adjusted
Calendar
cumulative factor for dialysis-only cumulative factor for dialysis-only cumulative factor for dialysis-only
year FFS trend dialysis- cumulative FFS trend dialysis-only cumulative FFS trend dialysis-only cumulative
only trend trend trend
2023 1.03432 1.00842 1.04303 1.06117 1.00303 1.06439 1.05003 1.00523 1.05553
2024 1.08983 1.01692 1.10827 1.08132 1.00607 1.08789 1.08485 1.01059 1.09635
2025 1.13758 1.02549 1.16657 1.12310 1.00912 1.13334 1.12911 1.01596 1.14713
2026 1.20005 1.03413 1.24101 1.17339 1.01218 1.18768 1.18445 1.02141 1.20981
2027 1.26403 1.04285 1.31819 1.22721 1.01524 1.24592 1.24249 1.02689 1.27591

Table II-5. Summary of Key Projections

Part A1
Calendar year Fiscal year (FY) inpatient FY Part A total reimbursement
Year CPI percent change PPS update factor (incurred)
2003 1.4% 3.0% 3.5%
2004 2.1 3.4 8.4
2005 2.7 3.3 8.8
2006 4.1 3.7 5.9
2007 3.3 3.4 5.7
2008 2.3 2.7 7.6
2009 5.8 2.7 6.7
2010 0.0 1.9 3.0
2011 0.0 −0.6 4.5
2012 3.6 −0.1 0.4
2013 1.7 2.8 4.7
2014 1.5 0.9 0.6
2015 1.7 1.4 3.2
2016 0.0 0.9 4.3
2017 0.3 0.2 4.0
2018 2.0 1.8 4.0
2019 2.8 1.9 5.5
2020 1.6 3.1 3.2
2021 1.3 2.9 5.0
2022 5.9 2.5 5.1
2023 8.7 4.3 6.6
2024 3.2 3.1 4.9
2025 2.6 2.6 4.3
2026 2.2 3.2 5.5
2027 2.4 3.2 3.5
 18

Part B2
Physician fee schedule
ESRD dialysis update
Calendar year Fees3 Residual4 Outpatient hospital factor5 Total
2003 1.4% 4.5% 4.4% 6.8%
2004 3.8 5.9 11.1 9.8
2005 2.1 3.2 10.8 7.0
2006 0.2 4.6 5.1 6.1
2007 -1.4 3.5 8.2 4.3
2008 -0.3 4.0 6.3 4.8
2009 1.4 2.3 5.4 3.9
2010 2.3 2.1 6.6 2.4
2011 0.8 2.3 7.1 2.5% 2.3
2012 -1.2 0.8 7.2 2.1 1.7
2013 -0.1 0.2 7.2 2.3 0.8
2014 0.4 0.6 12.6 2.8 3.4
2015 -0.3 -0.3 7.4 0.0 2.7
2016 -0.4 -0.3 5.2 0.15 1.9
2017 0.1 1.1 7.4 0.55 2.8
2018 0.5 1.1 11.4 0.3 6.2
2019 1.2 2.7 5.2 1.3 5.8
2020 0.2 -11.5 -5.6 1.7 -1.3
2021 4.8 13.1 19.8 1.6 8.7
2022 -1.1 5.0 4.3 1.9 5.5
2023 -0.5 3.1 9.1 3.0 6.6
2024 -1.6 3.6 8.3 2.1 3.2
2025 -2.0 3.2 7.9 1.7 4.7
2026 0.4 2.5 8.1 2.3 5.9
2027 0.4 3.3 8.4 2.3 6.1
1 Percent change over prior year.
2 Percent change in charges per aged Part B enrollee.

3 Reflects the physician update and legislation affecting physician services—for example, the addition of new preventive services enacted in

1997, 2000, and 2010.

4 Residual factors are factors other than price, including volume of services, intensity of services, and age/sex changes.
5 The ESRD Prospective Payment System was implemented in 2011.
 19

Table II-6. Medicare Enrollment Projections (In millions)

non-ESRD Total
Part A Part B
Calendar year Aged Disabled Aged Disabled
2003 34.437 5.961 33.038 5.215
2004 34.849 6.283 33.294 5.486
2005 35.257 6.610 33.621 5.776
2006 35.795 6.889 33.975 6.017
2007 36.447 7.167 34.465 6.245
2008 37.378 7.362 35.140 6.438
2009 38.257 7.574 35.832 6.664
2010 39.091 7.832 36.516 6.938
2011 39.950 8.171 37.247 7.254
2012 41.687 8.411 38.546 7.502
2013 43.087 8.629 39.779 7.732
2014 44.533 8.776 41.063 7.894
2015 45.911 8.853 42.311 7.977
2016 47.370 8.862 43.623 7.990
2017 48.893 8.940 44.944 8.007
2018 50.457 8.696 46.310 7.861
2019 52.119 8.530 47.765 7.735
2020 53.683 8.318 49.224 7.572
2021 55.040 8.069 50.517 7.361
2022 56.531 7.746 51.883 7.097
2023 58.423 7.394 53.503 6.819
2024 60.074 7.056 55.085 6.482
2025 61.747 6.845 56.696 6.296
2026 63.463 6.845 58.333 6.295
2027 65.040 6.936 59.875 6.379

non-ESRD FFS
Part A Part B
Calendar year Aged Disabled Aged Disabled
2003 29.593 5.628 28.097 4.875
2004 29.946 5.931 28.300 5.128
2005 30.014 6.178 28.287 5.339
2006 29.362 6.149 27.459 5.270
2007 28.838 6.225 26.782 5.297
2008 28.613 6.241 26.301 5.311
2009 28.563 6.288 26.071 5.374
2010 28.903 6.455 26.261 5.556
2011 29.210 6.659 26.440 5.736
2012 29.960 6.693 26.744 5.779
2013 30.330 6.691 26.948 5.790
2014 30.603 6.618 27.060 5.732
2015 30.947 6.488 27.274 5.609
2016 31.629 6.378 27.814 5.503
2017 31.916 6.299 27.882 5.361
2018 32.167 5.867 27.926 5.027
2019 32.466 5.466 28.016 4.665
2020 32.220 4.952 27.665 4.201
 20

Part A Part B
Calendar year Aged Disabled Aged Disabled
2021 31.438 4.424 26.820 3.713
2022 30.870 3.899 26.128 3.248
2023 30.616 3.396 25.573 2.789
2024 30.320 2.774 25.192 2.184
2025 30.429 2.283 25.255 1.724
2026 30.894 2.139 25.647 1.583
2027 31.249 2.063 25.967 1.500

ESRD
ESRD - Total ESRD - FFS
Calendar year Total Part A Total Part B Total Part A Total Part B
2003 0.340 0.331 0.319 0.309
2004 0.353 0.342 0.332 0.321
2005 0.366 0.355 0.344 0.332
2006 0.382 0.370 0.353 0.340
2007 0.396 0.383 0.361 0.347
2008 0.411 0.397 0.367 0.353
2009 0.426 0.412 0.374 0.360
2010 0.442 0.428 0.388 0.373
2011 0.429 0.416 0.371 0.358
2012 0.441 0.429 0.379 0.366
2013 0.454 0.441 0.385 0.372
2014 0.469 0.456 0.390 0.377
2015 0.482 0.468 0.393 0.379
2016 0.496 0.481 0.400 0.384
2017 0.511 0.495 0.404 0.386
2018 0.525 0.507 0.405 0.387
2019 0.538 0.520 0.407 0.388
2020 0.542 0.524 0.398 0.379
2021 0.533 0.515 0.331 0.312
2022 0.528 0.509 0.292 0.273
2023 0.525 0.509 0.257 0.239
2024 0.531 0.517 0.234 0.219
2025 0.542 0.526 0.230 0.213
2026 0.555 0.539 0.232 0.216
2027 0.568 0.552 0.235 0.219
 21

Table II-7a. Part A Projections for non-ESRD (Aged+Disabled)*

Hospice: Total
reimbursement
Calendar year Inpatient hospital SNF Home health agency Managed care (in millions)
2003 $2,594.78 $370.63 $124.28 $457.87 $5,733
2004 2,714.57 413.44 133.89 500.73 6,832
2005 2,818.21 450.54 140.87 602.29 8,016
2006 2,764.82 475.07 141.30 757.25 9,368
2007 2,707.49 504.24 143.72 905.73 10,518
2008 2,695.88 536.68 151.00 1,074.98 11,404
2009 2,651.47 551.67 153.86 1,246.01 12,274
2010 2,627.03 571.74 155.18 1,249.70 13,126
2011 2,585.95 623.31 138.31 1,299.28 13,897
2012 2,489.44 541.69 130.82 1,360.09 15,068
2013 2,485.37 540.47 128.47 1,399.68 15,263
2014 2,424.11 534.33 123.88 1,354.21 15,346
2015 2,407.71 530.93 126.06 1,416.03 16,159
2016 2,425.80 504.76 121.43 1,475.44 17,128
2017 2,404.74 484.60 117.33 1,586.71 18,228
2018 2,380.36 465.54 113.86 1,695.37 19,561
2019 2,343.50 444.25 108.46 1,909.92 21,168
2020 2,172.07 450.95 95.45 2,127.61 22,308
2021 2,165.19 420.89 93.06 2,238.30 22,997
2022 2,121.71 448.07 90.38 2,543.48 24,162
2023 2,111.02 418.61 87.52 2,777.98 26,268
2024 2,069.07 404.68 89.50 2,931.52 27,950
2025 2,028.60 418.43 92.63 3,055.93 29,922
2026 1,989.92 439.46 101.58 3,221.23 32,555
2027 2,044.15 461.75 107.99 3,423.54 35,613
*Average annual reimbursement per enrollee on an incurred basis.
 22

Table II-7b. Part A Projections for non-ESRD (Aged+Disabled)*

Calendar year Inpatient hospital SNF Home health agency Managed care
2003 $248.02 $35.43 $11.88 $297.71
2004 259.34 39.50 12.79 326.66
2005 271.67 43.43 13.58 370.30
2006 276.94 47.59 14.15 375.52
2007 280.65 52.27 14.90 384.98
2008 288.38 57.41 16.15 405.41
2009 290.56 60.45 16.86 433.45
2010 290.52 63.23 17.16 422.53
2011 286.48 69.05 15.34 435.96
2012 280.78 61.05 14.78 432.55
2013 286.35 62.22 14.82 420.62
2014 286.17 63.03 14.64 383.80
2015 289.86 63.89 15.21 383.32
2016 295.04 61.35 14.80 389.99
2017 298.76 60.17 14.61 400.77
2018 303.85 59.39 14.56 406.16
2019 310.41 58.77 14.38 428.81
2020 300.17 62.24 13.20 446.10
2021 315.67 61.26 13.58 435.15
2022 324.88 68.54 13.86 464.69
2023 338.33 66.99 14.04 481.93
2024 347.78 67.92 15.06 484.29
2025 352.45 72.62 16.12 489.19
2026 350.91 77.45 17.95 510.09
2027 365.95 82.62 19.37 533.42
*Average monthly reimbursement per enrollee on an incurred basis. Excludes cost plan expenditures included in
National Claims History file. Denominator for all fields except Managed Care is Part A FFS enrollment.
Denominator for Managed Care field is Part C enrollment.
 23

Table II-8a. Part B Projections for non-ESRD (Aged+Disabled)*

Calendar year Physician fee schedule Outpatient hospital Durable medical equipment
2003 $1,226.51 $364.77 $196.96
2004 1,344.01 418.85 195.61
2005 1,397.43 477.65 196.83
2006 1,396.40 497.47 197.78
2007 1,368.35 526.92 195.68
2008 1,367.83 555.09 200.92
2009 1,386.03 587.61 183.61
2010 1,429.74 623.13 183.76
2011 1,459.64 662.97 175.84
2012 1,412.72 697.86 173.70
2013 1,369.64 735.33 152.53
2014 1,351.36 821.29 128.57
2015 1,336.28 873.84 132.77
2016 1,313.76 908.35 120.73
2017 1,294.45 949.82 112.30
2018 1,287.56 1,033.92 127.05
2019 1,303.15 1,054.17 128.93
2020 1,110.27 948.78 123.23
2021 1,256.75 1,069.49 121.19
2022 1,209.84 1,023.29 130.33
2023 1,186.41 1,073.74 151.31
2024 1,143.44 1,103.67 144.15
2025 1,116.01 1,149.36 143.82
2026 1,127.23 1,224.04 149.87
2027 1,146.02 1,306.62 155.29
 24

Physician
Calendar year Carrier lab administered drugs Other carrier Intermediary lab
2003 $73.73 $182.58 $147.21 $75.18
2004 78.48 195.20 158.78 80.47
2005 82.71 178.77 184.02 84.16
2006 85.59 185.41 175.66 84.51
2007 90.65 186.97 176.55 84.38
2008 94.50 184.43 182.19 85.78
2009 101.60 196.19 178.46 79.19
2010 103.81 196.41 178.67 80.23
2011 103.85 209.50 179.44 83.31
2012 111.73 209.34 185.17 84.64
2013 111.79 216.91 177.08 81.74
2014 117.60 224.56 173.55 55.45
2015 113.99 252.11 174.94 55.26
2016 100.91 271.45 172.90 56.21
2017 100.65 280.51 177.43 54.99
2018 107.29 304.36 176.15 52.94
2019 108.74 329.29 174.11 50.30
2020 109.14 325.00 166.32 51.75
2021 122.81 339.57 165.19 56.21
2022 111.42 361.55 191.29 51.81
2023 102.43 397.67 205.78 46.37
2024 102.07 415.37 156.09 45.12
2025 103.16 443.91 154.98 44.63
2026 112.40 474.79 158.24 46.53
2027 116.20 506.23 161.73 46.98
*Average reimbursement per enrollee on an incurred basis.
 25

Calendar year Other intermediary Home health agency Managed care

2003 $113.99 $136.75 $421.40
2004 119.58 156.45 471.37
2005 139.78 179.44 560.31
2006 142.09 202.88 769.94
2007 151.16 232.33 931.18
2008 158.20 252.43 1,104.26
2009 187.44 282.09 1,203.78
2010 193.08 283.25 1,221.28
2011 198.15 254.42 1,276.29
2012 205.08 239.36 1,368.13
2013 194.43 234.07 1,497.49
2014 200.51 227.73 1,703.30
2015 210.36 224.84 1,829.45
2016 214.18 219.09 1,938.57
2017 220.57 208.93 2,096.91
2018 228.23 206.53 2,375.34
2019 235.82 201.42 2,704.30
2020 208.37 187.29 3,062.48
2021 219.60 182.57 3,326.73
2022 212.61 173.40 3,814.42
2023 220.49 168.95 4,328.66
2024 218.70 168.28 4,688.83
2025 221.37 170.75 5,036.97
2026 229.72 183.83 5,412.57
2027 238.28 195.13 5,823.94
* Average annual reimbursement per enrollee on an incurred basis.
 26

Table II-8b. Part B Projections for non-ESRD (Aged+Disabled)*

Calendar year Physician fee schedule Outpatient hospital Durable medical equipment
2003 $118.58 $35.27 $19.04
2004 129.94 40.49 18.91
2005 136.44 46.64 19.22
2006 142.19 50.65 20.14
2007 144.71 55.72 20.69
2008 149.92 60.84 22.02
2009 156.10 66.18 20.68
2010 162.73 70.92 20.91
2011 167.79 74.91 20.27
2012 166.32 80.61 20.36
2013 165.24 87.00 18.29
2014 167.65 99.96 15.82
2015 169.74 108.75 16.72
2016 169.02 114.38 15.35
2017 171.21 122.79 14.65
2018 175.76 138.01 17.13
2019 184.30 147.54 17.94
2020 164.63 139.34 18.18
2021 198.20 166.96 19.03
2022 201.98 168.97 21.69
2023 209.88 187.79 26.70
2024 213.91 204.39 26.88
2025 216.74 221.05 27.86
2026 222.51 239.37 29.51
2027 230.04 259.78 31.07
 27

Physician
Calendar year Carrier lab administered drugs Other carrier Intermediary lab
2003 $7.13 $17.65 $14.23 $7.27
2004 7.59 18.87 15.35 7.78
2005 8.08 17.45 17.97 8.22
2006 8.72 18.88 17.89 8.60
2007 9.59 19.77 18.67 8.92
2008 10.36 20.22 19.97 9.40
2009 11.44 22.10 20.10 8.92
2010 11.82 22.35 20.34 9.13
2011 11.97 24.15 20.68 9.60
2012 13.18 24.70 21.85 9.99
2013 13.52 26.23 21.42 9.89
2014 14.63 27.94 21.59 6.90
2015 14.53 32.13 22.29 7.04
2016 13.03 35.04 22.32 7.26
2017 13.36 37.23 23.55 7.30
2018 14.70 41.69 24.13 7.25
2019 15.39 46.60 24.64 7.12
2020 16.21 48.27 24.70 7.69
2021 19.40 53.64 26.09 8.88
2022 18.64 60.49 32.01 8.67
2023 18.15 70.49 36.47 8.22
2024 19.13 77.84 29.25 8.46
2025 20.07 86.37 30.15 8.68
2026 22.23 93.90 31.30 9.20
2027 23.36 101.76 32.51 9.44
*Average monthly reimbursement per enrollee on an incurred basis. Excludes cost plan expenditures included in
National Claims History file. Denominator for all fields except Managed Care is Part A FFS enrollment.
Denominator for Managed Care field is Part C enrollment.
 28

Calendar year Other intermediary Home health agency Managed care

2003 $11.02 $13.22 $254.39
2004 11.56 15.12 284.58
2005 13.65 17.52 318.75
2006 14.47 20.66 353.34
2007 15.99 24.57 366.01
2008 17.34 27.67 383.90
2009 21.11 31.77 385.73
2010 21.98 32.24 380.01
2011 22.84 29.29 389.17
2012 24.20 28.21 393.60
2013 23.51 28.27 406.92
2014 24.95 28.29 435.78
2015 26.81 28.60 446.95
2016 27.65 28.22 462.58
2017 29.28 27.68 476.58
2018 31.26 28.23 512.52
2019 33.37 28.47 551.14
2020 30.95 27.79 583.99
2021 34.69 28.81 589.52
2022 35.57 28.98 636.01
2023 39.08 29.91 683.56
2024 40.98 31.50 706.00
2025 43.07 33.18 736.57
2026 45.43 36.31 781.91
2027 47.90 39.18 831.49
* Average reimbursement per enrollee on an incurred basis.
 29

Table II-9. 2025 Projections by Service Category for non-ESRD (Aged+Disabled)*

Current Last year’s
Service type estimate estimate Ratio
Part A
Inpatient hospital $2,028.60 $2,122.61 0.956
SNF 418.43 434.96 0.962
Home health agency 92.63 102.09 0.907
Managed care 3,055.93 3,108.74 0.983
Part B
Physician fee schedule 1,116.01 1,139.05 0.980
Outpatient hospital 1,149.36 1,266.88 0.907
Durable medical equipment 143.82 138.33 1.040
Carrier lab 103.16 128.70 0.802
Physician Administered Drugs 443.91 410.19 1.082
Other carrier 154.98 187.50 0.827
Intermediary lab 44.63 54.52 0.819
Other intermediary 221.37 221.29 1.000
Home health agency 170.75 182.19 0.937
Managed care 5,036.97 5,007.97 1.006
* Average reimbursement per enrollee on an incurred basis.
 30

Table II-10. Claims Processing Costs as a Fraction of Benefits

Calendar
year FFS Part A FFS Part B Total Part A Total Part B
2003 0.001849 0.011194 0.001849 0.011194
2004 0.001676 0.010542 0.001676 0.010542
2005 0.001515 0.009540 0.001515 0.009540
2006 0.001245 0.007126 0.001245 0.007126
2007 0.000968 0.006067 0.000968 0.006067
2008 0.000944 0.006414 0.000944 0.006414
2009 0.000844 0.005455 0.000844 0.005455
2010 0.000773 0.005055 0.000773 0.005055
2011 0.000749 0.004396 0.000749 0.004396
2012 0.001008 0.003288 0.001008 0.003288
2013 0.000994 0.002846 0.000994 0.002846
2014 0.001003 0.002884 0.001003 0.002884
2015 0.000952 0.002730 0.000952 0.002730
2016 0.000852 0.002348 0.000852 0.002348
2017 0.000833 0.002111 0.000833 0.002111
2018 0.000836 0.001953 0.000836 0.001953
2019 0.000699 0.001644 0.000699 0.001644
2020 0.000625 0.001536 0.000625 0.001536
2021 0.001038 0.002708 0.000600 0.001399
2022 0.001094 0.002801 0.000582 0.001310
2023 0.001102 0.002916 0.000579 0.001330
2024 0.001102 0.002916 0.000579 0.001330
2025 0.001102 0.002916 0.000579 0.001330
2026 0.001102 0.002916 0.000579 0.001330
2027 0.001102 0.002916 0.000579 0.001330
 31

Approximate Calculation of the USPCC, the National MA Growth Percentage for

Combined (Aged+Disabled) Beneficiaries, and the FFS USPCC (Aged+Disabled)

The following procedure will approximate the actual calculation of the USPCCs from the
underlying assumptions for the contract year for both Part A and Part B.

Part A: The Part A USPCC can be approximated by using the assumptions in the tables titled
“Part A Projections for non-ESRD (Aged+Disabled)” and “Claims Processing Costs as a
Fraction of Benefits.” Information in the “Part A Projections” table is presented on a calendar
year per capita basis. First, add the per capita amounts over all types of providers (excluding
hospice). Next, multiply this amount by 1 plus the loading factor for administrative expenses
from the “Claims Processing Costs” table. Then, divide by 12 to put this amount on a monthly
basis.

Part B: The Part B USPCC can be approximated by using the assumptions in the tables titled
“Part B Projections for non-ESRD (Aged+Disabled)” and “Claims Processing Costs as a
Fraction of Benefits.” Information in the “Part B Projections” table is presented on a calendar
year per capita basis. First, add the per capita amounts over all types of providers. Next, multiply
by 1 plus the loading factor for administrative expenses from the “Claims Processing Costs”
table and then divide by 12 to put this amount on a monthly basis.

The National Per Capita MA Growth Percentage: The National Per Capita MA Growth
Percentage for CY 2025 (before adjusting for prior years’ over/under estimates) is calculated by
adding the USPCCs for Part A and Part B for CY 2025 and then dividing by the sum of the
current estimates of the USPCCs for Part A and Part B for 2024.

The FFS USPCC: The tables used to calculate the total USPCC can also be used to approximate
the calculation of the FFS USPCC. The per capita data presented by type of provider in the
projection tables for both Part A and Part B are based on total enrollment. To approximate the
FFS USPCCs, first add the corresponding provider types under Part A and Part B separately. For
the FFS calculations, do not include the managed care provider type. Next, rebase the sum of the
per capita amounts for FFS enrollees, i.e., multiply the sum by total enrollees and divide by FFS
enrollees. (The enrollment tables in this attachment now also include FFS enrollment). Then,
multiply by 1 plus the loading factor for administrative expenses and divide by 12. The result
will only be approximate because there is an additional adjustment to the FFS data which
accounts for cost plan data which comes through the FFS data system. This cost plan data is in
the total per capita amounts by type of provider, but it is removed for the FFS calculations.
 32

Attachment III. Responses to Public Comments on Part C Payment Policy

Section A. General Comments

Comment: CMS received a large number of comments in response to the CY 2025 Advance
Notice, with many supporting the direction of the proposals in the Advance Notice and others
expressing concerns about the impacts of the proposed updates. Commenters who supported the
proposals in the Advance Notice believed that the continuation of the phase-in of the technical
adjustment to the growth rates is a much-needed step to ensure payment accuracy and preserve
the financial integrity of the Medicare Trust Fund. A few commenters appreciated that the
proposals included in the Advance Notice provide stability in the MA and Part D programs,
particularly in light of upcoming Part D redesign and other new requirements in the MA and Part
D programs. A couple of commenters expressed continued support for the policies established in
the CY 2024 Rate Announcement, with one commenter noting that the risk adjustment model
finalized for CY 2024 was an important step in reducing overpayments to MA plans, and another
writing that the policies established for CY 2024 have not negatively impacted plan availability
or choice. Additionally, several comments expressed general support for MA, highlighting the
success of the MA program and the value the program brings to enrollees in the form of
enhanced benefits and lower cost sharing.

Many of the commenters who did not support the proposed changes included in the Advance
Notice saw the net effect of the proposals as cuts to the MA program that may increase costs for
beneficiaries and reduce the quality and quantity of benefits currently offered by MA plans and
special needs plans (SNPs). Commenters expressed concern that such impacts could differ across
geographic markets and patient groups, such as dual eligible enrollees or enrollees with chronic
conditions, and decrease the stability of the program. These commenters urged CMS to not
implement the proposed updates, with one commenter particularly emphasizing that CMS
consider the changes in the context of other upcoming regulatory requirements included in the
MA and Part D final rule and related to Pharmacy Direct and Indirect Remuneration (DIR)
policy change effective in 2024. A commenter requested that CMS analyze the net effect of the
proposed changes on beneficiaries enrolled in SNPs. Additionally, several commenters noted
that depressed payment growth rates are not aligned with increasing inflation and can indirectly
result in negative impacts to provider payments, potentially stressing the provider workforce and
resulting in decreased provider availability. One commenter believed that the level of the
payment change included in the CY 2024 Rate Announcement has already resulted in reduced
plan availability, beneficiary access, and supplemental benefits offerings. Another commenter,
while expressing support for the MA program, requested that CMS monitor how well the MA
program serves beneficiaries in terms of spending, benefits, quality, outcomes, and access to
providers.
 33

A number of the commenters who did not support the proposals in the CY 2025 Advance Notice
expressed concern that the proposed 3.70 percent increase in MA payment was too high and
urged CMS to reduce MA rates to a level commensurate with FFS rates. These commenters
opposed the estimated $16 billion increase in plan payments and expressed concern that CMS
overpays MA plans, citing investigations and reports primarily from the Office of Inspector
General (OIG) and the Medicare Payment Advisory Commission (MedPAC). Many of these
commenters stated the MA program is negatively impacting Medicare’s financial and long-term
sustainability and expressed support for increased oversight of the MA plans and for risk
adjustment data validation (RADV) audits of MA plans’ coding practices to address harmful
corporate practices, abuses and gaming, such as upcoding, favorable selection, and prior
authorization delays and denials. A commenter stated that MA payments should strike a balance
between encouraging insurers to enter and remain in the MA market and providing value for
beneficiaries, taxpayers, and Medicare.

Additionally, a few commenters cited a lack of transparency relating to various proposals in the
Advance Notice, and a commenter noted that the level of technicality and density of the Advance
Notice can deter community-based organizations and Medicare enrollees from commenting.

Response: CMS thanks commenters for their thoughts and input regarding payments made under
the MA program. CMS has a fiduciary duty to be a steward of the Medicare program. Protecting
and strengthening Medicare for the over 66 million Americans who have it now, and all the
beneficiaries in the future, is a key priority for CMS. Core to this mission is to maintain stability
for Medicare beneficiaries in both Medicare FFS and MA. The policies finalized for CY 2025
are projected to increase average payments to MA organizations by 3.70 percent in CY 2025,
which will provide continued stability to the MA market and MA beneficiaries. As we did for
CY 2024, we are finalizing policies that are commonsense, clinically-based technical updates
that are crucial to ensuring that payments to MA organizations are up to date and reflect current
diagnostic and expenditure trends. The updates included in the CY 2025 Rate Announcement
ensure accurate, appropriate payments to MA organizations and prevent wasteful Medicare
spending. These policies were proposed and finalized using careful analyses, in alignment with
CMS’ strategic pillars, especially our commitment to health equity, at the top of mind. Further,
we note that MA payments, though different than FFS payments, are closely tied to FFS payment
levels and are reflective of market considerations.

We respectfully disagree with those commenters’ claims that this continued reasonable update to
payments in MA is actually a payment cut that will result in increased costs or fewer benefits for
beneficiaries. As a commenter described, despite the fact that the projected 3.32 percent payment
change finalized in the CY 2024 Rate Announcement was lower than recent years’ rates, plan
 34

availability, choice, enrollment, and benefit offerings remained stable or grew in 2024.2 For CY
2024, on average, a beneficiary will be able to choose from 43 MA plans, which, in addition to
providing stability from CYs 2023 to 2024, represents the highest point of plan availability
relative to recently preceding years. Availability of SNPs is also at its highest level historically,
with 1,333 plans available nationwide, representing a 4 percent increase from CY 2023. Overall
MA enrollment has similarly not been negatively impacted by the projected 3.32 percent
payment increase we finalized in the CY 2024 Rate Announcement and has increased by nearly
6 percent from January 2023 to January 2024. As an example, enrollment in Dual-Eligible
Special Needs Plans (D-SNPs) grew by nearly 20 percent from January 2023 to January 2024.
Further, for CY 2024, 66 percent of MA-PDs charge no plan premium, consistent with CY 2023.
And finally, in CY 2024, average rebate payments to plans, which fund supplemental benefits,
increased for CY 2024 and at least 97 percent of individual plans offer some form of
supplemental benefits. Additionally, 99 percent of Medicare beneficiaries have access to at least
one or more plans with dental, fitness, vision, and hearing benefits, and 97 percent of SNPs offer
at least some supplemental benefits. CMS also notes that, given the increasing interest in and
availability of supplemental benefits, starting with CY 2024 dates of services, MA organizations
will be newly required to submit data for supplemental benefits through encounter data reporting.
This effort intends to increase transparency around and better document the use and value of
supplemental benefits in MA.

Given the stability recorded year-over-year following the changes announced in the CY 2024
Rate Announcement, CMS expects that this year’s estimated 3.70 percent increase to similarly
provide continued stability in beneficiary access, choice, and benefits. CMS reminds readers that
the updates and the continued planned phase-in of the risk adjustment model proposed in the CY
2025 Advance Notice are technical, data-driven, and clinically-based updates that improve the
accuracy of payments to MA organizations, as required under the statute governing the MA
program. As stated in the CY 2024 Rate Announcement, CMS expects MA organizations to
recognize the importance of maintaining stability in the MA program and have strong business
plans, long term financial strength, and a sustainable and robust business trajectory.

Finally, CMS recognizes that plan sponsors are facing several different updates to the MA and
Part D programs over the next few years and is cognizant of the operational complexity of these
changes. CMS is making every effort to provide resources to help stakeholders prepare for
upcoming changes to the MA and Part D programs. For example, in September 2023, CMS held
a User Group training session focused on CY 2025 Part D risk adjustment model updates, and
CMS encourages interested parties to monitor Health Plan Management System (HPMS)
memoranda for other training opportunities and informational resources. Additionally, although

2Refer to the Medicare Advantage/Part D Contract and Enrollment Data files. See additional analyses of this and other data
sources on MA and Part D by the Kaiser Family Foundation.
 35

CMS recognizes that the document is highly technical, given its focus on capitation and payment
rates, we invited all interested parties to provide comment on the Advance Notice. We also
released a Fact Sheet and FAQs that summarized key proposed updates and the impact of such
changes. We also note that CMS did receive many comments from beneficiaries and community-
facing organizations.

Section B. Estimates of the MA and FFS Growth Percentages for CY 2025

Phase-in of Technical Adjustment to the non-ESRD USPCC Baseline Regarding MA-Related

Medical Education Expenses

Comment: A commenter expressed appreciation for the phased-in approach to the technical
adjustment that began with the CY 2024 MA rates.

Response: We appreciate the support.

Comment: A couple of commenters expressed concern that the continued phase-in of the
technical adjustment would reduce the non-ESRD FFS growth rate during a period when MA
plans are experiencing higher utilization and cost trends. Many commenters requested that CMS
consider pausing the continued phase-in of the technical adjustment for CY 2025, extending the
phase-in period (ex: over five years with 40 percent of the technical adjustment for CY 2025), or
delaying the continued phase-in until at least 2026 or 2027, in order to further mitigate the
impact of the technical adjustment.

A couple of commenters expressed concern that the reduction in the growth rate for the technical
adjustment will exacerbate the lower-than-expected growth rates.

Response: We appreciate the concerns raised by the commenters. Section 1886(d)(11) of the Act
directs the Secretary to provide inpatient prospective payment system hospitals with an
additional payment amount for IME costs for discharges of MA enrollees, and section
1886(h)(3)(D) of the Act directs the Secretary to provide hospitals with an additional payment
amount for DGME costs associated with services furnished to MA enrollees. The non-ESRD
FFS USPCCs in ratebooks prior to CY 2024 had included both IME and DGME costs paid to
hospitals on behalf of MA enrollees. Consequently, MA benchmarks prior to CY 2024 had
included these admission-related costs even though CMS, and not MA organizations, had been
paying these costs associated with MA enrollees directly to hospitals. That is, the non-ESRD
FFS USPCCs in ratebooks prior to CY 2024 had included amounts paid for IME and GME
associated with services for MA enrollees, and those are not costs for Part A and Part B services
“for individuals who are not enrolled in an MA plan” per section 1853(c)(1)(D) of the Act.

Under authority in sections 1853(c)(1)(D) and 1876(a)(4) of the Act related to the development
of the FFS per capita cost estimates used for MA rates, in response to comments, the Secretary
 36

has directed the CMS Office of the Actuary to change the phase in of the medical education
technical adjustment to the USPCCs to 52 percent of this medical education adjustment applied
to the USPCCs in 2025.

Comment: A couple of commenters requested greater transparency with additional information

regarding the calculation of the technical adjustment.

Response: The CY 2024 and CY 2025 Advance Notices indicated that the baseline development
and modeling supporting the USPCCs had been updated to separately identify the historical and
projected costs of IME and DGME paid to hospitals by CMS associated with services furnished
to MA enrollees. This update in the modeling stems from separate projections of IME and
DGME by FFS versus MA coverages.

We provided the preliminary impacts on the growth rates of the technical adjustment in the CY
2025 Advance Notice, and we now provide the final impacts of the technical adjustment in this
Rate Announcement, for the FFS growth rate and the MA growth rate, so that stakeholders can
understand how the technical adjustment will impact the county rates in their plan service area.

In the table below, we provide the updated impact of the technical adjustment for IME/DGME
on the final estimate of the 2025 non-ESRD FFS USPCC (being released in this Rate
Announcement). Note that the 2025 Part B non-ESRD FFS USPCC is unaffected by the
technical adjustment for IME/DGME. As such, the following table illustrates the development of
the 2025 Part A non-ESRD FFS USPCC including the technical adjustment.

With 33% With 52% With full

implementation implementation (100%)
of technical of technical implementation of
update update technical update
Projection for Contract Year 2025 (informational) for CY 2025 rates (informational)
a. Part A FFS Enrollment (annual, in 32.712 32.712 32.712
millions)

Reimbursements (in millions):

b. Part A reimbursements including all $179,473.98 $179,473.98 $179,473.98
MA medical education

c. MA medical education amount (as a ($3,987.55) ($6,283.42) ($12,083.50)

negative number)

d. Part A reimbursements excluding $175,486.43 $173,190.56 $167,390.49

MA medical education
d = (b + c)
 37

With 33% With 52% With full

implementation implementation (100%)
of technical of technical implementation of
update update technical update
Projection for Contract Year 2025 (informational) for CY 2025 rates (informational)

e. Part A FFS Admin loading 1.001102 1.001102 1.001102

f. 2025 Part A non-ESRD FFS $447.54 $441.68 $426.89

USPCC
f = [(d * e) / a / 12]

g. 2025 Part B non-ESRD FFS $689.17 $689.17 $689.17

USPCC

h. 2025 non-ESRD FFS USPCC $1,136.71 $1,130.85 $1,116.06

h=f+g

i. 2024 non-ESRD FFS USPCC from $1,105.10 $1,105.10 $1,105.10

CY 2024 Rate Announcement

j. CY 2025 FFS growth rate 2.86% 2.33% 0.99%

j = h/i – 1 (rounded to hundredth of a
percent)

k. Impact of increase in phase-in on n/a -0.53% -1.87%

CY 2025 FFS growth rate (additive
impact, compared to 33% phase-in)

As stated earlier, we provided the preliminary impacts on the growth rates of the technical
adjustment in the CY 2025 Advance Notice, and we now provide the final impacts of the
technical adjustment in this Rate Announcement. For the MA growth rate, the updated impact of
the technical adjustment for MA-related medical education expenses on the final estimate of the
2025 non-ESRD Total USPCC (being released in this Rate Announcement) is as follows. The
impact of the increase in the phase-in on the final estimate of the 2025 MA growth rate being
released in this Rate Announcement (based on the change in the non-ESRD Total USPCC, which
includes both FFS and Part C projections) compared to the 2025 growth rate assuming 33
percent phase-in is -1.01 percent for full (100 percent) implementation of the medical education
 38

change (provided for informational purposes) and -0.28 percent for 52 percent implementation in
2025.

Estimates of non-ESRD USPCCs and Growth Rates

Comment: A commenter acknowledged and appreciated CMS’ continued effort to improve the
level of detail regarding the methodology and components of the USPCCs and growth rates.
Another commenter expressed appreciation for CMS’ diligence in its growth percentage
considerations and calculations.

Another commenter appreciated the information CMS included in the CY 2025 Advance Notice
regarding the data and assumptions used to derive the USPCCs, including the IRA’s Part B drug
related provisions as well as the 340B remedy payments discussed on pages 17-18 of the CY
2025 Advance Notice, and the responses to questions provided in a widely attended actuarial
user group call in February 2024.

Response: We appreciate the support.

Comment: A large number of commenters encouraged CMS to incorporate recent cost and
utilization data (including fourth quarter 2023) and explore policy options to ensure that the CY
2025 MA benchmarks reflect higher utilization and cost trends and inflation observed by
commenters. Commenters reported that a large number of MA organizations, as well as
Accountable Care Organizations (ACOs), have experienced increased utilization (particularly in
the fourth quarter of 2023) that may stem from delayed services during the COVID-19 pandemic
and questioned why CMS has not detected a similar increase in utilization among FFS
beneficiaries. Commenters expressed concern that the growth rates did not reflect higher
utilization and cost trends in the U.S. health care market and the impacts of ongoing inflation that
are expected to continue into 2025, and would be insufficient to cover the cost of care for
Medicare beneficiaries in CY 2025 (including the long term costs associated with COVID-19)
which could lead to higher beneficiary premiums and/or reduced supplemental benefits.

One of these commenters characterized the reduction in 2024 and 2025 FFS USPCC trends
between the CY 2024 Rate Announcement and the CY 2025 Advance Notice to be
“unsubstantiated,” “unsupported,” and “without explanation.” A couple of commenters
characterized the CY 2025 growth rates as “inadequate” that “do not reflect reality.”

Several commenters expressed concern that downward restated estimates of FFS costs for 2024
and 2025, compared to last year’s estimates, are inconsistent with higher utilization and costs
seen elsewhere in the U.S. health care market, particularly for Medicare-eligible populations.
Several commenters urged CMS to consider the full range of available sources when considering
data that may be incorporated into the growth rate calculation.
 39

A commenter noted that the 2025 FFS USPCC adjustment for prior periods stemmed from a
decrease from 2022 to 2023 in Part A and a decrease from 2023 to 2024 in Part B, in part due to
CMS assuming that outpatient utilization would not return to pre-pandemic levels, and found this
assumption to be inconsistent with recent commentary from publicly-held hospital companies
regarding 2023 and 2024 inpatient and outpatient volumes. Another commenter noted that their
MA and Medicare Supplement (i.e., Medigap) internal data indicated that outpatient/Part B
experience had accelerated throughout 2023, especially in the 4th quarter of 2023, and cited an
MA plan survey showing accelerating outpatient utilization trends, which would indicate that
outpatient utilization is still moving towards pre-pandemic levels.

A few commenters cited some specific causes of increased utilization and cost trend, such as
seasonal vaccinations (ex: RSV), use of new Alzheimer treatments, uptick in Part B prescription
drugs used to treat cancer, use of GLP-1 (Glucagon-like peptide-1) drugs, other Part B medical
pharmacy treatments, and increases in musculoskeletal, circulatory system, and respiratory
system surgeries. A few commenters noted the costs associated with compliance of recent MA
regulatory requirements and noted that MA plans are facing the implementation of CY 2025 Part
D changes, whereby MA-PD plans may need to allocate more rebates to keep Part D premiums
paid by their enrollees from escalating.

Several commenters noted the cost growth of more than 7 percent in the 2023 FFS USPCCs (and
over 6 percent in the 2023 Total USPCCs) in the CY 2025 Advance Notice and noted 2023
trends were higher than historical years. One of these commenters characterized the decline in
trends for 2024 and 2025 FFS USPCCs when compared to the higher trends for 2023 (and 2026
and 2027) FFS USPCCs to be “an aggressive assumption” and “unsubstantiated” and not
reasonable. A couple of commenters indicated that it was unclear why CMS was projecting cost
growth in the CY 2025 Advance Notice of less than 4 percent for both 2024 and 2025. A
commenter noted that the increase in the 2023 to 2024 Part B FFS USPCC is projected to be less
than 4 percent, whereas the 2024 Medicare Part B premium had increased nearly 6 percent.

A couple of commenters noted an analysis that the FFS growth rate was lower than the trends
that are observed when comparing the current estimates of the 2025 and 2024 FFS USPCCs (i.e.,
without factoring in any prior period adjustments) and noted that impacts will vary
geographically. A few commenters noted that the 2024 and 2025 FFS USPCC trends were the
lowest trend experienced since 2017, excluding 2022 (which was impacted by the COVID-19
pandemic). A couple of commenters indicated that the overall impact of the growth rate was
among the lowest in a decade, compounding the low growth rate finalized in the CY 2024 Rate
Announcement.

A couple of commenters requested that CMS ensure that adequate adjustments are included in
the projections for the utilization trend in 2020-2023, the costs for providing care for people
 40

dually eligible for Medicare and Medicaid and older populations disproportionately impacted by
the pandemic, as well as the additional hospital, testing, and vaccination costs associated with
COVID-19.

A commenter indicated that MA plans face many of the same cost pressures as commercial plans
face, citing an MA plan survey regarding utilization and medical expense trends. A couple of
commenters noted that MA plans face pressure from providers to increase payments considering
inflation, workforce challenges, and continued pandemic-related costs. Several commenters
expressed concern that lower-than-expected payment rates would be passed on to beneficiaries
and providers, particularly value-based care arrangements.

A commenter acknowledged that CMS does not typically incorporate anticipated legislative
changes into the projections, but expressed concern that potential legislation could increase
provider payment, which would increase the risk that the CY 2025 growth rates may be
inadequate. Another commenter urged CMS to incorporate any increase for Medicare physician
payments into the final growth rate calculation if Congress passes legislation in the near future.

A commenter reviewed the non-hospice expenditures incurred through November 2023 in the
January 2024 ACO REACH National Reference Population file, which indicated that fourth
quarter 2023 trends are coming back up compared to the lower trends in the third quarter. The
commenter expressed concern that CMS may be projecting based on the lower third quarter 2023
trends and that the assumptions supporting 2024 and 2025 “may not be actuarially sound” in
light of the data supporting higher trends (based on recent announcements from publicly-held
hospital companies, MA payers, and ACO REACH model data).

A few commenters expect that CMS will update the growth rates to incorporate actual claims
experience through the fourth quarter of 2023, and implored that CMS consider the fourth
quarter 2023 utilization data when developing the final CY 2025 growth rates.

Response: Section 1853 of the Act requires that FFS per capita cost estimates be used in
developing MA rates and sets the general approach to updating the USPCCs and growth rates.

The USPCC modeling approach used by CMS reflects projected changes in the factors used to
update Medicare FFS payment rates. The projected expenditures for some of the Medicare
payment systems include the expectation of inflation including projected market basket changes
for inpatient, SNF, home health agency, and outpatient hospital projections and consumer price
index (CPI) updates for durable medical equipment projections.

The growth percentages are based on CMS’ best estimate of historical program experience and
projected trend at the time those values are announced. We continue to consider it best practice
to base the growth rates on the most recent data and assumptions available at the time those
 41

values are announced. Therefore, for each release of the growth rates, CMS updates historical
enrollment and claims, as well as projection factors, based on the most recent data.

The baseline supporting the USPCCs and growth rates has been revised since the CY 2025
Advance Notice. A key change since the CY 2025 Advance Notice has been to incorporate 4th
quarter 2023 spending into the USPCC baseline, as is typical when updating the baseline to
include the most recent data for the Rate Announcement. We are aware of numerous reports
from MA organizations and stakeholders stating that MA organizations’ trends, especially for
fourth quarter 2023, is inconsistent with the CY 2025 Advance Notice non-ESRD USPCC trends
(that is, Medicare FFS cost trends). We are not aware of all of the specific drivers accounting for
the experience of these MA organizations. We have reviewed incomplete fourth quarter 2023
Medicare FFS incurred experience and it is consistent with our projections.

Also, we are clarifying the CMS statement regarding recent outpatient trends relative to pre-
pandemic trends. FFS baselines prepared prior to 2020 assumed increasing utilization of
outpatient services for 2023 and beyond. There was a notable decrease in outpatient utilization
during 2020, which is primarily attributed to the COVID-19 pandemic. Utilization has increased
since 2020, but the actual 2023 utilization remains below the 2023 level reflected in pre-2020
projected baselines. Recent annual trends have returned to levels projected prior to the pandemic.

As reported in the CY 2024 Rate Announcement, over the last several years, a greater
proportion of those dually eligible for Medicaid and Medicare have been enrolling in MA which
has decreased the average FFS per capita cost for inpatient hospital, SNF, and home health
spending and may be contributing to the faster spending growth for some MA organizations.

Comment: Several commenters characterized the CY 2025 growth rates as “not in line with
available data” regarding Medicare costs and medical inflation and “ignores the financial and
utilization realities.” A commenter acknowledged that the published analyses are not inherently
calculated in the same manner as the growth rates but found it concerning that the growth rates
were “drastically different.” Commenters cited published analyses of indicators higher than the
growth rate including the following: National Health Expenditures (NHE) projections of
Medicare spending, Congressional Budget Office estimates of Medicare spending, projections of
medical cost trend/inflation by consulting firms, two MA plan surveys of utilization and cost
trends, internal actuarial survey results, analyses of medical cost trends in the commercial
market, analyses of medical inflation in the national health system based on the Bureau of Labor
Statistics’ CPI, and numerous public reports of MA plans’ utilization and cost trends.

A commenter questioned why the 2025 FFS USPCC was not increasing at a higher rate given
that the preliminary CY 2025 Maximum Out-of-Pocket (MOOP) limits (calculated using
percentiles of estimated FFS beneficiary spend) were increasing at higher rates than the growth
rates.
 42

Another commenter indicated that the FFS USPCC trendline appeared to be inconsistent with
CMS’ Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment
System (OPPS) market basket updates, and it was unclear whether the final IPPS and OPPS rates
were incorporated into the 2024 and 2025 growth rates.

Commenters expressed concern that the CY 2025 growth rate estimates were lower than specific
estimates in the Medicare Trustees Report for 2024 and 2025 as well as specific estimates in the
NHE projections (which reflected total Medicare expenditures including FFS, MA and Part D).

Response: We appreciate the comparison of the non-ESRD FFS trends in the CY 2025 Advance
Notice to other representations of Medicare FFS experience. However, there are notable
differences in timing, population, and services covered between the USPCCs and the other
baselines.

For example, the published NHE and Medicare Trustees Reports are based on less current
spending and projections than the CY 2025 Advance Notice and CY 2025 Rate Announcement
USPCC baselines. The NHE and Medicare Trustees Report baselines also include beneficiaries
in ESRD status, which are excluded from the non-ESRD USPCCs. Further, the NHE includes
spending for hospice which is excluded from the USPCC baselines based on the scope of Part A
and B benefits covered by MA plans.

Additionally, the calculation of MOOP is based on projected Medicare FFS beneficiary cost
sharing whereas the USPCC baseline reflects Medicare FFS program expenditures. The MOOP
tabulations are based on less current experience and include ESRD beneficiaries, which are
excluded from the non-ESRD USPCCs.

Finally, the 2024 Part B Premium baseline is also based on less current experience. Also, the Part
B premium determination takes into account other factors, such as maintenance of adequate
surplus levels.

Comment: Several commenters expressed concern for perceived “inconsistencies” in the USPCC
calculations since the FFS USPCCs in the CY 2025 Advance Notice for 2018-2022 were each
1.0 percent - 1.5 percent higher than the CY 2024 Rate Announcement, and 2023 had little
change, but 2024-2026 were more than 1.0 percent lower.

Response: As discussed during the February 22, 2024 actuarial user group call,3 there were two
adjustments for 2018-2022 in the CY 2025 Advance Notice non-ESRD FFS USPCCs compared
to the CY 2024 Rate Announcement:

3 Refer to the call materials.

 43

• Removal of 33 percent MA medical education phase-in for years prior to CY 2024. The
pre-2024 reduction in the CY 2024 Rate Announcement USPCCs was incorrect but had
no impact on the CY 2024 ratebook growth rates.
• Impact of 340B acquired drug remedy for 2018-2022 (as discussed on pages 17-18 of the
CY 2025 Advance Notice). The lump sum remedy payments are reflected in the USPCCs
of the respective year associated with the service experience.

The impact of these adjustments are summarized in the table below and they had no impact on
the CY 2025 Advance Notice and CY 2025 Rate Announcement growth rates.

Adjustment 2018 2019 2020 2021 2022

a. Remove 33% MA med. ed. pre-2024 0.40% 0.44% 0.54% 0.60% 0.67%
b. 340B acquired drug remedy 0.60% 0.66% 0.73% 0.72% 0.72%

Also, the lower non-ESRD FFS USPCCs for 2024–2026 are primarily due to lower 2023 actual
experience than what was projected in the CY 2024 Rate Announcement.

Comment: A commenter requested clarification regarding whether the CY 2024 Rate

Announcement FFS and Total USPCCs were developed using actual experience incurred
through third or fourth quarter 2022. The commenter noted that in the “Narrative supporting
2024 growth rate,” CMS stated that the "projections supporting RA 2024 are based on incurred
experience through September 30, 2022 and cash activity through December 31, 2022" while
page 42 of the 2024 Rate Announcement stated "The CY 2022 non-ESRD FFS USPCC is lower
in the CY 2024 Advance Notice and CY 2024 Rate Announcement due to reflection of actual
incurred experience through 3rd quarter 2022 in the CY 2024 Advance Notice and through 4th
quarter 2022 in the CY 2024 Rate Announcement."

Further, the commenter requested that CMS clearly state whether the CY 2025 Rate
Announcement uses actual experience incurred through 3rd quarter or 4th quarter 2023 and
encouraged CMS to improve transparency regarding the USPCCs by publishing in future
Advance Notices the incurred and paid through dates of the data supporting the USPCCs and any
expected updates to the data supporting the Rate Announcement.

Response: We appreciate the opportunity to clarify this information. The non-ESRD FFS
USPCCs in the CY 2025 Advance Notice were based on actual spending through September 30,
2023 and incurred experience through September 30, 2023. The non-ESRD FFS USPCCs in the
CY 2025 Rate Announcement are based on actual spending through December 31, 2023 and
incurred experience through September 30, 2023, as is typical for the Rate Announcement.

Comment: Several commenters expressed concern regarding the level of transparency regarding
the analysis and assumptions used to calculate the growth percentages. A commenter urged CMS
 44

to provide as much data as possible regarding cost trends impacting health care for the FFS cost
projections for 2024 and 2025. Several commenters requested that CMS provide additional
details of the information, analyses, methodologies, and assumptions used to determine the 2025
USPCC projections. A couple of commenters requested that CMS clarify the reasons for the
lower growth percentages, including the extent to which it is a function of the medical education
technical adjustment or other factors. Specific requests from commenters included the following:

• Additional details on the information and analyses used to update the assumptions
supporting the revised 2024 Part B trend projection.
• A breakout of 2024 and 2025 FFS unit cost, utilization, and normalized trend
assumptions by service category.
• An explanation of if and how emerging experience is factored into the development of
the projection factors that support the final USPCCs.
• An explanation of the Part B drug projection methodology in more detail, such as at what
level of detail projections are calculated (e.g., by drug class), which historical trends are
used to project costs, and whether more weight is put on recent utilization and cost trend,
and an explanation of how new to market drugs are accounted for in the projections and
what criteria is used to determine whether a new to market drug or class of drugs will
have an impact on Part B FFS spending.
• Trends in utilization and unit costs that may impact the FFS growth percentage.
• Details regarding how IPPS and OPPS finalized payment rates were incorporated into the
USPCCs for 2024 and 2025.
• Details regarding utilization changes and unit costs by type of service.
• Additional details regarding the full impacts of costs associated with the COVID-19
pandemic, such as: vaccine cost and utilization for 2025, costs for providing care for
older populations and dually-eligible populations that may be disproportionately
impacted, additional hospital, testing, and vaccination costs associated with COVID-19,
and long-term costs associated with COVID-19.
• An explanation regarding lower projected costs in light of higher historical costs.
• More specific information regarding the drivers of change in the historical and projected
spending estimates.

Response: We discussed in the CY 2025 Advance Notice the methodology, sources of data,
assumptions, and trends underlying the MA capitation rates at a level of detail consistent with
past practice. In addition to the information provided in the CY 2025 Advance Notice, CMS also
shared information about actuarial assumptions related to growth rates in its Actuarial User
Group call on February 22, 2024.4 Participants of the call were invited to ask questions about

4 The Actuarial User Group call details were announced via HPMS memorandum on February 9, 2024.
 45

assumptions supporting the CY 2025 Advance Notice growth rates. This call was widely
attended by stakeholders, and the call’s agenda and materials are available at
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/actuarial-bid-
questions.

In support of the MA ratebook growth rates, CMS has, as required under section 1853(b)(3),
included an explanation of the assumptions and changes in methodology used in the CY 2025
Rate Announcement; see the key economic assumptions underlying the USPCCs included in
Attachment II of this Rate Announcement. Consistent with prior years, with this Rate
Announcement we have published additional information regarding trends for the prior five
years and unit cost increases to the contract year at https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/FFS-Trends.html. This information includes additional
details of drivers of historical and projected trends.

Additionally, the USPCC projections reflect payment levels based on the most recent Medicare
final rules for fiscal year 2024 or calendar year 2024.

We believe that this information in the CY 2025 Advance Notice and now this Rate
Announcement provides the necessary support for understanding USPCC levels and trends.

ESRD Dialysis-Only USPCC and Growth Rate

Comment: A commenter expressed appreciation for the additional explanatory information in

recent years’ Advance Notices regarding the methodology and assumptions used in developing
the ESRD Dialysis-only FFS USPCCs, and appreciated CMS’ commitment to offering
stakeholders greater transparency regarding the assumptions and other factors that underpin the
USPCCs.

Response: We appreciate the support.

Comment: A few commenters requested that CMS provide detailed information regarding the
methodology and assumptions used to develop the ESRD growth percentage, including details
pertaining to the change in the ESRD growth rate since the CY 2024 Rate Announcement. One
of these commenters requested that CMS publish expenditure trends for beneficiaries with ESRD
by service category.

A couple of commenters expressed concerns regarding the volatility of the ESRD growth
percentage and urged CMS to consider opportunities to stabilize the ESRD growth rate from year
to year. One of these commenters noted that restated ESRD USPCCs for 2022 and subsequent
years are dramatically lower than the prior year estimates—ranging from a difference of -0.4
percent for plan year 2022 to a difference of -11.3 percent for plan year 2026. A commenter
requested that CMS provide additional detail and explanation regarding the historical
 46

restatements of the ESRD Dialysis-only FFS USPCC, particularly regarding the removal of an
assumption that dialysis utilization will return to pre-2020 levels (i.e., changing the utilization
assumptions between pre- and post-COVID levels, given the clinical need for consistency in
dialysis treatment).

Response: As discussed in past Rate Announcements, we believe it is important to update the

FFS per capita cost estimates using the most current FFS data available at the time those values
are announced and apply repricing adjustments to reflect changes in FFS payment rules. Similar
to prior Rate Announcements, the method for calculating the county-level non-ESRD rates and
the state-level ESRD rates includes AGAs based on a five-year rolling average of historical
claims experience, which provides some measure of stability in the rates.

The published 2023-2025 “Medicare Unit Cost Increases” by service category (available at
https://www.cms.gov/files/document/ffs-trends-2023-2025.pdf) apply to provider payments for
both ESRD and non-ESRD beneficiaries. Starting last year with the CY 2024 Rate
Announcement posting, we have added trends for the ESRD Prospective Payment System
(ESRD PPS) base rate.

As we discussed in the CY 2024 Rate Announcement, actual Medicare FFS per capita spending
has been consistently below the pre-pandemic projections. In the CY 2024 Rate Announcement
baseline, we assumed that ESRD per capita spending would return to levels reflected in the pre-
pandemic baseline. Actual 2023 spending for ESRD beneficiaries, especially for dialysis
services, did not return to that reflected in the pre-pandemic baseline. Accordingly, the ESRD
projections for 2024 and later are based on recent experience instead of the pre-pandemic
baseline. This update to the baseline resulted in lower projected ESRD spending starting in 2023.

Comment: A couple of commenters expressed concern that the Comprehensive Kidney Care
Contracting (CKCC) model uses a Retrospective Trend Adjustment (RTA) based on restated
projections of the ESRD USPCCs. One of the commenters inquired whether CMS takes into
consideration or implements any changes in methodology due to the ESRD USPCCs’ evolving
role as the basis for CMMI model payment methodologies.

A couple of commenters expressed concern regarding the impact of the ESRD USPCC on the
Kidney Care Choices (KCC) model and ACO REACH model. One of these commenters
indicated that there were “unprecedented” forecast errors that occurred under the ESRD PPS in
recent years.

Response: We appreciate the feedback regarding the payment policies of the Innovation Center
models and the ESRD PPS.
 47

Comment: A few commenters expressed concern regarding the adequacy of the ESRD rates
relative to the cost of providing care. Another commenter expressed concern regarding the ESRD
growth rate compared to the projections in the Medicare Trustees Report.

Response: The ESRD dialysis USPCCs are derived from the total ESRD USPCC baseline but are
adjusted for recent trend differences between the total ESRD and dialysis ESRD populations.
Thus, the ESRD dialysis USPCCs are projected using a base year USPCC, CY 2022 for the 2025
dialysis ESRD ratebook, trended from 2022 to 2025 using total ESRD growth with an
“adjustment factor for dialysis only.” The utilization and intensity assumptions supporting the
ESRD trends are based on multiple years of historical experience. The applicable trends are
found in the table in Attachment II, “Basis for ESRD Dialysis-only FFS USPCC Trend.”

Comment: Several commenters requested clarification regarding whether the costs of oral-only
ESRD drugs (e.g., phosphate binders) that will be paid for under Part B instead of Part D
effective January 1, 2025 are accounted for in the development of the CY 2025 MA ESRD rates
and if so, the amount of the adjustment. If not accounted for in the MA ESRD rates, one of the
commenters inquired whether CMS has performed an analysis under the significant cost
threshold policy, 42 CFR 422.109, until it is accounted for in the rates. A couple of these
commenters noted a November 2023 GAO Report and asked CMS to consider the applicability
of the significant cost threshold policy under 42 C.F.R. 422.109 until the costs for phosphate
binders can be appropriately accounted for. A commenter noted that if the cost is considered in
terms of the ESRD population (rather than the entire MA population) the total impact of adding
these drugs to the base rate is significant. A couple of the commenters requested that CMS
provide additional explanatory information on the methodology and assumptions used to
incorporate these costs into the FFS Dialysis-only ESRD USPCC.

Response: Yes, oral-only ESRD drugs are represented in the 2025 Part B dialysis USPCC
projection, resulting in a 2.47 percent increase in trend from 2024 to 2025. As a result, these new
Part B costs are included in the CY 2025 MA rates and the significant cost test is irrelevant.

Comment: A few commenters expressed concerns regarding beneficiary access to new and
innovative treatments given the contractual payment arrangements between providers and MA
organizations regarding the Transitional Drug Add-on Payment Adjustment (TDAPA) and
Transitional Add-On Payment Adjustment for New and Innovative Equipment and Supplies
(TPNIES) under the ESRD PPS and further suggested that CMS reimburse dialysis facilities
directly for MA beneficiaries. Another commenter requested that CMS provide oversight to
ensure MA plans are updating payment rates under their contracts to provide TDAPA or similar
payment adjustments and collect data comparing utilization of these medicines in MA and FFS
to ensure beneficiary access.
 48

Response: We appreciate the commenters’ feedback regarding adequately funding new and
innovative treatments for beneficiaries with ESRD. We note that the TPNIES for eligible
equipment and supplies and the TDAPA for drugs or biological products in existing ESRD PPS
functional categories5 are two-year add-on payment adjustments with no subsequent
modification to the base rate. For drugs and biological products that meet the criteria for TDAPA
payment and are not in an existing ESRD PPS functional category, CMS pays the TDAPA for at
least 2 years, after which CMS may modify the base rate if appropriate.

The CY 2025 ESRD dialysis-only FFS USPCC reflects our best estimate of the national per-
capita cost, including changes to the ESRD PPS bundled payments for variables such as payment
adjustments to the ESRD PPS base rate, including the TDAPA and the TPNIES. We believe the
current methodology for calculating MA ESRD rates account for products that receive the
TDAPA or TPNIES under the ESRD PPS. CMS will continue to monitor and investigate
complaints related to beneficiary challenges obtaining access to new and innovative products to
determine if an MA organization has designed its plan benefits in an impermissible way or
failing to cover Medicare Part A and B benefits (subject to limited exclusions) as required.

Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022

Comment: A commenter indicated that CMS should incorporate the 340B OPPS lump sum
remedy payment into the CY 2025 MA rates if CMS finalizes a policy to reduce MA rates due to
budget neutrality adjustments in future years. The commenter believes it would be inconsistent
and inequitable to finalize a policy that reduces future MA rates due to FFS budget neutral
payment adjustments but does not incorporate the lump-sum remedy payment into the CY 2025
MA rates, and believes that incorporating the remedy into the CY 2025 MA rates would be
consistent with how CMS is providing a payment increase to providers under FFS to correct for
prior year payment decreases.

Another commenter requested confirmation that the lump sum payments for the portion of 2022
claims not reprocessed were included in the USPCCs.

Response: The USPCCs projected for 2025, which are used in developing MA rates for CY
2025, are based on projected Medicare FFS per capita costs for 2025. The 340B Remedy Rule6

5 An ESRD PPS functional category is defined by § 413.234(a) as a distinct grouping of drugs or biological products, as
determined by CMS, whose end action effect is the treatment or management of a condition or conditions associated with ESRD.
6 The Hospital Outpatient Prospective Payment System Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years

2018-2022 Final Rule, CMS-1793-F, was issued on November 2, 2023. The final rule appeared in the Federal Register on
November 8, 2023, and is available online here: https://www.federalregister.gov/documents/2023/11/08/2023-24407/medicare-
program-hospital-outpatient-prospective-payment system-remedy-for-the-340b-acquired-drug.
 49

does not pertain to payments for 2025. We anticipate addressing how aspects of the 340B
Remedy Rule might impact MA rates for other years in future policymaking.

Comment: A commenter urged CMS to address concerns regarding MA plans’ payment to

providers pertaining to 340B claims during 2018-2022 and the prospective outpatient rate
reductions for non-drug items and services beginning in 2026. The commenter suggested that
CMS either make lump-sum payments directly to hospitals or direct MA plans to pay providers,
whereby the 2025 USPCCs include any additional funding needed for such payments. Further,
the commenter suggested if additional payments are not made then CMS should direct MA plans
to not apply prospective reductions, since the reductions are to offset a remedy payment that was
not applied to MA.

Response: We appreciate the feedback on this issue. We refer commenters to the Hospital
Outpatient Prospective Payment System Update on Payment Rates for Drugs Acquired through
the 340B Program – Informational for MAOs memorandum that was issued by CMS on
December 20, 2022.7 As noted above, the 340B Remedy does not pertain to 2025 USPCCs. We
anticipate addressing how aspects of the 340B Remedy Rule might impact MA rates for other
years in future policymaking.

Section C. MA Benchmark, Quality Bonus Payments, and Rebate

Comment: A few commenters urged CMS to use its administrative authority to eliminate the cap
on benchmarks or exclude quality payments from the benchmark cap calculation. A couple of
these commenters noted legal analysis provided to CMS on this topic in previous years that
showed that they believed such changes were legally permissible.

One of these commenters encouraged CMS to consider the impact of the benchmark cap on the
Administration goal to support health equity. A few commenters stated that the benchmark cap
undermines the Quality Bonus Payment (QBP), whereby high-quality MA plans rated 4-Stars or
higher will not receive the full QBP due to the benchmark cap which leads to fewer supplemental
benefits for MA enrollees in high-quality plans.

A commenter expressed concern that the cap is inconsistent with Congressional intent. Another
commenter expressed concern that certain counties are capped at “artificially low levels based on
anomalous data from pre-ACA baselines” and that MA rates are not adjusted as intended for the
quartile adjustment due to the benchmark cap and encouraged CMS to evaluate alternatives for
outlier counties.

7Refer to the December 20, 2022 HPMS memo titled “Hospital Outpatient Prospective Payment System Update on Payment
Rates for Drugs Acquired through the 340B Program – Informational for MAOs.”
 50

Response: As we have stated in response to similar comments in prior Rate Announcements,

while we appreciate the commenters’ concerns, we have not identified discretion under Section
1853(n)(4) of the Act to eliminate application of the pre-Patient Protection and Affordable Care
Act (ACA) (Pub. L. 111-148) rate cap or exclude the bonus payment or quartile adjustment from
the cap calculation. The applicable amount (i.e., “benchmark cap”) is the rate established under
section 1853(k)(1) of the Act.

Comment: A few commenters urged CMS to work on revising the Quality Bonus rate
methodology so that they would be budget neutral similar to other Medicare bonus payments,
reflect local MA plans’ data rather than more aggregated contract-level data, and incorporate
corrective action plans and sanctions for lower rated plans. A couple of commenters expressed
concern that the Quality Bonus Program is ineffective at incentivizing high quality and equitable
care delivery, with commenters noting the high proportion of plans that receive quality bonus
payments.

Response: We appreciate the feedback submitted by the commenters regarding quality bonus
payments. The statutory requirements regarding QBPs are prescribed in Section 1853(o) of the
Act and our implementation complies with the statute.

The Patient Protection and Affordable Care Act (Pub. L. 111–148), as amended by the
Healthcare and Education Reconciliation Act (Pub. L. 111–152), provides for quality ratings,
based on a 5-star rating system and the information collected under section 1852(e) of the Act, to
be used in calculating payment to MA organizations since 2012. Specifically, sections 1853(o)
and 1854(b)(1)(C) of the Act were added and amended to provide, respectively, for an increase
in the benchmark against which MA organizations bid and in the portion of the savings between
the bid and benchmark available to the MA organization to use as a rebate. The Star Ratings
measures are tied in many ways to responsibilities and obligations of MA organizations and Part
D sponsors under their contracts with CMS. We have considered measuring performance at the
plan versus contract level, but measurement reliability issues at the plan level due to small
sample sizes decrease our ability to measure true performance and add complexities to the rating
system. As discussed in the rulemakings that add, remove, or substantively update the Star
Ratings measures and change the methodology for how Star Ratings are calculated, we believe
the Star Ratings reflect plan performance and are appropriate for use in implementing section
1853(o) of the Act.

Comment: A few commenters encouraged CMS to explore alternative methods to apply the
quartile adjustment (i.e., applicable percentage), such as: adjusting counties within a quartile by
the same per-member-per-month (PMPM) amount (whereby the PMPM amount is computed as a
percentage of the average per capita FFS costs within a quartile), increasing the number of
 51

divided groups (ex: deciles instead of quartiles), and removing the quartile adjustment and
instead blend county FFS costs with other measures of per capita costs (ex: USPCCs).

A couple of commenters suggested, in reference to MA rates in for Puerto Rico, that the quartile
adjustment be based on a per-member-per-month (PMPM) amount for all counties in a quartile.
More specifically for Puerto Rico, commenters suggested that CMS could apply the applicable
percentage to the average per capita FFS costs of all counties that are in the bottom quartile and
increase the territory county FFS cost by that PMPM dollar amount. Further, the PMPM amount
that would be added to the territory FFS costs could be capped at no higher than 15 percent of
the lowest non-territorial county per capita FFS cost, such that this proposed PMPM adjustment
to the territories would not exceed the adjustments to non-territorial counties. One of the
commenters indicated that this would be similar to the method used by CMS to adjust low wage
index hospital payments in Part A.

Response: We appreciate the feedback submitted by the commenters regarding the applicable
percentage adjustment (i.e., quartile adjustment). The statutory requirements regarding the
quartile adjustment are prescribed in Section 1853(n)(2)(B) and (C) of the Act.

Comment: A few commenters supported CMS’ interpretation of Sections 1853(o)(3)(B) and

1853(c)(1)(B) of the Act with regard to Puerto Rico counties that would have had an urban floor
county rate, whereby more counties in Puerto Rico will continue to qualify for a double bonus.

Response: We appreciate the support.

Comment: A couple of commenters suggested that, for dually eligible beneficiaries enrolled in
D-SNPs in Puerto Rico, the Part B premium buy-downs should be considered part of the A/B bid
and not considered a supplemental benefit, since dually eligible beneficiaries in the mainland
would have the Part B premium covered by Medicaid.

Response: Section 1854 of the Act specifies the costs that may be included in the bid submitted
by each MAO. Per section 1854(a)(6)(A)(ii), the bid for basic benefits (that is, “the A/B bid”)
must separately address the costs attributable to provision of benefits under the Medicare FFS
program (as defined in section 1852(a)(1)(B) as those items and services for which benefits are
available under Parts A and B, excluding hospice and the costs of acquisition of a kidney for
transplant), including, for plan year 2020 and subsequent plan years, the provision of additional
telehealth benefits as described in section 1852(m) from any costs attributable to supplemental
benefits and Part D benefits. Payment of the Part B premium is not a benefit under Medicare Part
A or B but is a permissible use of the MA rebates. CMS does not have discretion under section
1854(a)(6)(A) to treat the payment of the Part B premium as a benefit under Part A or B.
 52

Section D. Calculation of Fee-for-Service Costs

Comment: A commenter expressed support for the repricing refinements applied to the
development of FFS costs.

Response: We appreciate the support.

Comment: A commenter urged additional transparency regarding the rebasing methodology,

given the regional variations in pandemic impacts and to ensure accuracy and stability. Another
commenter suggested that CMS release a preliminary estimate of the impact of
rebasing/repricing the county rates at the time of the Advance Notice.

Response: We appreciate the request for transparency and believe that we have been responsive
to stakeholders’ interest in understanding and analyzing the rebasing methodology. As noted on
page 29 of the CY 2025 Advance Notice, CMS released the 2022 FFS cost data by county used
for rebasing county rates in the development of the 2025 ratebook. This data is available on the
CMS website at https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/FFS-Data.html. Due to timing constraints, this publicly
posted data did not reflect adjustments for Innovation Center models and demonstrations and the
Medicare Shared Savings Program and Advanced Alternative Payment Models when posted, and
the publicly posted data did not reflect adjustments for claim repricing for the most current
available Medicare FFS payment rules and parameters. However, those adjustments are included
in the data we used for the MA ratebook.

Starting with the CY 2020 Advance Notice, CMS has published with each Advance Notice the
latest FFS cost data by county used in the development of the non-ESRD ratebooks. For the CY
2019 Advance Notice and prior, this FFS cost data was released at the same time as the Rate
Announcement on the CMS webpage at: https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/FFS-Data. The accelerated release of the FFS experience
allows stakeholders to conduct basic analyses of the impact of recent program experience on the
geographic adjustments supporting the rates.

Comment: A commenter expressed support for the use of five years of FFS experience to
mitigate any annual fluctuations and anomalies in the data.

Another commenter expressed concerns regarding rebasing the rates for CY 2025 pertaining to
the potential for disparities across counties and requested that CMS consider a variety of
alternatives, such as: make an adjustment for Puerto Rico for the impact of natural disasters,
make an adjustment regarding the 2020 FFS experience impacted by the COVID-19 pandemic,
rebasing less frequently (e.g., AGA update every three years).
 53

Response: We appreciate the feedback submitted by the commenters and appreciate their
concerns about stability in MA county rates.

The CY 2020 Advance Notice (page 21, in the context of developing MA rates for Puerto Rico)
and Rate Announcement (pages 27 and 28, in response to comments about MA rates for Puerto
Rico) included discussion and analysis of trends in the FFS data and concluded that our
methodology of using five years of FFS experience mitigates annual fluctuations and anomalies
in the data that may occur for a variety of reasons. The CY 2023 Advance Notice (pages 24 and
25) also discussed CMS’ analysis of the trends in the 2020 FFS data that were impacted by the
COVID-19 pandemic and affirmed our position that using five years of historical data provides
for stability in the rates despite local or regional events, such as natural or weather-related
disasters, and varying impacts from nationwide events, such as pandemics.

As discussed on page 22 of the CY 2025 Advance Notice, section 1853(c)(1)(D)(ii) of the Act
requires CMS to rebase the county FFS per capita costs periodically, which entails updating the
estimate of each county’s FFS costs using more current FFS claims information. As discussed in
past Rate Announcements, given that MA county rates are based on FFS costs, we believe it is
important to update the FFS per capita cost estimates using the most current FFS data available
and apply repricing adjustments to reflect changes in FFS payment rules. We have stated in
previous Rate Announcements that we anticipate rebasing the rates each year. We have also
previously discussed how the method for calculating the MA county rates includes a five-year
rolling average of historical FFS claims experience, which provides a measure of stability in the
rates. We are finalizing the proposal to rebase the CY 2025 rates.

Comment: A couple of commenters urged CMS to take action to mitigate negative downstream
effects of significant unanticipated FFS payment adjustments for the contract year that are
adopted in rules that come out after the Rate Announcement, such as the wage index calculations
for rural reclassified hospital providers in last year’s IPPS rule that dramatically increased costs
to plans in certain regions – including upstate New York – with no corresponding adjustment in
CY 2024 MA benchmarks due to the timing of regulatory actions. One of the commenters
expressed concern that the CY 2025 Advance Notice did not indicate any adjustment to the rate
methodology to account for the area-specific effects of its reinterpretation of the rural wage
index. The commenter requested that, under the discretion allotted to the Secretary to estimate
FFS costs in the geographic region under Section 1876(a)(4) of the Act, CMS further adjust the
AGA factor to account for the “gap year” (i.e., CY 2024) in which the commenter states MA
rates under-estimated actual area-specific cost experience. In addition, the commenter
recommended that CMS take a more surgical approach to MA rate setting by applying an area-
specific factor to the correction of prior year growth rates within and pursuant to the statutory
authority and direction under 1853(c)(6)(C) based on the plain meaning of the statutory text.
 54

The commenter indicated that in some regions, particular wage indices increased by as much as
43 percent, and the average increase across the Upstate NY region was approximately 26
percent, which is far above the 2 percent historical wage index increases and was the direct result
of recent court decisions that overturned CMS’ prior hospital rate methodology; the commenter
described the fiscal implications of the changes in the wage index used for IPPS without
corresponding changes in the MA rates for the same year as “unsustainable.” The commenter
also expressed concern that the benchmark cap and the quartile adjustment would negatively
impact the MA rate updates for CY 2025 for the affected regions.

A couple of commenters noted that recent changes to the Medicare FFS wage index resulted in
significant increases in payment rates for many California hospitals from MA plans beginning
2024, causing concern regarding maintaining affordable coverage for their enrollees. One of the
commenters requested that CMS confirm whether this specific IPPS change is incorporated into
the USPCCs and AGAs.

A commenter expressed concern regarding regions that experienced a significant increase in the
Medicare wage index following the 2024 IPPS final regulation and requested that CMS account
for these wage index variations in the 2025 MA rates.

Response: We appreciate the concerns raised by commenters. As discussed in past Rate

Announcements, given that MA county rates are based on FFS costs, we believe it is important
to update the FFS per capita cost estimates using the most current FFS data available and apply
repricing adjustments to reflect changes in FFS payment rules. The CY 2025 USPCC projections
reflect payment levels based on the most recent Medicare final rules for fiscal year 2024 or
calendar year 2024. Section 1853(b)(1) of the Act prescribes the timing of the release of the MA
capitation rates for the contract year and the risk and other factors to be used in adjusting such
rates.

As noted on page 29 of the CY 2025 Advance Notice, CMS released the 2022 FFS cost data by
county used in the development of the CY 2025 ratebook. The data is published on the CMS
website at https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics. With the
Rate Announcement, CMS annually publishes a tool and corresponding glossary, Medicare FFS
County 20YY web.xlsm, which provides stakeholders with means to replicate the FFS rate
development and publishes information regarding county-level geographic indices and repricing
adjustments. Using this information, stakeholders are able to analyze the drivers of changes in
FFS per capita costs for specific counties from one ratebook to another.

Comment: A commenter expressed concern that we are continuing to limit our adjustment of the
AGAs for Innovation Center payment and service delivery models to those listed in Table II-4 of
the CY 2025 Advance Notice, and with the proposed exclusion of certain payments under those
models (e.g., care management fees) that are funded through the Innovation Center rather than
 55

the Medicare Part A or B Trust Funds. The commenter inquired about the statutory basis for
excluding these costs from the calculation of MA benchmarks and was concerned that as models
expand in scope that a growing share of FFS spending may be excluded from MA benchmarks.
The commenter expressed concern that the current approach fails to adequately determine the
cost of providing a benefit to MA enrollees that is comparable to the cost of providing the benefit
under FFS.

The commenter is particularly concerned about the exclusion of advance payment of shared
savings and additional reconciliation payments paid to providers under Innovation Center
models. The commenter requested that CMS reconsider policies that exclude Innovation Center
costs and that CMS provide stakeholders with the amounts currently being excluded from the
development of FFS costs.

Response: As explained on pages 34-35 of the CY 2025 Advance Notice, we considered

adjusting the FFS claims experience for care management fees, per-beneficiary-per-month fees,
and/or advance payment of shared savings paid using the Innovation Center appropriation
instead of the Medicare Part A or B Trust Funds for other Innovation Center models conducted
in the 2018–2022 period. However, in continuing prior policy, we will not take fees of this type
into account in our adjustments to historical FFS experience when they were not funded under
Medicare Part A or B Trust Funds.

As we discussed on page 20 of the CY 2018 Advance Notice, the fees paid from administrative
accounts authorized by section 1115A of the Act are not from the Parts A and B Trust Funds,
from which Medicare claims are disbursed, so we do not consider those payments to be part of
FFS costs. Per section 1853(c)(1)(D)(i) and (n)(2)(F) of the Act, CMS uses the “adjusted average
per capita cost for the year involved, determined under section 1876(a)(4) [of the Act]” as the
base payment amount for setting MA rates. Section 1876(a)(4) indicates that FFS costs used for
MA rates are based on the estimated amount that would be payable for services covered under
Parts A and B, and types of expenses otherwise reimbursable under Parts A and B (including
administrative costs incurred by organizations described in sections 1816 and 1842). As these
costs described in section 1876(a)(4) of the Act are paid from the Trust Funds, excluding costs
paid from another appropriation is appropriate to determine FFS costs. See also sections 1817
and 1841 of the Act. In addition, section 1853(f) of the Act indicates that payments to MA
organizations shall be made from the Trust Funds “in such proportion as the Secretary
determines reflects the relative weight that benefits under Part A and under Part B represents of
the actuarial value of the total benefits under this title.” Therefore, we will not make an
adjustment to historical FFS claims to account for payments made from the funds appropriated
under section 1115A(f).
 56

Comment: A commenter expressed concern that there may be divergent trend patterns between
the MA and FFS programs (for example, utilization patterns) and that as MA enrollment
continues to increase, the MA rates would be based on a smaller and less-representative cohort in
FFS. The commenter acknowledged that this concern may be outside of CMS’ statutory
authority to address.

A couple of commenters recommended that CMS incorporate an adjustment to the benchmark

methodology for the differences between Medicare FFS and MA as a result of favorable
selection, based on county-level MA penetration rates.

Response: We appreciate the concerns raised by commenters. The statute prescribes the general
approach per section 1853(c) to updating the USPCCs and growth rates, and section 1853 of the
Act requires that FFS per capita costs be used in developing MA rates, and our approach is
consistent with the statute.

Comment: Several commenters requested that we calculate FFS spending using only claims and
utilization data for beneficiaries enrolled in both Part A and Part B (rather than based on such
data for beneficiaries in Part A and/or Part B, as is the practice today), because they believed that
would be a more appropriate and/or equitable methodology. A couple of these commenters cited
MedPAC’s support of benchmarks calculated based on FFS data for beneficiaries with both Part
A and Part B.

Several commenters pointed out that, in order to enroll in an MA plan, beneficiaries are required
to be enrolled in both Part A and Part B and believe that the benchmark calculations should align
with the population of beneficiaries eligible to enroll in MA plans. A couple of these commenters
believes the current methodology is inappropriate from an actuarial perspective, as the current
methodology includes beneficiaries who are not eligible to enroll in MA and stated that actuarial
principles require that an estimate of the benchmark must represent what the MA enrollee would
cost in FFS. Further, one of the commenters believes the Social Security Act requires that Part
A-only enrollees be excluded from the calculation of county benchmarks to ensure that the
estimate best represents what that enrollee would cost in FFS.

A couple of commenters expressed concern that, as the number of Medicare beneficiaries with
Part A-only grows and as beneficiaries with only Part A tend to have lower costs, MA
benchmarks may be distorted as artificially low and fail to reflect the FFS costs of the population
eligible to enroll in MA, which the commenters believe results in actuarially inaccurate and
inequivalent benchmarks. One of the commenters indicated that the difference in costs for
individuals with Part A or B compared to individuals with Part A and B raises concerns that
“CMS is not achieving actuarial equivalence when calculating the benchmarks.”
 57

A commenter cited an external analysis that examined the differences in Part A spending for
those enrolled in Part A only versus those enrolled in Parts A and B, including over time as the
share of FFS enrollees with Part A only has grown.

A couple of commenters noted that for a published public use file, the documentation released by
the CMS Office of Enterprise Data and Analytics stated the following regarding per-capita
spending for beneficiaries enrolled in Part A only or Part B only: “cannot be compared directly
to spending for beneficiaries that are enrolled in both Part A and Part B.”

A couple of commenters noted that in 2021, CMS had indicated that the agency intended to issue
a Request for Information (RFI) on the topic of revising MA rates to be based on data from
beneficiaries with both Part A and Part B, but no such RFI has been released.

A commenter stated that, similar to their belief that the adjustment made to per capita costs for
Medicare beneficiaries who are dually eligible for benefits through the Department of Veterans
Affairs and the Department of Defense (i.e., the VA/DoD adjustment) is needed because these
beneficiaries are not enrolled in MA, a similar adjustment should be made for Part A-only and
Part B-only beneficiaries who are not enrolled in MA (because they are not eligible to enroll).

Many commenters expressed support for continuing our policy of basing benchmarks in Puerto
Rico on Medicare costs for beneficiaries with both Part A and Part B coverage. A couple of
commenters requested that we apply a uniform approach in all counties to calculate benchmarks,
pointing to the methodology used by CMS for Puerto Rico rates, to improve payment accuracy.
A commenter suggested that CMS could implement a phased-in approach for counties with MA
penetration over a certain percentage and gradually lower the threshold each year. Another
commenter indicated it is unclear how the differing enrollment policy for Puerto Rico supports a
differential approach to FFS data for the MA benchmark, characterizing the use of FFS data for
beneficiaries with both Part A and Part B to be “equally applicable to the rest of the United
States” given that MA enrollees must have both Part A and Part B.

A couple of commenters reiterated a request from last year that CMS revise the benchmark
methodology for counties in Maryland, to be based on the FFS experience for beneficiaries
enrolled in both Part A and Part B similar to the rate adjustment for Puerto Rico, due to the
unique impact of the TCOC Model in establishing benchmarks for Maryland. A commenter
indicated that Medicare FFS spending under the TCOC Model is higher than it would otherwise
be under typical Medicare FFS payment rates (e.g., IPPS/OPPS) which results in most Maryland
rates being adjusted downward by a 95 percent applicable percentage.

Response: We refer commenters to the detailed response that we provided in the CY 2020 Rate
Announcement regarding use of FFS data for costs of all Medicare beneficiaries, whereby CMS
concluded that it finds the current ratebook methodology (our longstanding policy of considering
 58

costs of beneficiaries with Part A and/or Part B) to be consistent with the statute at Section
1853(c)(1)(D) of the Act. We continue to believe that it is not necessary to change the
methodology at this time, nor is it required as the statutory language clearly permits CMS to
include Medicare beneficiaries who have Part A only or Part B only. While we recognize that
calculating rates based on data that excludes beneficiaries entitled only to Part A would yield
different results than calculating rates based on our current methodology, that fact alone does not
determine which methodology should be employed.

With respect to Puerto Rico, we have discussed in past Advance Notices and Rate
Announcements that while most Medicare beneficiaries are automatically enrolled in Part B and
must opt out to decline it, beneficiaries in Puerto Rico must take affirmative action to opt in to
Part B coverage. As a result, we believe it is appropriate to adjust the FFS rate calculation for
Puerto Rico used to determine MA rates so that it is based only on the Medicare costs for
beneficiaries with both Part A and Part B.

Further, section 1853(c)(1)(D)(iii) of the Act explicitly requires an adjustment to the estimate of
the FFS per capita cost for individuals dually eligible for benefits through the Department of
Veterans Affairs and the Department of Defense. There is no statutory requirement for excluding
cost data for beneficiaries with coverage for Part A only or Part B only from the information
used to develop the FFS per capita cost estimate.

We appreciate the commenter’s suggestion to revise MA rates in Maryland due to the impact of
the TCOC Model on the FFS experience; however, the statute requires that MA capitation rates
be based on FFS per capita costs, and does not provide CMS with the authority to calculate MA
capitation rates based on what FFS per capita costs may be under different (hypothetical)
circumstances.

The public use file documentation noted that beneficiaries enrolled in only one part of Medicare
have different levels of per-capita spending than beneficiaries that are enrolled in both Part A
and Part B. As noted above, while we recognize that calculating rates based on data that excludes
beneficiaries entitled only to Part A would yield different results than calculating rates based on
our current methodology, that fact alone does not determine which methodology should be
employed.

We appreciate the suggestions submitted by commenters, and we will continue to analyze this
issue and consider whether any adjustments to the methodology on this point may be warranted
in future years. For CY 2025 we will continue to calculate FFS spending for the purpose of
establishing MA benchmarks using FFS claims and utilization data for beneficiaries in Part A
and/or Part B.
 59

Puerto Rico

Comment: A commenter expressed appreciation for the special attention given by HHS and
CMS to understand the unique challenges faced by the health system in Puerto Rico and
differences between the mainland and Puerto Rico. A couple of commenters expressed
appreciation for CMS’ continued efforts to address the disparity between payment rates in Puerto
Rico and the U.S. mainland.

Response: We appreciate the support.

Comment: The CY 2025 Advance Notice sought public comment on the possibility of adjusting
FFS experience in Puerto Rico to reflect the propensity of zero-dollar beneficiaries nationwide.
Many commenters supported the use of an adjustment to the Puerto Rico MA rates to reflect the
prevalence of zero-dollar beneficiaries nationwide. One of the commenters indicated that such an
adjustment is appropriate because the number of zero claimants in the Puerto Rico FFS
population is a significantly greater proportion of the population relative to the rest of the United
States.

Response: For the past eight years, the Secretary has directed OACT to adjust the FFS
experience for beneficiaries in Puerto Rico to reflect the propensity of zero-dollar beneficiaries
nationwide. For the CY 2025 ratebook development, the Secretary has directed OACT to adjust
the FFS experience for beneficiaries in Puerto Rico to reflect the propensity of zero-dollar
beneficiaries nationwide. For purposes of making this adjustment, consistent with the Secretary’s
instructions, OACT evaluated experience exclusively for beneficiaries that are enrolled in both
Part A and Part B and are not also eligible for VA coverage.

The updated study analyzed experience for calendar years 2018 through 2022, using the cohort
of FFS beneficiaries enrolled mid-year (i.e., enrolled in both Part A and Part B as of the mid-year
dates used for the study) to approximate the average enrollment for the year. On average, 13.9
percent of Puerto Rico FFS beneficiaries with both Part A and Part B were found to have no
Medicare claim reimbursements per year. This compares to a nationwide, non-territory
proportion of 6.0 percent of FFS beneficiaries without Medicare spending. These results were
applied to the Puerto Rico FFS experience by adjusting the weighting of the enrollment and risk
scores for the zero-claim cohort to reflect the nationwide proportion of zero-claim beneficiaries.
The resulting impact was an average increase in the standardized FFS costs in Puerto Rico of 4.2
percent for 2018 through 2022. Accordingly, a 4.2 percent adjustment was applied to the pre-
standardized Puerto Rico FFS rates supporting the CY 2025 ratebook development.

Comment: A large number of commenters expressed concern regarding the disparity between
payment rates in Puerto Rico and payment rates in the mainland and urged CMS to explore all
potential options to increase MA benchmark rates in Puerto Rico to achieve greater parity with
 60

the mainland and advance health equity. One of these commenters stated that the disparity in MA
rates compromises healthcare quality and accessibility and also impedes crucial investments in
Puerto Rico’s healthcare infrastructure.

Commenters described historic socioeconomic and legal disparities and long-standing health
inequities in federal programs, as well as a limited commercial health market in Puerto Rico. A
couple of commenters noted that the Medicare payroll tax and Part B premium apply to
beneficiaries in Puerto Rico and contrasted the level of federal funding provided under the MA
program.

Many commenters compared the level of the standardized benchmarks in Puerto Rico to the
national level and to other locales over a period of time (including low-income counties in the
mainland), and one of these commenters provided statistical distributions of the county MA rates
to characterize MA rates in Puerto Rico as outliers that are more than 3 standard deviations from
the statistical mean. The commenter contrasted that analysis with a distribution of Part B
Medicare rates for the ten most utilized services, in which Puerto Rico was well within 3
standard deviations.

A couple of commenters indicated that there have been changes in Medicare FFS payment policy
that they would expect would position FFS per capita costs in Puerto Rico to be closer to the
nationwide average, but the AGAs for MA benchmarks remain near 0.50, from which they
conclude the ratebook methodology does not produce a rational result.

A large number of commenters noted that the MA program is critically important in Puerto Rico
as the foundation of Puerto Rico’s healthcare system with high MA penetration, noting the
higher proportion of dually eligible beneficiaries in Puerto Rico whereby plans devote significant
resources to addressing Health-Related Social Needs (HRSNs) to fill gaps in the healthcare
system in Puerto Rico.

A few commenters recommended that we adjust the MA benchmarks in Puerto Rico to account
for the proportion of dually eligible beneficiaries in the Puerto Rico FFS population. A few
commenters suggested that we adjust MA benchmarks in Puerto Rico using the Area Deprivation
Index (ADI) or other measures of socioeconomic status, citing VBID model flexibilities based on
ADI and a Health Equity Adjustment in the ACO REACH model.

A large number of commenters suggested that we use a proxy factor in the development of the
MA rates in Puerto Rico, such as applying the AGA level used for the US Virgin Islands or
based on a national level or a budget neutral floor. A large number of commenters requested that
we consider establishing a minimum AGA of 0.70 for Puerto Rico (similar to the AGA level in
the US Virgin Islands). Several commenters suggested that CMS begin a phased-in approach in
CY 2025 to implementing a minimum AGA (for ex: apply incremental increases based on
 61

medical cost trends reported by recognized institutions). A commenter suggested that a minimum
AGA be implemented in a manner that is not budget neutral.

A commenter believes that a minimum AGA would still satisfy the statutory requirement that
“MA benchmarks be based on a county’s average Medicare FFS per-capita cost” (with emphasis
added).

A few commenters believed that certain polices in the Medicare FFS program (e.g., similar to the
Part A Low Wage Index floor and monitoring of staffing compensation over a period of time)
establish precedent for CMS to establish a minimum AGA and to monitor the impacts in
addressing the needs of beneficiaries and supporting health care providers. A few commenters
requested that CMS monitor and provide guidance regarding the use of funds for Medicare A &
B benefits to positively address hospital infrastructure and provider compensation, whereby any
additional funding provided to MA plans in Puerto Rico should include provisions that address
better reimbursement for providers such as the use of guardrails to ensure additional funding to
applied directly to physicians and hospitals.

Several commenters indicated that increases to MA rates in Puerto Rico will positively impact
the health care delivery system, including the hospital infrastructure, provider compensation and
support, the quality of services received by MA enrollees, overall economic growth in Puerto
Rico, and incentivize more healthcare providers to participate in the Medicare program in Puerto
Rico. Several commenters indicated that low MA rates play a major role in provider and
professional migration from the island, leading to access and quality issues which are
exacerbated by hurricanes, earthquakes, and the COVID-19 pandemic.

A couple of commenters noted a decline in the number of FFS beneficiaries in Puerto Rico over
the past four years, which they believe undermines the use of FFS data to calculate MA rates.
Several commenters characterized the FFS data used for MA rates in Puerto Rico to be
“inadequate,” given the relatively small proportion of Medicare beneficiaries remaining in FFS
with low utilization of medical services considered to be not representative of the Medicare
beneficiaries in Puerto Rico and differing statutory treatment and exclusion from federal benefit
programs. Further, one of the commenters noted that a MedPAC analysis had excluded Puerto
Rico due to the relatively small number of FFS beneficiaries in that territory, and further noted
that 90 percent of counties in Puerto Rico have a credibility adjustment in the MA rate
calculation (which results in Puerto Rico accounting for the majority of all counties that require a
credibility adjustment).

Another commenter urged CMS to consider whether the FFS data in Puerto Rico meets the
statutory language at Section 1876(a)(4) that the average per capita cost be “based upon an
adequate sample” (with emphasis added). A few commenters provided analyses of FFS data in
Puerto Rico which indicated that the FFS data that is used as the basis for MA rates is not robust
 62

and is not representative of MA enrollees in Puerto Rico, due to the proportion of beneficiaries
with zero FFS claims, the relatively small number of FFS beneficiaries, and the low proportion
of dually eligible FFS beneficiaries in Puerto Rico. A couple of commenters provided analyses
of hospital costs and provider compensation in Puerto Rico, the US Virgin Islands, and
nationally.

A couple of commenters indicated that CMS should “avoid the mistaken perception” that higher
levels of supplemental benefits and market competition as suggesting that MA benchmarks are
adequate. Several commenters indicated that these supplemental benefits are necessary to
address the extreme concentration of poverty in Puerto Rico given the statutory exclusion from
numerous federal benefit programs (ex: Low Income Subsidy, Medicare Savings Program) and
further advocated that these federal benefit programs should be provided to beneficiaries in
Puerto Rico. A commenter stated that “the MA program in Puerto Rico is structurally obliged to
cover higher-than-usual supplemental benefits.” Further, a couple of commenters stated that
higher risk scores in Puerto Rico should not be used to minimize the disparity in MA rates, given
the population profile with higher morbidity and prevalence of chronic conditions than other
jurisdictions. A commenter provided details regarding the specific types of supplemental benefits
offered in Puerto Rico, and an analysis of the proportion of MA rebates used for categories of
supplemental benefits.

Response: CMS thanks commenters for their thoughtful comments regarding alternate
adjustment approaches that may be appropriate in Puerto Rico and appreciates the concerns
about access to health care in Puerto Rico. CMS shares the concerns about access to health care
for U.S. citizens in Puerto Rico, including because of health care providers who are leaving
Puerto Rico. Bid data shows that MA plans in Puerto Rico have the lowest bid-to-benchmark
ratio, most spending on supplemental benefits, and highest rebates compared to any U.S. state.
CMS has implemented policies that apply only to, and increase payments for, Puerto Rico,
including those the agency is finalizing for 2025. Over time, however, standardized plan bids,
which are used to pay doctors and medical providers for providing required Medicare A and B
benefits, have remained relatively flat. As part of the annual bid review process, CMS will
carefully review bids to ensure that bids reflect the costs needed to provide required services.

We appreciate the suggestions and recommendations submitted by commenters. However, we

note that section 1853 of the Act prescribes the general approach that FFS per capita costs be
used in developing MA rates and CMS has limited discretion to incorporate targeted adjustments
or exceptions.

As noted in prior Advance Notices, the law requires that MA benchmarks be based on a county’s
average Medicare FFS per capita costs, and there is no evidence that FFS costs in Puerto Rico
are higher than the costs observed in the FFS claims data and thus no basis for overhauling
 63

Puerto Rico’s MA benchmarks. Section 1853(c)(1)(D) requires an estimate of the per capita
costs for services covered under Parts A and B for individuals who are not enrolled in an MA
plan. We believe that using data pertaining to actual Medicare FFS costs in Puerto Rico is the
best approach to developing the estimate of FFS per capita costs for the contract year and we
have not seen evidence to suggest that Medicare FFS costs in another jurisdiction are a reliable
proxy. As we stated in the CYs 2017 and 2018 Rate Announcements, and based on the number
of FFS beneficiaries used in development of 2025 ratebook FFS rate we have determined that the
FFS data in Puerto Rico is sufficient for establishing accurate MA benchmarks. As noted on page
37 of the CY 2025 Advance Notice, the credibility adjustment is used for counties that have
certain levels of FFS beneficiaries.

In response to a commenter’s suggestion that there is precedent under the Medicare FFS program
(e.g., under the Physician Fee Schedule, ESRD PPS, IPPS) for CMS to establish a minimum
AGA, we note that these examples are based on statutory provisions that are neither applicable to
the MA program nor provide a direct analog to the provisions in section 1853 that determine the
formula for setting MA capitation rates.

As commenters noted, comparisons of the standardized MA rates in Puerto Rico to other

geographic areas and nationally is one informative measure. The standardized MA rates are used
to calculate benchmarks for the bidding process. MA plan payments are not solely based on the
level of standardized MA rates, rather MA payment is based on risk adjusted plan bids and
rebates, intended to cover the expected cost of plan benefits under Part A and Part B and for
supplemental benefits. Total actual MA payments to plans is another informative measure of MA
funding. Public use data files regarding actual MA plan payments are available at:
https://www.cms.gov/medicare/health-drug-plans/plan-payment-data.

Each year, since CY 2006, MA organizations submit plan bids to CMS that detail the projected
revenue needed to cover the expected per beneficiary costs of their enrollee population. Risk
adjustment is used to adjust plan bids for payment, based on health status and demographic
characteristics (such as dual eligible status) such that plans are paid more for beneficiaries
predicted to have higher costs. Comparisons of these plan-submitted bids to the benchmarks is
another informative measure of plans’ expected funding needs for benefits under Part A and Part
B. Public use data files regarding MA bids are available at:
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/data.
 64

Section E. Direct Graduate Medical Education

Maryland TCOC Model

Comment: Commenters were concerned about the proposed change, indicating that the current
methodology has been helpful to MA organizations to manage revenue shortfalls stemming from
the TCOC model and the quartile adjustments in Maryland. The commenters believe that the
proposed AGA methodology change in the CY 2025 Advance Notice would remove financial
value, further disadvantaging MA organizations in Maryland, particularly impacting Baltimore
City and Baltimore County, which are home to higher-cost teaching hospitals. These commenters
state that this methodological change will create added challenges in serving lower income
members, beyond the already low growth rate proposed in this year’s Advance Notice.

Commenters highlighted that the Baltimore area has a high proportion of individuals from
marginalized communities facing disparities in health care and social risk factors related to
income, education, and health status. Commenters also stated that Baltimore City has a
household income approximately half the Maryland state average; a poverty rate nearly twice as
high, and a higher rate of disability. Commenters indicated that for CY 2025, 22 out of
Maryland’s 24 counties are in the 95 percent quartile (including Baltimore City and Baltimore
County) and adjusting payments to plans downward relative to FFS will further exacerbate the
already challenging financial environment for MA plans operating in Maryland. A commenter
expressed concern that the proposed methodology would disproportionately impact low-income
beneficiaries and could have significant health equity implications.

Response: We appreciate the support for improving the accuracy of the MA rates and
benchmarks for service areas in Maryland. The methodological change will result in more
accurate projections of FFS per capita costs for Maryland, in order to adhere to the statutory
requirements under 1853(c)(1)(D)(i), 1853(k)(4), and 1853(n)(2)(F) of the Act. The CY 2025
Advance Notice indicated that CMS had worked to identify data that could be used to develop
the DGME and IME carve-outs for hospitals participating the Maryland TCOC Model, thereby
lowering MA rates in Maryland. Even with this change, MA rates in Maryland continue to be
among the highest in the country compared to the average MA rates of other states.

As stated in the CY 2025 Advance Notice on page 52, the Maryland TCOC Model sets a per
capita limit on Medicare total cost of care in Maryland and is the first Innovation Center model
to hold a state fully at risk for the total cost of care for Medicare beneficiaries. The TCOC Model
builds upon the Innovation Center’s Maryland All-Payer Model, which had set a limit on per
capita hospital expenditures in the State. Maryland operates an all-payer hospital rate regulation
system. This system is made possible, in part, by a Medicare waiver (codified in section 1814(b)
of the Act) that exempted Maryland from IPPS and OPPS and allowed Maryland to set rates for
these services. This exemption affects the CMS system data used to develop the DGME and IME
 65

carve-outs, and as such we have worked with the Medicare Administrative Contractor and
Maryland's HSCRC to identify data that can be used to develop the DGME and IME carve-outs
for hospitals participating in the Maryland TCOC Model.

We appreciate the concerns raised by the commenters, and we will continue to analyze this issue
and consider whether any adjustments to the methodology may be warranted in future years.

Comment: Several commenters recommended CMS delay implementation or phase in the

implementation of this methodological change, similar to the way CMS is phasing in the
technical correction to USPCCs, to mitigate the impact on enrollees and allow health plans
operating in Maryland to adjust to this additional revenue impact. The commenters also urge
CMS not to adopt the proposed AGA methodology change for CY 2025, in the interest of
supporting MA and Medicare beneficiaries in Maryland. Commenters also state that sufficient
lead time to prepare for this type of change allows for better bid planning, thereby easing
potential member impact.

Another commenter supports better alignment between the data used to develop the carve-out
with expected capitation rates, but believes additional time is required for MA plans to analyze
the impacts of any updated methodology and that CMS should reconsider its proposal to give
MA plans additional time.

Response: CMS is finalizing the methodology change as proposed in the CY 2025 Advance
Notice because this change in the data source and methodology for calculating the MA rates in
Maryland will more accurately reflect FFS per capita costs and will result in developing more
accurate estimates of the FFS per capita costs for the payment year that are the basis for MA
rates as required by the statute. Section 1853(c)(1)(D)(i) of the Act requires the exclusion of
costs attributable to payments under section 1886(h), that is payments for DGME, from the FFS
per capita costs used for developing the MA ratebooks. Furthermore, section 161 of the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275) amended
section 1853(k)(4) of the Act to require CMS to phase out IME amounts from MA capitation
rates. Section 1853(n)(2)(F) applies the same phase-out to FFS costs in the calculation of the
specified amount in setting MA rates. In addition, implementing this change in one year is
consistent with how, in the CY 2023 Rate Announcement, we fully implemented the change in
the methodology for the development of DGME amounts to using the provider specific file data
to estimate amounts instead of the inpatient Medicare cost reports.8

8 Refer to CMS’ CY 2023 Rate Announcement.

 66

The change in data source pertaining to Maryland TCOC model (described in detail in sections
C1 (DGME) and C3 (IME) of the CY 2025 Advance Notice) results in a more accurate
projection of per capita costs because the revision will properly exclude medical education costs.

Comment: A few commenters urged CMS to both clarify the proposed methodology and provide
more information to stakeholders about the proposed change in methodology, including how
DGME and IME costs are calculated in Maryland under current methodology and why CMS
believes the calculation change is necessary.

Response: Previously, the data used for the ratebook development did not separately identify
medical education costs for providers participating in the Maryland TCOC Model. The updated
data source and methodology described in the CY 2025 Advance Notice will lead to more
accurate MA rates in Maryland. As stated in the CY 2025 Advance Notice, the proposed
adjustment will be based on the Provider Statistical & Reimbursement Report (PS&R) figures
for MA admissions for each Maryland hospital with a graduate medical program for each
calendar year. The PS&R includes for each Maryland provider the fiscal year MA DGME and
IME expenditures and MA days of admission, which are used to calculate the DGME and IME
per diem for MA admissions. This MA experience is used as the basis for the FFS DGME and
IME amounts since DGME and IME payments for FFS admissions are not specified in the
inpatient Provider Specific File and the National Claims History file for providers participating
in the Maryland TCOC model. The CY 2025 Advance Notice provided the specific calculation
steps when using this data.

Section F. Organ Acquisition Costs for Kidney Transplants

Comment: A commenter requests that CMS consider how other changes may affect county
benchmarks and that CMS acts to limit the impact any such changes will have in a single year.

Response: We will continue to monitor the amount of kidney acquisition costs to determine
whether refinements and improvements to the methodology for the carve-out adjustment are
warranted for future years.

Comment: A commenter appreciated that CMS provided notice in advance of its intention to
calculate Maryland hospital-specific adjustments for kidney acquisition costs and requests the
opportunity to review the methodology before the release of the Advance Notice and requests to
phase in the impact of such methodology changes over several years in order to mitigate
disruption to county benchmarks across the state.

Response: We appreciate the feedback.

Comment: A commenter expressed continued support of the use of the kidney acquisition costs
carve-out methodology and thanked CMS for their work in this space.
 67

Response: We appreciate the support.

Section G. IME Phase Out

Maryland TCOC Model

See Comments and Responses in the section titled “Direct Graduate Medical Education.”

Section H. MA ESRD Rates

Comment: The majority of commenters on this topic expressed concerns that ESRD rates are not
sufficient to cover the cost of care for beneficiaries with ESRD. The commenters requested that
CMS continue regular evaluations of ESRD rates to improve the stability, adequacy, and
accuracy of MA ESRD benchmarks and payment, particularly given the increasing number of
beneficiaries with ESRD in MA plans. Commenters highlighted the potential consequences of
inadequate rates, including impacts to all MA beneficiaries through increased premiums and
cost-sharing, reduced benefits, and fewer plan options.

Response: CMS appreciates the comments regarding MA ESRD payment adequacy given the
increased enrollment into MA plans by beneficiaries with ESRD. CMS continues to analyze
these issues and consider whether, consistent with the statutory requirements for setting ESRD
rates in section 1853(a)(1)(H) of the Act, any refinements to the methodology may be warranted
in future years to ensure appropriate ESRD payment rates.

Comment: Several commenters supported setting MA ESRD rates at the state level. One
commenter expressed concerns that a smaller geographic unit would not provide adequate data to
establish appropriate rates. Another commenter noted that rates set at the Core-Based Statistical
Area (CSBSA) level might have negative impacts on medically underserved areas, which often
have high rates of kidney disease. However, a majority of commenters on this topic expressed
concern that the state-based rate-setting methodology results in rates that are inadequate to cover
costs in certain markets. Many of these commenters noted that expenditures for ESRD care in
metropolitan areas can deviate from the state average, indicating the need for a more localized
approach in setting payment rates, and encouraged CMS to continue exploring other options to
state-based payments using smaller geographic units. Commenters acknowledged that certain
areas, such as rural and medically underserved areas, could receive lower rates under a new
methodology, and suggested CMS consider adjustments to these areas to ensure continued access
to services.

Response: CMS appreciates the comments regarding ESRD rate setting and refers commenters to
our analyses of sub-state ESRD rates provided in the CY 2023 and CY 2024 Advance Notices.
In the CY 2024 Advance Notice, we provided details of our analysis of potential changes in
ESRD rates by CBSA, showing that CBSAs representing the 40 percent of enrollment with the
 68

highest ADI measures were expected to receive CY 2022 ESRD rates that were an average of
2.13 percent lower under the CBSA-level approach. We believe our longstanding rate-setting
approach is fair and reasonable, and agree with commenters that significant changes to the
current methodology should be fully examined prior to implementation. CMS will continue
taking into consideration commenters’ concerns and recommendations.

Comment: Several commenters stated concerns that the MOOP limit is a factor contributing to
underpayment for beneficiaries with ESRD. Commenters suggested that CMS update the MA
benchmark to incorporate the difference between FFS Medicare out-of-pocket (OOP) costs and
the MA MOOP to directly increase payments for beneficiaries with ESRD.

Response: While we appreciate the suggestions of commenters, we do not find the suggestions to
revise the ESRD rate-setting methodology to be consistent with our interpretation of section
1853 of the Act. As explained in the CY 2012 Advance Notice and CY 2012 Rate
Announcement, CMS interprets the legislative changes made by the ACA to MA payment to
indicate that all MA payment rates, including the separate rates of payment for ESRD enrollees,
should closely align with FFS Medicare costs. As provided in section 1853(a)(1)(H) of the Act,
CMS establishes separate rates of payment to MA organizations for ESRD beneficiaries enrolled
in MA plans. See also §§ 422.254 and 422.304 through 422.308. The rates used for enrollees in
dialysis or transplant status are based on statewide average FFS Medicare costs for ESRD
beneficiaries in dialysis status. For enrollees with functioning graft status, the MA county
benchmark rates are the payment rates. The rates for those in dialysis, transplant, and functioning
graft status are also adjusted using a risk adjustment methodology that is specific to the health
care costs for beneficiaries with ESRD in dialysis, transplant or functioning graft status. We
understand the concern about potential subsidization of ESRD costs by enrollees without
diagnoses of ESRD, however the data CMS uses to calculate the CY 2025 MOOP limits includes
OOP expenses from beneficiaries with and without diagnoses of ESRD because the MOOP
limits will apply to enrollees with and without diagnoses of ESRD in CY 2025. This practice
avoids discriminating against beneficiaries with diagnoses of ESRD — or any group of
beneficiaries with a particular high-cost condition or health status — that would result if there
were higher premiums, cost sharing, or MOOP amounts applicable only to those individuals with
a certain chronic condition. Additional detail on how CMS finalized MOOP limits calculations,
including the data used and the percentiles of FFS Medicare data projections that should be used
in those calculations is available in the final rule titled “Medicare Program; Maximum Out-of-
Pocket (MOOP) Limits and Service Category Cost Sharing Standards” (CMS-4190-FC4) (87 FR
22290) published April 14, 2022.

Comment: A few commenters recommended CMS make changes to the Bid Pricing Tool (BPT)
so that the ESRD subsidy falls under Medicare-covered benefits instead of under Mandatory
Supplemental benefits. The commenters suggested that in the short term, CMS should make the
 69

ESRD and non-ESRD service categories consistent and merge the ESRD and MA BPT format,
and in the long-term, CMS should eliminate the ESRD BPT filing altogether.

Response: We appreciate the suggestions submitted by the commenters related to the BPT.
Section 1853(a)(1)(H) of the Act authorizes CMS to establish “separate rates of payment” with
respect to beneficiaries with ESRD enrolled in MA plans and does not require that a competitive
bidding methodology be used for CMS capitation payments for ESRD enrollees. In setting such
separate rates, CMS has established an approach for paying MA organizations for enrollees with
ESRD that directly use the rates, rather than bids. As such, the ESRD rates are intended to be the
base rate for enrollees with ESRD, and these costs cannot be paid under the rates used in the bids
to determine payment for non-ESRD beneficiaries. Therefore, the ESRD subsidy that is
permitted in plan bids for non-ESRD beneficiaries will remain as a mandatory supplemental
benefit. Regarding the commenters’ request that CMS eliminate the ESRD C-SNP BPT filing
requirement, we will continue to analyze this issue and consider whether any adjustments to
reporting may be warranted in future years.

Comment: A commenter requested that CMS work with the National Institute of Diabetes and
Digestive and Kidney Disorders and other partners to identify and close data gaps in the United
States Renal Data System related to beneficiaries with kidney disease with MA coverage.

Response: CMS notes that this issue is outside of the scope of this document.

Comment: A commenter suggested that CMS expand access by allowing MA plans to participate
in the Innovation Center’s kidney demonstration models, expanding the ESRD Chronic
Condition Special Needs Plans (C-SNP) to include beneficiaries with chronic kidney disease
(CKD), and modernizing Medicare conditions for coverage to provide beneficiaries with ESRD
the choice to receive care in their preferred home or in-center dialysis setting, when clinically
appropriate.

Response: CMS notes that potential demonstrations and changes to ESRD regulations are outside
the scope of this document.

Section I. MA EGWPs

Comment: Several commenters expressed their support for EGWPs and requested that CMS
consider the nuances of the EGWP environment, such as the multi-plan year contracts generally
signed by public sector stakeholders for their EGWPs and the healthcare needs of public sector
retirees.

Response: We appreciate the support.

 70

Comment: Several commenters expressed support for the continuation of the current payment
methodology for CY 2025.

Response: We appreciate the support.

Comment: Some commenters expressed appreciation for the inclusion of the preliminary bid-to-
benchmark ratios for EGWPs in the Advance Notice to facilitate more accurate benefit and
premium information for employers and beneficiaries.

Response: We appreciate the support.

Comment: Some commenters recommended CMS exclude negative margin plans from the
calculation of estimated bid-to-benchmark ratios for EGWPs to avoid undermining the
availability of supplemental benefits and limiting EGWPs ability to expand.

Response: As we have noted in past Rate Announcements, we do not believe that there is a
reasonable rationale to exclude these plans because the ratios are intended to be representative of
the market. Negative margin plans are included in the non-EGWP market as well, so the bids of
such plans are included when the bid-to-benchmark ratios are developed. CMS does adjust for
factors which would otherwise result in significant differences between the EGWP and non-
EGWP market. More specifically, because the majority of plans in the EGWP market are PPO
plans and the non-EGWP market is predominantly HMO plans, EGWP bid-to-benchmark ratios
are calculated separately for HMO and PPO plan types by quartile. Unlike the HMO/PPO
difference between EGWP and non-EGWP plans, there is no data to suggest that a similar
difference exists between EGWP and non-EGWP plans regarding negative margin plans upon
which CMS can judge the reasonableness of adjusting the bid-to-benchmark ratios to account for
negative margin plans.

Comment: Some commenters expressed support for the continuation of the policy permitting
EGWPs to buy down Part B premiums. A commenter suggested that to reduce the number of
PBPs submitted, CMS should establish a process using segment ID to facilitate additional
flexibility with Part B buy-downs.

Response: We appreciate the commenters’ support. As described in recent past Advance Notices
and Rate Announcements, when an MA organization submits an individual market MA plan bid
to CMS, the MA organization is permitted to use MA rebates to buy down a portion of the Part B
premiums for its enrollees in each PBP by identifying the buydown amount in the BPT as its use
of the beneficiary rebate. We then retain that rebate amount specified by the MA organization in
each PBP and coordinate directly with the Social Security Administration (SSA) to ensure that
each beneficiary’s Part B premium is appropriately calculated and takes into account the buy-
down amount, which is uniform for all enrollees in the PBP. In the Advance Notice, we
 71

described a similar implementation for MA EGWPs: the Part B premium buy-down amount
cannot vary among beneficiaries enrolled in an EGWP. (In addition, the Part B premium buy-
down amount is limited to a maximum amount described in CMS guidance issued prior to the
bid deadline.) Implementing the bidding waiver as described in the Advance Notice facilitates
the communication of this information throughout CMS systems by maintaining an operational
structure that is similar to the one that exists for individual market MA plans. For this reason, we
decline to make the recommended changes, but we appreciate the commenter’s thoughts on this
issue and will continue to analyze and explore suggestions for refinements to this policy in the
future.

Comment: A commenter suggested adjusting current rate setting to capture differences in the use
of HMO and PPO plans between the EGWP and non-EGWP markets. The commenter believes it
would be more accurate for CMS to segment the benchmark calculation by HMO and PPO
products and adjust the bid-to-benchmark ratio for the differing products accordingly.

Response: We appreciate this suggestion; however, we are continuing to apply our current
methodology for paying EGWPs in CY 2025. Consistent with how we have developed EGWP
payments since 2019, the CY 2025 EGWP payment methodology takes into account the
prevalence of HMO and PPO enrollment in the EGWP market by calculating CY 2025
individual market bid-to-benchmark ratios separately for HMO and PPO plan types by quartile.
CMS then takes into account the prevalence of HMO and PPO enrollment in the EGWP market
to combine the ratios by quartile. This methodology is more consistent with the county rates for
individual market plans, which are also not calculated separately for HMO and PPO plan types.

Comment: Several commenters encouraged facilitating greater access to EGWPs in rural

markets. Commenters noted that implementing additional flexibilities around telehealth for
provider network requirements could address factors that inhibit the formation of direct contract
networks and enable more EGWPs to be offered in rural markets.

Response: We believe this comment is unrelated to our proposals in the CY 2025 Advance
Notice. This comment is about EGWP availability, service areas and network adequacy
considerations, rather than EGWP payment policy. We note that CMS has waived certain service
area requirements that hinder the design of, the offering of, or the enrollment in EGWPs. To
enable employers/unions to offer coordinated care plans to all their Medicare-eligible members
wherever they reside, CMS has waived certain service area requirements for EGWPs; we
encourage readers to review Chapter 9 of the Medicare Managed Care Manual for more
information on EGWP waivers.

Comment: Several commenters requested that CMS enable professional or group associations to
pool membership to enroll in EGWPs.
 72

Response: CMS notes that membership in EGWPs and the scope of non-payment EGWP
waivers are outside of the scope of this document. We refer readers to Chapter 9 of the Medicare
Managed Care Manual for more information on EGWP waivers.

Comment: A commenter requested that CMS provide updated bid-to-benchmark ratios based on
February enrollment data in advance of the Rate Announcement release to reduce operational
pressures on MA plans with short windows for the negotiation and finalization of bids.

Response: We appreciate this recommendation. In response to feedback from the industry, CMS
began publishing preliminary bid-to-benchmark ratios for EGWPs based on January enrollment
data in the CY 2023 Advance Notice. Due to timing and operational constraints, we are unable to
provide bid-to-benchmark ratios based on February enrollment data in advance of the release of
the Rate Announcement.

Section J. CMS-HCC Risk Adjustment Model for CY 2025

Comment: The majority of commenters stated their support for the continued
implementation of the 2024 CMS-HCC model, stating it improves payment accuracy and
program integrity, and helps address excess payments to MA organizations that have
negatively affected taxpayers and beneficiaries. Specific examples of support included the
following comments:

• Continued implementation of the revised model helps to reduce incentives for MA plans
to code intensively.
• The model will improve risk adjustment across the industry and promote more
responsible and equitable risk adjustment practices.
• Commenters stated their appreciation for CMS efforts to address what they refer to as
upcoding.
• Commenters noted that the updated model is a first step to address “upcoding” and
“overpayments,” but more reforms are needed.

Response: We thank the commenters for their support. We agree that continuing to move to the
2024 CMS-HCC model will improve payment accuracy to MA plans and that updating the risk
adjustment model is an essential part of CMS’ duty to effectively run the MA program and be a
steward of the Medicare program.

Comment: Some commenters recommended CMS stop or delay the three-year phase-in of the
2024 CMS-HCC risk adjustment model, so there could be more time to assess and understand it
and make modifications.
 73

Response: The three-year phase in of the 2024 CMS-HCC risk adjustment model is consistent
with how CMS has approached other instances in which model updates have been phased in over
time (e.g., the 2014 model was phased in over three years and the 21st Century Cures Act model
requirements were phased in over four years, with the final model adopted in the CY 2020 Rate
Announcement and phased in over three years). CMS appreciates the concerns raised by the
commenters on the timeline for the implementation of the updated risk adjustment model.
However, it is important to maintain or improve the accuracy of the risk adjustment model by
updating it to reflect more recent relative costs, treatment and utilization patterns, and coding
practices. We have previously noted that as a model ages and is used to predict expenditures for
more recent enrollees in MA plans, that predictive accuracy begins to decline. Delaying the
phase in of a risk adjustment model that is based on more recent underlying data will prolong the
use of an older risk adjustment model that, though still accurate according to CMS’ measures
(i.e., having a predictive ratio between 0.90 and 1.10), is waning in its ability to predict current
costs. For CY 2025, risk scores will be calculated as the sum of 67 percent of the risk score
calculated using the updated 2024 CMS-HCC risk adjustment model with 33 percent of the risk
score calculated using the previous 2020 CMS-HCC risk adjustment model. For 2026, we expect
that 100 percent of the risk scores will be calculated using the updated model.

Comment: Some commenters requested that CMS provide at least 60-day notice for changes to
the risk adjustment model. Another commenter recommended that any major risk adjustment
model changes should be finalized two years before implementation to allow time for plans and
providers to make necessary operational changes.

Response: We acknowledge the commenters’ request for an extended comment period. Per
section 1853(b)(2) of the Act, the Advance Notice of proposed changes to the methodology and
assumptions used to determine annual MA capitation rates and the risk and other factors used in
adjusting MA capitation rates under section 1853(a)(1)(C) is required to have a minimum 30-day
comment period. The CY 2025 Advance Notice was released on January 31st, 2024, and
comments were accepted through 6 PM Eastern Time on Friday March 1, 2024 (30 days). The
statutory requirement for a 60-day comment period applied only to proposals to implement
certain changes to the CMS-HCC model (based on section 1853(a)(1)(I) of the Act), in
accordance with requirements in the 21st Century Cures Act (Pub.L. 114-255).

CMS believes that the period provided for comments on the CY 2025 Advance Notice is
sufficient. In setting these timelines, we seek to achieve multiple goals, including providing the
statutory-required amount of time for public comment while also releasing the Advance Notice
using more current data to calibrate the model and ensuring that the Rate Announcement is
published by the statutory deadline. We provided the public with sufficient information to review
the proposals since we informed the industry that the evaluation to reclassify the model was
underway as far back as 2018 and we provided a number of resources to evaluate the updated
 74

model. Further, the updates proposed last year are in line with typical model updates for which
CMS has provided a similar or shorter comment period per the existing statutory requirement at
the time.

Comment: Some commenters stated that the updated model has impacted care delivery and the
quality of care and will continue to do so as it is phased in. Many of these commenters expressed
concerns regarding various ICD-10 codes that no longer map to HCCs in the model, as well as
some of the specific clinical areas that are not included in the new CMS-HCC risk adjustment
model, and expressed belief that these changes are directly affecting both physician payments
from MA plans and patient care. Some commenters also believe that the model has resulted in
negative clinical outcomes for particularly vulnerable populations. A few commenters expressed
concern of possible unintended consequences to patient care that may occur due to changes in
clinician coding practices. Commenters highlighted specific conditions as areas of concern
(which were addressed in specific responses in the CY 2024 Rate Announcement).

Response: MA organizations are required, by their contracts with CMS and section 1852(a) of
the Act, to furnish medically necessary Part A and Part B benefits to their enrollees. The risk
adjustment model used for MA payment is not designed to drive clinical behavior to look for
specific conditions or to be the sole or primary purpose for MA organizations or health care
providers to identify and treat conditions that are potential precursors to adverse medical events
or complicating factors in the identification and treatment of other conditions. Because MA
organizations are at financial risk for the care of their enrollees, changes in the risk adjustment
model do not change the fundamental incentive in a capitated payment system to reduce
morbidity and mortality by identifying and treating early stages of disease. MA organizations
submit bids to CMS that are based on the revenue needed to cover the expected per beneficiary
costs of their enrollee population. Risk adjustment is used to adjust plan bids and calculate
payment based on health status and demographic characteristics such that plans are paid more for
beneficiaries predicted to have higher costs. To accurately predict the likely relative cost of each
beneficiary, it is important to include in the risk adjustment model those diagnoses and
conditions that are reliable predictors of future costs and exclude those that are unreliable
predictors of future costs. For the 2024 CMS-HCC model, CMS undertook a comprehensive and
thoughtful process, informed by clinical input, to determine the diagnoses and conditions for
inclusion. As a result, the new model better directs resources to plans with beneficiaries with
higher health care needs.

The CMS-HCC reclassification involved revising condition categories – including adding,

deleting, and reconfiguring categories and clinical hierarchies, and freshly considering which
categories are included in the payment model. The goal was to improve predictive ability, to
better account for current disease patterns, treatment methods and costs, and diagnosis and
coding practices. The resulting model classifies the ~74,000 ICD-10-CM codes into 266 CMS-
 75

HCCs, 115 of which are included in the 2024 CMS-HCC payment model. This increase in
condition categories from the 2020 CMS-HCC model (204 CMS-HCCs; 86 in payment) is due to
the greater level of detail in ICD-10-CM diagnosis codes, allowing for the development of HCCs
with increased clinical specificity and validity that better capture clinical and cost differences
between conditions. In aggregate, the 2024 CMS-HCC model contains approximately 20 percent
fewer ICD-10-CM codes than the 2020 CMS-HCC model. This resulted from the removal of
diagnoses in accordance with CMS’ risk adjustment principles, evaluated based on (1) empirical
data including frequency, sample size, associated expenditures (e.g., overpredicted under the
current model HCC); (2) clinical specificity and salience; (3) reliability to predict 86 prospective
costs (including conditions that represent side effects of medical or drug treatment rather than
underlying health status risk); and (4) variable diagnosis or reporting (based on empirical
evidence or clinical input). Further discussion regarding the reclassification process can be found
in the CY 2024 Rate Announcement.

Comment: A few commenters stated concerns that the Fact Sheet released with the CY 2025
Advance Notice did not discuss the methodology, assumptions, and data used for developing the
MA risk score trend. A commenter believed that not providing this additional context may lead
to confusion, misinterpretation, and possibly false conclusion about the impact of the risk score
trend on MA payments. Commenters requested that CMS either include the methodological
details behind the MA risk score trend or stop using the risk score trend in future fact sheet and
Advance Notices.

Response: Each year, CMS releases an associated Fact Sheet that shows the year-to-year
percentage change in payment associated with the proposed (in the Advance Notice) or finalized
(in the Rate Announcement) policies. The Fact Sheet shows the overall average impact on MA
revenue, as well as the average impact of each individual update or policy proposal. As part of
the impacts released in the Fact Sheet, CMS also estimates the average growth of MA risk scores
in the payment year, known as the MA risk score trend. The MA risk score trend is the average
increase in risk scores, not accounting for normalization and the MA coding pattern adjustment
(which are included separately). The MA risk score trend is included in the Fact Sheet because it
has direct bearing on MA payments and the MA revenue picture would be incomplete without it.

As discussed in the CY 2025 Advance Notice, CMS calculates the MA risk score trend by
calculating MA risk scores over three prior years, then calculating the average annual change in
risk scores across those three years. All three years of risk scores are calculated using the risk
adjustment model(s) to be used in the upcoming payment year. This average annual change is the
MA risk score trend provided in the Advance Notice and Rate Announcement Fact Sheet. The
trend is an industry average and individual plans’ experience will vary.
 76

Note that the MA risk score trend has a separate impact from the impact of the risk adjustment
model, which is represented in a separate row of the Fact Sheet and is based on risk score
changes where the underlying data is held steady. Specifically, to measure the risk adjustment
model impact CMS uses the same diagnostic and demographic information run through the
current model and the model(s) for the upcoming payment years (e.g., 2020 diagnoses were used
to calculate 2021 risk scores under each model to calculate the risk adjustment model impact in
the Fact Sheet). The difference between the current model and payment year model(s) risk
scores, accounting for differences in normalization, is represented in the risk adjustment model
impact and normalization row.

By including both the risk adjustment model/normalization impact and the MA risk score trend
in the Fact Sheet, the resulting impact is effectively estimating a year-over-year payment impact
if diagnostic and demographic data are held steady, then further accounting for growth in risk
scores in the payment year based on historical experience. Therefore, it is imperative to consider
the MA risk score trend in concert with the impact of risk adjustment policy proposals to
accurately predict payment impacts in the following year. It is important to note that every model
has its own risk score trend.

Comment: Many commenters expressed concern that the model has and will continue to have a
negative impact on certain beneficiary populations, locations, and plan types. Multiple
commenters believed that the diabetes changes and model changes where diagnoses are no
longer included for payment are having a negative impact on dually eligible beneficiaries and
vulnerable populations (e.g., minority beneficiaries and those under the federal poverty level), or
beneficiaries in urban or rural areas. Multiple commenters expressed concerns about the model’s
impacts on plans with high enrollment of dually eligible beneficiaries, and high-risk, chronically
complex vulnerable populations (e.g., Special Needs Plans that serve dually eligible beneficiaries
(D-SNPs) or beneficiaries with certain chronic diseases (C-SNPs)). Multiple commenters stated
that minorities and people with low incomes make up a larger share of MA enrollees than they
do in FFS, and that further implementation of the model will more negatively affect them. Some
commenters cited a slower growth in the availability and enrollment in D-SNPs in 2024
compared to previous years despite phasing in the model, and others expressed concern that the
negative impact of the model may disincentivize MA plans from offering C-SNPs. Commenters
expressed concern about the implication for benefits that SNP beneficiaries have, such as greater
access to supplemental benefits, and stated that, according to their research, the model has and
will continue to have a more negative impact on SNPs compared to other MA plans, which they
believe may impact beneficiary cost and access to benefits.

Response: The updates improve the accuracy of the risk adjustment model and help ensure that
higher payments are available to plans that serve beneficiaries with more costly health care
needs. Additionally, the updates did not change features in the CMS-HCC risk adjustment
 77

model, first implemented in 2017, that ensure dually eligible beneficiaries have unique
adjustments for every health condition based on their dual-eligibility status that result in higher
payments for those conditions than non-duals. The updates also do not alter changes first
implemented in 2020 that ensure that plans receive an additional increase in payment based on
the number of conditions the beneficiary has.

As discussed in the CY 2024 Rate Announcement, conditions in the model are used as predictors
of relative costs, not as direct reimbursement for the treatment of each condition. Plan bids
project the average revenue needed to cover all Part A and B benefits, and the risk score is used
to assess the relative cost of a plan’s enrollee population. Further, it is the total risk score that
predicts the relative cost of a beneficiary, and each factor predicts part of the costs; therefore,
each relative factor cannot be assessed in isolation. If a specific HCC (or diagnosis code mapped
to a specific HCC) is no longer included in the payment model, coefficients of other HCCs and
demographic factors will be increased such that the model continues to predict the overall total
expenditures. Because the updated model improves upon the previous model by incorporating
recent costs and utilization patterns and is developed using ICD-10 codes, and because the model
ensures that plans that enroll beneficiaries with higher expected costs receive higher payments,
we do not agree that the continued phase-in of the model will negatively affect beneficiary costs
or supplemental benefits, and care delivery.

There will be variation in the impact on risk scores depending on each beneficiary’s clinical mix.
All of the model updates (i.e., underlying data updates, denominator update, and ICD-10
reclassification) contribute to changes in the relative costs of conditions compared to the 2020
CMS-HCC model previously used, and therefore changes to the resulting risk scores. Beneficiary
risk scores or plan average risk scores may change depending on an individual beneficiary’s
combination of diagnoses or the clinical profile of a plan’s enrollee population.

Comment: A few commenters stated their concern about the impact of the model on Puerto Rico.
These commenters stated that the proposed model will have the largest negative effect on Puerto
Rico due to the territory’s very high MA penetration, poverty levels, and higher than national
average prevalence rates for diabetes, mental health disorders, and congestive heart failure. A
commenter recommended CMS include adjustments based on ADI when identifying benchmark
rates.

Response: The CMS-HCC model is a national model, including large subgroup segments that
capture national variation in costs between the segmented populations. The goal of risk adjusted
payments is to pay accurately using the appropriate relative risk for a beneficiary. There will be
variation in the impact on risk scores depending on each beneficiary’s clinical mix. All of the
model updates (i.e., underlying data updates, denominator update, and ICD-10 reclassification)
contribute to changes in the relative costs of conditions, and therefore changes to the resulting
 78

risk scores. Beneficiary risk scores or plan average risk scores may change depending on
individual beneficiary’s combination of diagnoses or the clinical profile of a plan’s enrollee
population.

Conditions in the model are used as predictors of relative costs, not as direct reimbursement for
each condition. As discussed previously, the updated model improves predictive accuracy and
helps ensure that higher payments are available to plans that serve beneficiaries with greater
expected health care costs and, therefore, we do not agree that the updated model has
disproportionately negatively affected beneficiaries depending on their geographic region.

We understand that geographically Puerto Rico has a high percentage of beneficiaries with risk
scores calculated using the full benefit dual segment. As previously stated, CMS has observed
that, on average, predicted risk for dually eligible populations are higher than non-dually eligible
enrolled beneficiaries. The risk scores for dually eligible beneficiaries decrease less, compared to
the risk scores for non-dual eligibles when taking into account the risk adjustment model and
normalization impact as well as the MA risk score trend. When considering payment, the full
scope of contributing factors must be considered. MA plans submit bids to CMS that request the
total revenue needed to cover the expected per beneficiary costs of their enrollee population. The
purpose of the model is to calculate risk scores (that are used in calculating payments made to
plans) to take into account differences in expected costs for their enrollees and to increase or
lower payment based on the relative expected costs. Risk adjustment is used to adjust plan bids
and calculate payments based on health status and demographic characteristics such that plans
are paid more for beneficiaries predicted to have higher costs due to increased risk. Further,
individual coefficients do not represent complete costs for expected expenditures related to a
condition, but only the average increase in the overall predicted costs for a beneficiary with that
condition relative to other conditions used for payment in the model. Rather, the total relative
cost of a beneficiary, or a group of beneficiaries, is represented by the total risk score.

Comment: Commenters stated their concern that the model is negatively impacting providers
engaged in value-based payment models. A few commenters expressed concern that cuts to MA
payments will exacerbate provider shortages.

Response: CMS thanks the commenters for expressing their concerns. Per section
1854(a)(6)(B)(iii) of the Act, CMS is prohibited from interfering in payment arrangements
between MA organizations and providers with which they contract by requiring specific price
structures for payment. The purpose of the risk adjustment model is to predict the overall relative
expected expenditures for beneficiaries for purposes of paying MA organizations accurately and
fairly for the relative expected costs for the enrollees in their plans. MA organizations in turn
develop provider networks and negotiate payment arrangements with participating providers for
the delivery of covered services to enrollees.
 79

MA organizations are required to cover all Medicare Part A and Part B services (subject to
limited exclusions), maintain adequate networks, and provide quality care. They are responsible
for determining their own revenue needs to cover these services. An updated risk adjustment
model is intended to more appropriately pay plans that are enrolling a sicker population. In
paying plans a capitated payment, CMS contracts with MA organizations for them to provide
coverage of – by furnishing, arranging for, or making payment for – these benefits. The nature of
the MA program, by using capitated payments, allowing MA plans to use a portion of savings
when they bid below the benchmark to furnish additional benefits, and transferring full financial
risk to MA plans, incentivizes MA organizations to develop cost efficiencies in care provision.
Reducing morbidity and mortality by catching early stages of disease in an inherent expectation
of a capitated managed care system.

Section 1852 of the Act requires MA plans to cover Medicare Part A and B benefits (subject to
limited exclusions) for their enrollees and that when the MA plan uses a network of providers
and limits coverage to those providers, the MA plan must ensure that covered benefits are
available and accessible to enrollees. The CMS-HCC risk model used for risk adjusting
payments to MA plans does not limit or change these requirements related to coverage. We
expect that MA organizations will renegotiate or revise the payment arrangements they have
with their contracted providers as necessary to ensure that the MA plan continues to make
benefits available and accessible for enrollees.

The risk adjustment model is not intended to incentivize (or disincentivize) any particular care
modality. This is illustrated by, for example, not weighting diagnoses by site of care. Another
example is allowing costs to flow to demographic variables, which allows some portion of plan
payments to be paid regardless of disease state and thereby provide funds for a wide range of
prevention and intervention approaches, as well as to cover treatment of acute and lower-severity
chronic conditions not included in the risk-adjustment model. Finally, and to reiterate, by using
more recent data in calibrating the model, coefficients are recalculated, and conditions that might
be relatively more costly than they were in previous years, will result in higher risk scores for
beneficiaries with such conditions. The 2020 CMS-HCC risk adjustment model was calibrated
using diagnosis from 2014 and costs from 2015 and has a 2015 denominator whereas the 2024
CMS-HCC risk adjustment model was calibrated using diagnoses from 2018 and costs from
2019 and has a 2020 denominator.

Comment: A commenter expressed concern that the continued phase in of the model requires
providers to modify their practices related to coding and diagnosis. They requested CMS conduct
an educational campaign throughout the model phase-in to support provider understanding of the
model.
 80

Response: While CMS engages with stakeholders on a regular basis through various lines of
communication, physicians should not adjust their diagnostic or coding practices as we phase-in
the model. Physicians should not be diagnosing and coding based off risk adjustment, rather,
they should accurately diagnose and code for patients’ diagnoses using ICD coding guidelines.

Comment: Commenters suggested several proposals for model revisions including:

• Many commenters suggested the removal of health risk assessments and chart reviews as
a source of diagnoses for risk adjustment, which they believe would help reduce
overcoding practices.
• Multiple commenters requested CMS use two years of diagnostic data in risk adjustment
to reduce the impact of coding differences between MA and FFS.
• Several commenters recommended CMS switch to a model based on MA encounter data
so the model does not rely on FFS data.

Response: We appreciate the extensive and thoughtful comments and feedback we received on
improving the CMS-HCC risk adjustment model.

Comment: A commenter expressed concern that CMS has not fully accounted for the model
impact. The commenter requested CMS provide methodology for calculating the -4.44 percent
model phase-in impact noted in the CY 2025 Advance Notice.

Response: As explained in our FAQ #11 for the CY 2025 Advance Notice, 9 the model impact in
the Fact Sheet included with the CY 2025 Advance Notice and the CY 2025 Rate Announcement
is the net of two impacts: the “raw” (unnormalized) model impact – the difference between risk
scores for the same population under the older and newer model – and the impact of the updated
normalization factor. The combined impact accounts for the continued phase in of the 2024
CMS-HCC model. By combining the raw model impact with the impact of the updated
normalization factor on risk scores, we are accounting for the trend in risk scores that occur
between the denominator and the payment year. We note that the -4.44 percent is the difference
in raw risk scores, and reflects the phase in of the new model, whereby we are using 33 percent
of the risk scores under the 2024 CMS-HCC model in CY 2024, and 67 percent of the risk scores
under the 2024 model in CY 2025 – so a change of 34 percentage points. As with every update
of the risk adjustment model, the impact on each plan can vary, depending on the clinical profiles
of their enrollees.

9 Refer to CMS’ CY 2025 Advance Notice Fact Sheet.

 81

CMS-HCC Risk Adjustment Model for PACE organizations for CY 2025

Comment: Of the commenters who addressed the continued use of the 2017 CMS-HCC model,
all supported the use of the 2017 CMS-HCC model to calculate PACE organization risk scores.
While these commenters supported the use of the 2017 CMS-HCC model, they also expressed
concerns about the model (addressed in the comments and responses below).

Response: CMS appreciates the support. CMS will continue to use the 2017 CMS-HCC model to
calculate risk scores in CY 2025.

Comment: Commenters expressed general concern that PACE payments under the current risk
adjustment methodology continue to fail to recognize the costs of care associated with their
complex population and requested that CMS transition PACE to the same model being used to
calculate risk scores for MA organizations, commenting that:

• The 2024 CMS-HCC risk model includes dementia (and other chronic condition HCCs)
that have a high prevalence in the PACE population and are missing in the 2017 CMS-
HCC model. As a result, these commenters believe the model results in systemically low
payments to PACE organizations and threatens their ability to provide integrated, quality
care to this frail, often dual-eligible population.
• The use of frailty adjusters under the 2017 CMS-HCC model is not seen as a reliable or
adequate substitute for recognizing the risk faced by PACE organizations in caring for
their participants with dementia.
• The lack of alignment between MA and PACE may exacerbate payment disparities by
failing to recognize the cost of care for complex PACE population, further aggravated by
the fact that the 2024 CMS-HCC model is calibrated on ICD-10 diagnostic codes
whereas the 2017 CMS-HCC model continues to be calibrated on ICD-9 codes.
• The standard software and systems MA and PACE organizations use to generate data and
information are no longer supporting ICD-9 codes and RAPS files, potentially leading to
inaccurate or non-comprehensive data submissions.

Response: CMS will continue using the 2017 CMS-HCC risk adjustment model for risk adjusted
payment to PACE organizations for CY 2025. The 2017 CMS-HCC risk adjustment model was
first adopted for PACE in the 2022 Rate Announcement.10 As CMS has noted in the past, we
recognize that using distinct HCCs to calibrate separate models for PACE and MA may result in
differences in predicted risk for individual beneficiaries, however, we note again that the costs
associated with conditions that are not in the 2017 CMS-HCC risk adjustment model for
payment, such as dementia, are predicted by comorbid conditions and demographic factors. To

10 Refer to Section I. of the CY 2022 Rate Announcement.

 82

the extent that these costs are not predicted by the model, they are reflected in the frailty factors.
While the 2017 CMS-HCC model was calibrated using ICD-9 codes, risk adjustment
submissions and risk score calculation converted to the use of ICD-10 codes during the industry
conversion in October 2015. Therefore, CMS updated the diagnosis to HCC/RxHCC mappings
for all the models, including those used for PACE to ICD-10. CMS provides risk adjustment
model software for all models used to calculate PACE risk scores for each model run. In
addition, CMS releases the diagnosis to HCC/RxHCC ICD-10 mappings for each model run.

As CMS noted in the CY 2024 Rate Announcement,11 because we do not have a complete
diagnostic profile for their members in the encounter data system, we cannot rely solely on
encounter data to calculate PACE risk scores and, instead, use diagnoses from encounter data as
a supplement to RAPS data when calculating risk scores for payment using the 2017 CMS-HCC
risk adjustment model. We understand the desire to move PACE organizations to the updated
model calibrated on ICD-10 codes. However, because the 2024 CMS-HCC risk adjustment
model was calibrated using FFS diagnoses that were selected using the filtering method that is
used for encounter data, this model is intended to calculate risk scores using diagnoses submitted
on encounter data records and FFS claims (for beneficiaries who switch from FFS to MA)
filtered in the same manner as encounter data records. Since we do not have complete encounter
data from PACE organizations, we are not calculating PACE beneficiary risk scores using
diagnoses solely from encounter data and FFS claims (in contrast to the approach to calculating
Non-PACE beneficiary risk scores), and we cannot implement the 2024 CMS-HCC risk
adjustment model for PACE at this time.

In January of 2024, CMS released technical instructions to PACE organizations on the

submission of risk adjustment data to the EDS (that is, encounter data) for PACE center services
for which a claim is not generated. CMS also provided the instruction to begin transitioning all
PACE organizations to submitting risk adjustment data to the EDS rather than RAPS. As noted
in the CY 2025 Advance Notice,12 because of our findings from stakeholder engagement and
analysis, CMS believes that calculating PACE risk scores solely using diagnoses from encounter
data and FFS claims is achievable soon. We remain committed to working closely with PACE
organizations to support their transition to EDS submissions and the implementation of the
updated risk adjustment model for PACE. We intend to provide ample support and guidance to
make this transition as straightforward as possible.

11 Refer to Section J. of the CY 2024 Rate Announcement.

12 Refer to Section L1. of the CY 2025 Advance Notice.
 83

Section K. ESRD Risk Adjustment Models for CY 2025

For PACE Organizations

CMS did not receive comments on the CMS-HCC ESRD risk adjustment models for PACE
organizations for CY 2025. CMS will continue to calculate risk scores for payment of
beneficiaries with ESRD in PACE organizations using the CY 2019 CMS-HCC ESRD risk
adjustment models as proposed in the CY 2025 Advance Notice.

For Non-PACE Organizations

Comment: One commenter supported the continued use of the CY 2023 CMS-HCC ESRD
Models for 2025.

Response: Thank you for your comment. For CY 2025, we will continue to calculate risk scores
for payment of beneficiaries with ESRD in MA plans and certain demonstrations using the CY
2023 CMS-HCC ESRD risk adjustment models as proposed in the CY 2025 Advance Notice.

Comment: Several commenters expressed concern about interaction of the Part B transition of
oral-only ESRD drugs between the Part D and ESRD models. Specifically, a few commenters
noted that CMS updated the Part D model to account for the Part D to Part B transition of oral-
only ESRD drugs (e.g., phosphate binders) but did not update the ESRD model to account for
ESRD bundled costs. Commenters requested coordination amongst CMS policy teams on the
timeline and implementation of incorporating oral-only drugs into the ESRD PPS bundled
payment. A couple of commenters stated that when the transition occurs, CMS should also
update the ESRD risk adjustment models to account for the cost of phosphate binders.
Commenters expressed concern about inadequate reimbursement rates if the costs of drugs in the
ESRD PPS bundled payment is not accounted for in the ESRD model.

Response: Thank you for your comments. We appreciate the request for model updates and
coordination. CMS acknowledges the concern that the phosphate binder costs are not included in
the current ESRD risk model. We note that the costs for the final reconciled payment years
available for model calibration do not include phosphate binder coverage. Therefore, we will
continue to analyze and consider these recommendations as we evaluate ESRD model calibration
updates in the future.

Comment: One commenter believes that the ESRD model does not appropriately reflect the high
costs MA plans face in providing care and coverage for ESRD enrollees, and that CMS should
revise the model to ensure MA payments are adequate to ensure access to care.

Response: Thank you for your comment. CMS implemented the ESRD model to improve
accuracy for enrollees with ESRD, including those in dialysis status, transplant status, and in
 84

post-graft status in 2005 specifically to address this issue. We have updated the model over the
years to reflect more recent cost and utilization trends, as well as clinical updates to improve risk
adjustment payments for beneficiaries with ESRD. The risk scores generated by the model
predict beneficiaries’ expected health care costs relative to the average beneficiary, and are used
to calculate payments by adjusting the appropriate ESRD rate. We appreciate the comment and
acknowledge the commenter’s concerns and will continue to evaluate the ESRD risk adjustment
model in the future.

Section L. Frailty Adjustment for PACE Organizations and FIDE SNPs

Frailty for FIDE SNPs

Comment: One commenter specifically expressed support for the use of the full Medicaid frailty
factors to calculate FIDE SNP frailty scores in CY 2025.

Response: CMS appreciates the support. As proposed, CMS will use only the full Medicaid
frailty factors to calculate FIDE SNP frailty scores for FIDE SNP enrollees in CY 2025.

Comment: Commenters expressed concerns regarding a number of aspects of frailty they believe
result in underpayment for beneficiaries with the highest need including general concerns about
the decline in frailty scores, the disproportionate impacts of lower frailty scores on vulnerable
and high-need populations (e.g., dual-eligible enrollees) due to payment decreases, concerns
about low response rates, and concerns that response rate shifts to the lower activities of daily
living (ADLs) groups may result in survey bias. These commenters made a variety of
recommendations, including:

• Adjustments. Several commenters recommended that CMS adjust frailty scores to

account for the under-estimation of frailty in prior years, contract-level adjustments to
frailty factors to account for response rate bias, adjust the model coefficients and results
to account for potential bias produced by uneven response rates by ADL group, institute
measures that would phase-in/out frailty to allow application in years where a plan does
not meet the PACE minimum.
• Frailty score source. A couple of commenters recommended that CMS evaluate other
potential sources to assess frailty, such as state-level assessment data.
• Survey protocol modifications. A couple of commenters recommended modifications to
the current survey protocol such as increasing the number of members being surveyed,
improving HOS/HOS-M vendor capabilities and competition to field surveys, that CMS
consider allowing FIDE-SNPs to survey only those members who are at a nursing home
level of care, and increased data sharing between CMS, health plans, and the HOS/HOS-
M survey vendor to ensure the surveyed and responding population is representative of
the full population.
 85

• Application to expanded beneficiaries. Some commenters recommended CMS apply

frailty to additional populations such as working with Congress to provide Highly
Integrated Dual Eligible Special Needs Plans (HIDE SNPs) access to the frailty
adjustment as accessed by FIDE SNPs, and that CMS decouple the FIDE SNP
requirement from PACE to apply the frailty adjustment to the under 55 population.

Response: By law, CMS must use the same payment methodology for all enrollees in MA plans,
including Special Needs Plans (SNPs), except as explicitly provided for in statute. Section
1853(a)(1)(B)(iv) of the Act authorizes CMS to make frailty-adjusted payments only to certain
dual SNPs, which must have similar average levels of frailty as the PACE program. Thus, CMS
cannot make frailty payments to any SNP that does not meet these criteria without implementing
frailty payments program wide. CMS has explored ways of incorporating frailty into the risk
adjustment model in order to account for frailty when making risk adjusted payments to all plans
(including HIDE SNPs) without limitations on age and found challenges with a number of
approaches.13 Because the frailty factors are calculated using the residual of the CMS-HCC risk
adjustment model (the difference between the predicted expenditure amounts and the actual
expenditure amounts), and frailty scores have an average value of zero, the application of a
frailty adjustment to all MA plans would result in many plans receiving a negative frailty
adjustment.

The HOS has had considerable validation of its ability to accurately capture functional
limitations and other health related characteristics. For example, see “Patients’ Self-report of
Diseases in the Medicare Health Outcomes Survey Based on Comparisons with Linked Survey
and Medical Data from the Veterans Health Administration” (Journal of Ambulatory Care
Management, 2008 by Miller, et. al.). While we understand that surveys can have operational
challenges in administration, as noted in prior Rate Announcements (e.g., 2019), we believe that
the HOS and HOS-M continue to provide an accurate and representative measurement of frailty
at the plan level because ADL data are collected to calculate frailty scores in the same manner
that are collected and used to calculate frailty factors for model calibration (i.e., limitations in
activities of daily living collected from self-reported surveys). In addition, data are collected
consistently across respondents, such that frailty scores are calculated using data collected in the
same manner across plans, thereby allowing survey results to be compared across plans and
relative to PACE (a requirement for determining whether FIDE SNPs receive a frailty
adjustment in payment) and thus resulting in frailty payments that are comparable.

As noted in the CY 2025 Advance Notice14 CMS is continuing to evaluate the underlying
patterns driving the changes in the 2024 CMS-HCC model frailty factors.

13 Refer to the studies discussed in Section K. of the CY 2023 Rate Announcement.

14 Refer to Section I. of the CY 2025 Advance Notice.
 86

Comment: A couple of commenters requested that CMS provide additional information. One
commenter requested that CMS release additional information to support bidding submissions.
Specifically, the commenter requested the distribution of survey responses corresponding to the
PACE minimum for the last several years to support bidding given what they believe is year-
over-year instability. In addition, they requested that in future years, CMS include the
distribution used to calculate the PACE minimum as a standard part of the Advance Notice
and/or Rate Announcement, believing the historic PACE distribution would help plans
understand the variation of the minimum from year-to-year and use that information to better
project the likelihood of payment. Another commenter requested that CMS clarify how using the
updated 2024 CMS-HCC model will impact the FIDE SNPs’ frailty adjustment calculations,
specifically expressing concern that there is a negative impact on FIDE-SNPs as frailty scores
have declined over time with the population served most likely to have the deleted or changed
2024 CMS-HCC model HCC groups.

Response: Every year CMS releases the distribution of ADL limitations across all PACE
organizations based on the most current HOS-M data in the annual HPMS memo regarding
participation in HOS/HOS-M for MA organizations planning to sponsor FIDE SNPs.15 In
addition, the PACE minimum is provided every year via HPMS with the release of the payment
year frailty scores.16 CMS will consider what additional information can be provided in the
future to assist FIDE SNPs in estimating frailty for their bid submissions.

CMS understands the concern regarding decreases in frailty scores. CMS releases the survey
results and ADL distribution to each FIDE SNP that elects to field the survey annually. Using
this information and the frailty factors corresponding to each payment year, FIDE SNPs can
analyze their ADL distribution and frailty factor impact over time. We note that we must
implement frailty factors that align with the CMS-HCC risk adjustment model to be used in
payment, since the frailty factors are calculated by predicting costs that are not captured by the
specific CMS-HCC risk adjustment model used for payment. When the risk adjustment models
are updated and better predict beneficiary cost patterns, there is less residual cost to attribute to
the frailty factors used in risk adjustment payments in the payment year. As a result, frailty
factors can be lower for the 2024 CMS-HCC risk model relative to the older model. As noted in
the CY 2025 Advance Notice,17 CMS is continuing to evaluate the underlying patterns driving
the changes in the 2024 CMS-HCC model frailty factors.

15 For the most recent version of this memo, see: Participation in 2024 HOS/HOS-M for MA Organizations Planning to Sponsor
FIDE SNPs in 2025 – Response Needed by Wednesday, February 28, 2024.
16 For the most recent version of this memo, see: 2023 Frailty Scores and 2022 Health Outcomes Survey (HOS) or Health

Outcomes Survey Modified (HOS-M) Activities of Daily Living (ADLs) Results.

17
Refer to Section I. of the CY 2025 Advance Notice.
 87

Frailty for PACE Organizations

Comment: Commenters supported the continued use of the frailty factors associated with the
2017 CMS-HCC model to calculate frailty scores for CY 2025.

Response: CMS appreciates the support. CMS will continue to use the frailty factors associated
with the 2017 CMS-HCC model to calculate frailty scores for PACE organizations in CY 2025.

Comment: Commenters expressed concerns with using the HOS-M survey to estimate frailty
because of low response rates (especially amongst those with dementia), and that reliance on the
HOS-M for frailty adjustment does not consider the challenges faced by people with dementia in
completing the survey. The commenters urged that, if dementia could not be included in the
2017 CMS-HCC risk adjustment model used to pay PACE organizations for CY 2025, CMS
modify the CY 2024 HOS-M survey administration protocol to allow PACE organizations to
proactively offer completion assistance for the survey to their participants living with dementia
to increase the likelihood that they are adequately represented in the survey’s results.
Commenters stated they estimate 50 percent of PACE enrollees have dementia, and they believe
the HOS-M is not a reliable or adequate substitute for recognizing the risk faced by PACE
organizations in caring for their participants living with dementia.

Response: Because the CMS-HCC risk adjustment model predicts total expenditures for Part A
and Part B benefits, for beneficiaries with conditions such as dementia that are not directly
incorporated in the 2017 CMS-HCC model, the associated costs can be predicted by comorbid
conditions and demographic factors that are included in the model. To the extent that these costs
are not predicted by the model, they are likely to be reflected in the frailty factors. CMS
estimates frailty factors to explain additional costs not explained by diagnoses in the CMS-HCC
model used to calculate risk adjusted payments for the organization in the payment year. CMS
calibrates the frailty factors by regressing the residual, or unexplained costs from the CMS-HCC
risk adjustment model, onto counts of ADLs. Although total costs are included in the calibration
of the 2017 CMS-HCC risk adjustment model, and the associated frailty factors help predict
overall costs where diagnoses are not fully predictive, results for individual organizations may
differ due to differences between the sample used for model calibration and the populations
enrolled in individual plans.

CMS acknowledges the concerns related to the response rates for the HOS-M for PACE
participants, particularly among participants with dementia. The responses from this survey are
used to determine a beneficiary’s limitations in ADLs that are accounted for in the calculation of
 88

a contract’s frailty score. We collect survey data in a consistent manner for all PACE
organizations, as this helps to ensure equitable frailty results for payment. In addition, ADL data
are collected to calculate frailty scores in the same manner that these data are collected and used
to calculate frailty factors for model calibration (i.e., limitations in activities of daily living
collected from self-reported surveys). Permitting variation in how the survey is administered for
participants with specific conditions may disproportionately affect frailty scores for certain
organizations, depending on what proportion of an organization’s participants have that
condition and which organizations provide the assistance. There are existing proxy allowances in
the survey administration protocol. For the HOS-M, a proxy response is at the discretion of the
beneficiary, but PACE staff may inform the family member or caregiver of their right to request
a proxy if participants with dementia need assistance completing the survey.

Section M. MA Coding Pattern Difference Adjustment

Comment: Several commenters supported CMS’ proposed 5.9 percent coding pattern
adjustment for CY 2025.

Response: CMS appreciates the support of the commenters. CMS is finalizing the proposed
adjustment of 5.9 percent for CY 2025.

Comment: Several commenters opposed CMS’ proposed 5.9 percent 2025 coding pattern
adjustment and provided alternative recommendations to the statutory minimum coding pattern
adjustment of 5.9 percent, as summarized below:

Higher Adjustment Factor: Several commenters recommended a higher adjustment factor than
the statutory minimum, which they state is inadequate to adjust for differential patterns of
coding between MA and FFS. Commenters expressed concern that the statutory minimum does
not account for the full impact of coding pattern differences, and multiple commenters
highlighted analyses from MedPAC that the coding adjustment factor should be several
percentage points higher. These commenters stated their belief that excess spending is
accelerating the depletion of the Medicare Trust Funds and the potential savings from fully
accounting for the coding pattern differential would increase solvency of the Trust Funds. A
few commenters that recommended a higher coding pattern adjustment expressed concern that
the current application of the minimum adjustment and the risk adjustment model incentivize
plan sponsors to code their enrollees with as many conditions as possible, driving up payment
rates.

Specific Methodological Recommendations:

• Demographic Estimate of Coding Intensity (DECI). One commenter recommended the

incorporation of the DECI method to calculate a coding pattern adjustment factor. Under
 89

the assumption that MA does not receive adverse or favorable selection relative to FFS
in terms of health status, the recommended DECI method controls for demographics,
estimating the coding pattern adjustment by comparing MA risk relative to FFS risk
using the CMS-HCC risk adjustment model, and comparing that relationship against
MA risk versus FFS risk using the Adjusted Average Per Capita Cost (AAPCC) model
that is based on demographics only and was used in payment prior to 2000.

• Targeted Approaches:

o General comments supporting targeted approaches. Several commenters

expressed concern that applying an across-the-board coding pattern adjustment
could negatively affect smaller plans who do not engage in upcoding. A few
commenters recommended targeted approaches, because of their concern that
certain MA organizations code much more aggressively than others with higher
levels of coding intensity due to various structural payment incentives, including
payments between MA organizations and their contracted providers. Other
commenters stated their concern about the current application of the factor
because it does not adequately adjust for risk score increases above the average,
and disadvantages plans serving primarily low-income and historically
underserved communities that have less administrative resources to focus on
diagnosis coding.

o Segmented/tiered approach. Several commenters suggested a segmented or

tiered approach to coding pattern adjustments that recognizes different levels of
coding patterns among plans, such that the lowest coding factor is applied to
lower coding plans while the highest factor is applied to higher coding plans.
One commenter suggested that CMS investigate whether such an approach
would discourage over coding without penalizing plans that appropriately adhere
to coding guidelines.

o Contract-specific approach. A few commenters recommended tailoring the MA

coding pattern adjustment to the relative level of coding intensity seen in
individual MA contracts – rather than the across-the-board coding pattern
adjustment that CMS applies today to all MA contracts. A few commenters
believe that CMS should consider increasing the MA coding pattern adjustment
for all contracts and consider using its statutory authority to vary the coding
pattern adjustment by contract.

A few commenters had recommendations to calibrate the CMS-HCC risk model using different
data to address coding pattern differences between MA and FFS. One commenter recommended
a multipronged approach to addressing coding pattern differences in MA and FFS. Their
 90

recommendation included three parts: 1) develop a risk adjustment model that uses two years of
FFS and MA diagnostic data; 2) exclude diagnoses that are documented only on health risk
assessments from either FFS or MA; and then 3) apply a coding adjustment that fully accounts
for the remaining differences in coding between FFS Medicare and MA plans.

One commenter stated that CMS should work with Congress to reduce the statutory minimum
coding pattern adjustment given the Prinicple-10 based updates made to the 2024 CMS-HCC
model and another commenter suggested a population adjuster that could help ensure the coding
intensity adjustment accounts for the vast differences between populations.

Response: Section 1853(a)(1)(C)(ii) of the Act establishes a minimum MA coding pattern

adjustment, which was originally adopted beginning with 2014 payment. The current statutory
minimum coding pattern adjustment is 5.9 percent. In accordance with statute, CMS analyzes
coding pattern differences and determines what the coding pattern adjustment factor should be
on an annual basis. We have found that the minimum adjustment is sufficient to reflect
differences in coding patterns between MA plans and providers under FFS Parts A and B. CMS
continues to believe that applying a uniform adjustment is an appropriate approach. Therefore,
we are finalizing our proposed MA coding pattern adjustment factor for CY 2025.

We appreciate the extensive and thoughtful comments and feedback we received on this
proposal. Ensuring that the coding pattern adjustment policy appropriately addresses differences
in coding patterns between the FFS program and MA is essential, and we will consider these
recommendations in the development of future proposals regarding the coding pattern
adjustment.

Comment: One commenter requested sufficient time and information to comment on any
potential changes to the MA coding pattern adjustment in the future.

Response: CMS appreciates the comment. Section 1853(b)(2) of the Act requires that CMS
provide notice of proposed changes in the methodology and assumptions for setting MA
capitation rates and risk and other factors used to adjust the capitation payments, with a comment
period of at least 30 days to comment on the proposed changes. We will continue to consider
additional ways in which we can engage with stakeholders should we consider changes to the
MA coding pattern adjustment.

Comment: One commenter suggested that CMS utilize the RADV audits on health plans to
identify potential upcoding based on significant variation from risk adjustment averages.

Response: We appreciate the suggestion. The coding pattern adjustment is applied to account for
the impact on MA risk scores of the differential coding patterns between MA and FFS, whereas
the primary goal of the RADV audits is to address improper payments to MA organizations.
 91

Comment: A few commenters recommended making fundamental changes to the CMS-HCC

Risk Adjustment model that prevents gaming and helps to drive high-quality and equitable
healthcare in the long run, such as using two years of traditional Medicare and MA diagnostic
data for calculating MA risk adjusted payments.

Response: We appreciate commenters’ feedback. CMS diligently updates the CMS-HCC Risk
Adjustment model to account for several changes such as updated data years, clinical revisions,
and ICD-10 changes, and will continue to update the CMS-HCC model to drive high-quality
and equitable healthcare.

Comment: A few commenters recommended that CMS limit the use of chart reviews and health
risk assessments by MA plans to eliminate potential upcoding.

Response: We appreciate the recommendation to limit the use of chart reviews and health risk
assessments in risk adjustment. CMS has issued guidance regarding health risk assessments and
chart review records in recent years to ensure they are being utilized appropriately.18 We
understand commenters’ concerns and will keep them in consideration in the future.

Section N. Normalization Factors for the CMS-HCC Risk Adjustment Models

Comment: Multiple commenters supported transitioning to a multiple linear regression

methodology that incorporates FFS risk scores from the most current five years of average FFS
risk scores available (2019-2023) and includes a flag that identifies whether an average FFS
risk score is based on dates of service before or after the onset of the COVID-19 pandemic. A
commenter stated support for the proposal saying that a more fundamental methodological
change is needed. The commenter also stated that projecting forward from the denominator year
to the payment year under a linear slope methodology is inappropriate given the impact the
COVID-19 pandemic had on FFS risk scores in 2021 and 2022. A few commenters believe that
the multiple linear regression methodology better captures more recent demographic changes in
the Medicare population because of the incorporation of more recent data. Another commenter
stated that they largely agree with and support CMS’ proposed methodology, but they did have
concerns with the proposed use of data from only 2019 through 2023 for the regression
analysis.

Response: CMS appreciates the support of the commenters. CMS is finalizing the methodology
for the normalization factors for the CMS-HCC and CMS-HCC ESRD risk adjustment models as
proposed.

18Refer to the CY 2016 Rate Announcement; Medicare Managed Care Manual; and April 28, 2018 HPMS memo entitled,
“Additional Guidance for Chart Review Record (CRR) Submissions.”
 92

Comment: The majority of the commenters opposed the Part C normalization factor
methodology as proposed. This includes many commenters who supported using a multiple
linear regression methodology but with recommended changes and a smaller subset of
commenters who opposed deviating from the historical linear slope methodology altogether.

Most of these commenters believe CMS is overstating the CY 2025 Part C normalization factor
by putting too much weight on FFS risk scores from years after the onset of COVID-19 that
have significant variability and not enough weight on FFS risk scores prior to the onset of the
COVID-19 pandemic. Most of the commenters assumed that the future FFS risk score trend
will return to pre-COVID-19 levels and this return should be accounted for in the normalization
factor calculation. A commenter stated the proposed methodology would misestimate the
normalization factor by 2.5 percent and that this would harm beneficiaries through higher
premiums, reduced benefits, and fewer choices.

Response: CMS appreciates the feedback and concerns of the commenters. We also thank the
commenters who agree with adopting a multiple linear regression methodology but also
recommended adjustments. By using a multiple linear regression methodology, CMS can more
appropriately take into account significant changes in the trend, as was observed with the onset
of the COVID-19 pandemic when risk scores dropped significantly due to atypically low
utilization. This methodology enables CMS to incorporate more recent years of data in the FFS
risk score trend to reflect current risk while projecting a risk score that is reflective of what the
average FFS risk score is likely to be. CMS believes that this approach is the best way to more
reasonably normalize risk scores given the variability in the years after the onset of COVID-19.
CMS thinks it is important to incorporate more recent years of data in the trend to reflect current
risk and we must balance that with projecting a risk score that is reflective of what the average
FFS risk score is likely to be in order to establish an appropriate normalization factor.

CMS accomplishes this by including a COVID-19 indicator flag in our regression inputs to
differentiate risk scores that were based on diagnoses from before and after the onset of COVID-
19. The inclusion of the COVID-19 indicator in the multiple linear regression allows us to
incorporate all of the most current five years of FFS risk scores available by not treating all data
years uniformly when it comes to their impact on the trend calculations and projections,
accounting for the drop in the average FFS risk score due to COVID-19 and distinct slopes
between the two time periods. We note that we are not weighting the post-COVID-19 trend more
than pre-COVID-19 trends, but rather allowing the regression to recognize two distinct trends
and take them into account. Previously, our projections treated each year uniformly without
considering the distinct trends that exist before and after the onset of COVID-19. The inclusion
of the COVID-19 indicator in our multiple linear regression methodology allows us to consider
the specific influence of the pandemic by now recognizing a distinction between the trends and
 93

risk score levels for the pre- and post-COVID-19 periods when projecting to the future year
without needing to exclude any FFS risk score data.

By accounting for the impact of the pandemic on risk score trends and the actual variation in the
risk scores over time in our projections we believe the multiple linear regression methodology as
proposed in the CY 2025 Advance Notice produces normalization factors for CY 2025 that better
fit the FFS risk score data relative to the historical linear slope approach, and results in a
reasonable projection without excluding data.

In response to the commenters concerned that the risk model revisions and normalization factors
will negatively impact MA revenue, CMS notes that every year we release an associated Fact
Sheet that shows the year-to-year percentage change in payment associated with the proposals in
the Advance Notice and the policies finalized in the Rate Announcement. The Fact Sheet for this
Rate Announcement shows the overall average impact on MA revenue, accounting for all factors
listed in this Rate Announcement, is expected to be a positive 3.70 percent for CY 2025. This
estimate includes impacts related to the 2025 Part C normalization factor and the phasing in of
the 2024 CMS-HCC model.

Comment: CMS received numerous comments containing varying individual recommendations

and alternatives for CMS to consider regarding the data years used in the calculation of the
normalization factors for CY 2025, which are discussed in more detail below. Many
commenters believe the data years used in the proposed Part C normalization methodology will
create normalization factors that are too high, thereby inappropriately lowering risk scores for
CY 2025. Many of these commenters are concerned that using FFS risk scores that were
previously excluded from the normalization factor calculation (e.g., 2021 and/or 2022) is
inconsistent and will lead to normalization factors that are erroneously high. Some of the
commenters also believe that 2021 and 2022 risk scores (based on 2020 and 2021 dates of
service, respectively) are causing the proposed Part C normalization factor to represent a risk
score trend that does not match historical patterns of risk score growth.

A few commenters stated that they believed that the number of years of FFS risk scores used in
the proposed multiple linear regression methodology is insufficient and runs the risk of
“overfit,” whereby a statistical model begins to describe the random error in the data rather than
the relationships between variables due to an insufficient amount of data used in the calculation.
The commenters stated that the issue of overfitting is due to CMS only using five data points
and because of this, the multiple linear regression methodology will not be accurate when
predicting for years outside of those used in the regression (2019-2023). A number of
commenters provided recommendations for adjusting the FFS data years used in the Part C
normalization factor methodology trend. The recommendations included various alternatives
 94

that involve either excluding a number of FFS risk score data years between 2020 – 2022,
including data years between 2017 – 2018, and/or a combination of the two.

Many commenters believed that the average FFS risk scores are, or will begin to be, trending
back toward the pre-COVID-19 rate of growth and that the post-COVID-19 trend is overly
accounted for in the proposed Part C normalization factor methodology. Multiple commenters
provided in-depth analysis indicating their belief that the post-COVID-19 risk score trends do
not exhibit a linear relationship over time and that non-linear relationship should be accounted
for in the Part C normalization factor methodology. Specifically, commenters stated that the
pre-COVID-19 years reflect a linear pattern, but the post-COVID-19 period may be exhibiting
more of a decelerating, curved pattern.

Response: CMS appreciates commenters’ concerns regarding the data years used to calculate the
Part C normalization factors for CY 2025. As stated above, CMS received a significant number
of alternative recommendations from commenters about which data years to use to calculate the
Part C normalization factors. There was not an industry-wide consensus; the recommended
alternatives were varied, sometimes conflicting, and produced different normalization factors
with varying degrees of magnitude. CMS believes that these alternatives to the data years used in
determining the CY 2025 normalization factors will not provide more reasonable estimates of
average 2025 FFS risk scores, and that the proposed Part C normalization factors – developed
using a multiple linear regression approach with the most recent five years of data and a COVID-
19 indicator, without excluding data – are better projections of the applicable average FFS risk
score in 2025.

The goal of the normalization factor is to reasonably predict the FFS risk score in the payment
year, thereby maintaining an average FFS risk score of 1.0 across the entire FFS population.
CMS believes that the inclusion of data years prior to 2019 or exclusion of data years impacted
by COVID-19 in the multiple linear regression calculation will result in a projected risk score
(i.e., normalization factor) that is significantly below what the actual average FFS risk score is
likely to be in 2025.

Using a linear slope method assumes a constant trend across all years whereas the multiple linear
regression method with a COVID-19 indicator allows us to estimate different slopes for pre- and
post-COVID-19 affected years, capturing the impact of the pandemic on FFS risk scores in our
projections. Rather than calculating one slope over a five-year period to estimate the average
FFS risk score in the payment year, which in recent years necessitated the exclusion of atypical
FFS risk scores to estimate a reasonable projection, our multiple linear regression method
considers the distinct slopes and FFS risk score levels that exist before and after the onset of
COVID-19, without requiring any exclusion of recent-year risk scores. The inclusion of a
 95

COVID-19 indicator and performing a multiple linear regression will ensure our projections
align more closely with reasonable FFS risk score projections.

CMS believes that five years of FFS risk score data continues to be appropriate for the purposes
of calculating normalization factors. The use of five recent years of FFS risk scores allows CMS
to consider risk scores in its estimates of the normalization factors that are more likely to reflect
the current state of FFS risk score growth, while smoothing some of the volatility that can occur
over time. We believe that including an additional one or two years of historical FFS risk scores
would place emphasis on data that do not have an influence on the current trend. While there is
inherent uncertainty with any prediction of future values, the five-year trend already includes two
years of FFS risk scores (2019 and 2020) that do not exhibit the same increase observed from
2021 to 2023, which provides a smoothing effect in the event the FFS risk score increase slows
down in the future.

In response to commenters concerned about incorporating previously excluded FFS data years
2021 and/or 2022, including previously excluded FFS data years does not contradict our position
in prior year Advance Notice and Rate Announcements where CMS used the linear slope method
to calculate the Part C normalization factors. Excluding those FFS data years under the historical
methodology was necessary to allow CMS to avoid unreasonable projections during a period of
unpredictability. CMS’ five-year linear slope methodology, that has largely been used since
2007, to calculate model normalization factors assumes that risk scores will change uniformly
from one year to the next and is sensitive to extreme events. Given this, a single anomalous data
point can have a large impact on projected FFS risk scores possibly yielding an unreasonable
normalization factor, particularly where that data point is the first and/or last value used for
projecting the trend. Including anomalous data in the trend, such as 2021 and 2022 FFS risk
scores, under the historical linear slope methodology can have a large impact on the projected
value, the directionality of which is dependent on where the anomalous data point is in the slope.
In contrast, a multiple linear regression methodology can account for the anomalous COVID-19
data point and calculates slopes independent from the decrease in risk score level between the
two time periods. It achieves this by not treating all data years uniformly when it comes to their
impact on the trend calculations and projection, negating the need to exclude data years as is
required under the linear slope methodology.

Comment: Some commenters believe that the rationale for using the linear regression
methodology as proposed, specifically incorporating the most recent five years of data, is
inconsistent with the rationale for the RxHCC methodology and what CMS has said in prior
Rate Announcements whereby CMS excluded periods substantially impacted by the COVID-19
pandemic because they were atypical. The commenters urged CMS to take a consistent
approach toward Part C and Part D normalization by reconsidering the data years used in the
Part C normalization factor methodology.
 96

Response: There are two important considerations driving the different approaches to calculating
the normalization factors for the Part C (MA and PACE) and Part D risk adjustment models.

First, the historical average Part D risk scores used to calculate the Part D normalization factors
for MA-PD plans and PDPs include the most recent years available (2018-2022), which are
lagged one year compared to the historical average FFS risk scores used to calculate the Part C
normalization factors for MA and PACE (2019-2023). In response to commenters concerned
with inconsistency between the CMS-HCC model and RxHCC model, CMS notes that Part D
normalization factors include risk scores of enrollees in both MA-PD plans and PDPs, while only
risk scores of beneficiaries in FFS are used to calculate the Part C normalization factors. Due to
additional time needed for complete encounter data submissions from MA organizations, the
availability of risk scores used to calculate RxHCC model normalization factors are lagged one
year relative to CMS-HCC risk scores, meaning that the most recent final reconciled RxHCC
risk score is for 2022 (using diagnoses from 2021 dates of service) and, therefore, the 2023
RxHCC risk score is not available for consideration in the calculation of the RxHCC
normalization factor for CY 2025. Because we do not have a 2023 risk score for the RxHCC
normalization factor calculation to evaluate the accuracy of the multiple linear regression
approach, we do not believe it is prudent at this time to alter the methodology for the RxHCC
model normalization factors. For the RxHCC model normalization factors (see Attachment IV,
Section H), we are being consistent with the method finalized in CY 2024 for the CMS-HCC
models when 2022 was the most recent risk score available.

Second, the use of the multiple linear regression equation avoids the need to exclude prior years
of risk score data because it takes into account the different slopes that exist before and after the
onset of the COVID-19 pandemic, effectively capturing the impact of the pandemic in our
projections. As explained in the prior responses to public comments in this section and in the CY
2025 Advance Notice, the linear slope approach – the approach for which CMS determined that
excluding certain past years of data was necessary – is vulnerable to significant changes in the
trend, as was observed during the COVID-19 pandemic when risk scores dropped significantly
due to atypically low utilization. The Part D normalization factors for CY 2025 are calculated
using the linear slope approach in part because we do not believe there is sufficient post-COVID-
19 risk score experience to conclude that the multiple linear regression approach is necessary to
calculate a reasonable projection of average 2025 risk scores. As also stated in the CY 2025
Advance Notice, for future years, when more post-COVID-19 risk scores are available for
RxHCC models, CMS will evaluate the multiple linear regression approach, but we believe that
using that approach for the RxHCC models is not prudent for CY 2025.

Comment: Many commenters supported or were open to changing the normalization factor
methodology, including the use of the multiple linear regression methodology. Of these
commenters, most stated support for alternative implementations of the multiple linear regression
 97

methodology that use alternative regression inputs for FFS data years and/or the COVID-19
indicators.

Many commenters believed that there were more appropriate ways to use the COVID-19
indicator, rather than the binary (“0” or “1”) flag that CMS used in their multiple linear
regression to indicate a pre- and post-COVID-19 period, given that the impact of COVID-19 is
not consistent across each year and assuming as such may not result in a good prediction of
2025 average FFS risk scores. A number of these commenters suggested CMS re-evaluate the
COVID-19 indicator used for years after 2022.

Some of these commenters suggested CMS instead use a COVID-19 indicator that is variable
and reflects the impact COVID-19 had on each year’s risk scores rather than a categorical
binary variable. The commenters recommended a quantifiable indicator that assumes the post-
COVID-19 growth in risk scores seen since 2021 will phase out over time such that the post-
COVID-19 trend will ultimately resemble the pre-COVID-19 trend. Multiple other commenters
suggested an alternative methodology whereby the COVID-19 indicator decays over time at a
constant rate.

A few commenters believe that CMS should indicate 2023 as a non-COVID-19 year, indicated
by a “0”, with one commenter stating this is appropriate given the official end of the federal
public health emergency was in 2023.

A couple of commenters also recommended adopting a non-linear “Decay” adjustment to

account for the unique post-COVID-19 FFS risk score pattern in the trend when projecting the
future risk score average to set the normalization factor. The Decay adjustment assumes that the
initial post-COVID-19 growth from 2021 to 2022 that is higher than growth from 2022 to 2023
will continue into years beyond 2024. This modeling approach assumes that there was an initial
impact of COVID-19 on FFS risk scores that declines over time, and that FFS risk score growth
will eventually return to the trend seen pre-COVID-19, while still incorporating a post-COVID-
19 “shift.” Commenters stated that the Decay approach allows the proposed methodology to
retain the anomalous 2021 data point while using a non-linear rather than linear assumption,
which they believe will mitigate the bias that a linear model would have.

Some of the recommended alternative approaches to the proposed multiple linear regression
methodology by the commenters include:

• Using FFS data from 2017 – 2023 or 2018 – 2023;

• Using FFS data from 2017 – 2023, but excluding 2021 and/or 2022 FFS data;
• Modifying the COVID-19 indicator to reflect a gradually declining factor that more
closely reflects the pre-COVID-19 trend;
• A COVID-19 indicator that decays over time at a constant rate;
 98

• Inputting “0” for the COVID-19 indicator for years after 2021;
• Inputting “0” for the COVID-19 indicator for 2023; and/or
• Inputting “0” for the COVID-19 indicator for 2025.

Response: CMS thanks the commenters for the thoughtful feedback and the valuable analyses.
We also appreciate the support in using a new multiple linear regression methodology for use in
calculating the 2025 Part C normalization factors. CMS is finalizing the proposed normalization
factors that were developed using the multiple linear regression methodology that accounts for
the different trends in the FFS risk scores between the pre-COVID-19 period and the period
during and after by including a binary COVID-19 indicator for time periods before and after the
onset of the COVID-19 pandemic in the regression.

This COVID-19 indicator accounts for the distinct difference in the level and year-over-year
change in the average FFS risk score between the pre- and post-COVID-19 periods in a way that
does not necessitate the need to exclude any years of data. The COVID-19 indicator itself is a
categorical and binary variable that identifies in the regression whether an average FFS risk score
is based on dates of service before or after the onset of the COVID-19 pandemic.

Many commenters based their recommendations for adjusting the COVID-19 indicator on the
assumption that the post-COVID-19 trend will recover completely and return to pre-COVID-19
levels resulting in a COVID-19 indicator that will decrease and eventually phase out over time.
At this time, CMS believes there is insufficient post-COVID-19 FFS risk score data to
adequately analyze whether it is appropriate to make this assumption and to change the COVID-
19 indicator from a categorical variable, indicating pre- and post-COVID-19 periods, to a
variable indicator that is adjusted based on a prediction of future trend with confidence. CMS
also believes the use of a categorical variable provides valuable transparency in that it is a clear
and replicable approach for accounting for the impact of the COVID-19 pandemic in the
regression and relies on basic information without the need to make inferences about the impact
of certain years in the historical data on future trends.

While CMS will be finalizing the normalization factors for MA and PACE developed using the
multiple linear regression methodology as proposed in the CY 2025 Advance Notice, we will
continue to assess trends and the appropriateness of alternate methods for future years.

Comment: A few commenters stated that the multiple linear regression Part C normalization
factor methodology predicts a higher rate of growth in FFS risk scores in the years following
the COVID-19 pandemic than in the years prior to the pandemic and does not account for the
observed deceleration in risk score growth from 2022 to 2023. Multiple commenters
recommended CMS continue to use the historical linear slope methodology to calculate the
2025 Part C normalization factors. Most of these commenters believe that using the historical
 99

linear slope methodology produces a normalization factor that more closely aligns with the pre-
COVID-19 trend, which they believe is more appropriate.

Multiple commenters provided their own Part C CMS-HCC normalization analysis using the
linear slope methodology under different scenarios, including using more historical FFS data in
the trend (2017-2019) and/or continuing to exclude years affected by COVID-19 (2021 and/or
2022). Specifically:

• A couple of commenters recommended using a five-year average but excluding 2020 and
2021 FFS risk scores from the trend (using years 2017-2019, 2022-2023);
• Several commenters recommended excluding only 2021 FFS risk scores;
• Multiple commenters recommended excluding only 2021 and 2022 FFS risk scores;
• A number of commenters recommended excluding only 2021 FFS risk scores, but also
including 2017 and 2018 as additional years used in the trend;
• A few commenters recommended using 2017-2023 FFS risk scores but excluding 2021-
2022 FFS risk scores; and
• Another commenter recommended CMS follow prior years methodology and exclude
2021 FFS risk scores but keep 2018 FFS risk scores in order to have a consistent 5 years
of data points.

Response: For CY 2024, to ensure a reasonable projection of FFS risk scores given the
information available at the time, CMS appropriately excluded FFS risk scores that had an
anomalous effect on our trend under the historical linear slope methodology. As noted in the CY
2025 Advance Notice, our analysis showed that when the CY 2025 normalization factor for the
Part C risk adjustment models are calculated with a linear slope using the most recent average
FFS risk scores (2019 through 2023, excluding 2021), the resulting normalization factors are the
same (2024 CMS-HCC model) or lower (2020 CMS-HCC model) than the CY 2024
normalization factor, predicting that average FFS risk scores would not grow between CY 2024
and CY 2025, or would decrease. Similarly, when performing the same calculation but also
excluding the 2022 average FFS risk score, CMS observes that the 2025 normalization factor for
the 2020 CMS-HCC model again comes in lower than the 2024 normalization factor. We do not
believe that excluding fewer years of risk scores, as suggested by several commenters, improves
the projections that result from using the linear slope approach. Because the linear slope
methodology produces factors that CMS does not consider reasonable projections for CY 2025,
CMS developed and is finalizing normalization factors using a more sophisticated multiple linear
regression methodology for calculating normalization factors for CMS-HCC models for CY
2025.

Excluding data years is not necessary when using the multiple linear regression methodology due
to how the multiple linear regression approach does not assume uniform variability across all
 100

years and provides a way to take into account the variability in FFS risk scores due to the
pandemic. Previously, using the linear slope methodology, our projections treated each year
uniformly without explicitly considering the varying impact of the COVID-19 pandemic.

Regarding commenters who supported including additional years of historical FFS risk scores, as
stated in an earlier response, CMS believes including historical 2017 and/or 2018 FFS risk scores
would place emphasis on data that is not influencing the current trend. While there is inherent
uncertainty with any prediction of future values, the five-year trend already includes two years
that do not exhibit the same increase observed from 2021 to 2023, which provides a smoothing
effect in the event the FFS risk score increase slows down in the future.

Comment: Some commenters recommended that CMS provide more transparency through
releasing additional data and conducting further analysis to test the accuracy of the predictions
calculated under the multiple linear regression normalization factor calculation methodology. A
few commenters suggested that CMS delay implementation of the new methodology for
developing normalization factors until more analysis is conducted and made public.

Response: We appreciate the request for transparency. We will continue to consider additional
ways in which we can engage with stakeholders as we consider changes to the normalization
factor methodology for future years and appreciate commenter input.

Comment: Several commenters are concerned the proposed normalization factors will have a
negative impact on ESRD payment and recommended CMS use the same considerations
provided by the commenters in relation to the proposed non-ESRD CMS-HCC normalization
factor methodology. A commenter specifically recommended CMS continue to use the
historical linear slope methodology and continuing to exclude the 2021 FFS risk score.

Response: CMS appreciates the feedback and concerns of the commenters related to ESRD
payment. As discussed in prior year Advance Notices and in this document, the normalization
factor is intended to maintain an average FFS risk score of 1.0 in each payment year, as well as
provide payment stability between model calibrations. When calculating the normalization factor
for the ESRD CMS-HCC risk adjustment models, CMS carefully considered the approaches for
projecting a reasonable prediction of future FFS risk scores under these models. While we
considered impacts on all normalization factor calculations, including those for the ESRD
models, CMS believes the finalized normalization factors are appropriate and produce reasonable
estimates of what the average FFS risk scores will be under the ESRD models in 2025.

Comment: Several commenters provided suggestions for how CMS may calculate the
normalization factors that are unrelated to the methodologies discussed in the CY 2025
Advance Notice. These included individual commenters who recommended:
 101

• using beneficiary level risk score data to calculate normalization factors;

• using MA risk scores to calculate the normalization factors rather than FFS risk scores;
and
• applying a limit to the normalization factor applied to I-SNP beneficiaries.

Response: CMS thanks the commenters for their recommendations. The CMS-HCC models are
calibrated using diagnostic and cost information for beneficiaries enrolled in Medicare FFS and
the average FFS risk score is a 1.0 in the year used to set the model relative factors (i.e., the
denominator year), which aligns with the ratebook that is also standardized to a 1.0 FFS risk
score. For years other than the denominator year, the average risk score can vary from 1.0 due to
an underlying trend that reflects changes in the health status and demographic characteristics of
the population, as well as changes in coding practices. The normalization factor is a technical
adjustment that must be made to risk scores produced by a risk adjustment model to account for
the underlying trend so as to maintain an average FFS risk score of 1.0 and to do so, the
normalization factor should be a reasonably accurate prediction of the average FFS risk score in
the payment year. For these reasons, we do not believe that using MA risk scores to calculate the
normalization factor is appropriate. While we appreciate the suggestions to change how we
calculate the normalization factors, we believe that the proposed normalization factors – using a
multiple linear regression approach with the five most recent years of average FFS risk scores
available – will produce a reasonable estimate of the average FFS risk score under each model in
2025.

Section O. Sources of Diagnoses for Risk Score Calculation for CY 2025

Non-PACE Organizations

CMS did not receive comments regarding the proposal for the sources of diagnoses for Non-
PACE organizations for CY 2025. CMS will continue the policy adopted in the CY 2024 Rate
Announcement to calculate risk scores for payment to MA organizations and certain
demonstrations using only risk adjustment-eligible diagnoses from encounter data and FFS
claims.

PACE Organizations

Comment: CMS received a few comments addressing the sources of diagnoses for PACE and
PACE Data Transition. Those comments were supportive of CMS’ policy proposal to continue
the same method of pooling risk adjustment-eligible diagnoses from the following sources to
calculate a single risk score for CY 2025: (1) encounter data, (2) RAPS, and (3) FFS (fee for
service) claims.
 102

Response: CMS appreciates the support for the proposal and will continue using the same
method of calculating risk scores under all risk adjustment models that we have been using
since CY 2015, which is to pool risk adjustment-eligible diagnoses from the following sources
to calculate a single risk score (with no weighting): (1) encounter data, (2) RAPS data, and (3)
FFS claims.

Comment: Comments also supported CMS’ decision to begin transitioning PACE organizations
from the RAPS to the encounter data system (EDS), stating that they would appreciate guidance
and technical support in doing so. The comments suggested the need for guidance to PACE
organizations for properly capturing the data elements to submit to EDS, especially for
participant assessments conducted in the PACE centers, and around telehealth, behavioral
health, physical therapy, occupational therapy, and social work. In addition, a commenter asked
whether the transition from RAPS to EDS for diagnosis submission for primary care was
limited to diagnoses that would have been captured in RAPS. Commenters also requested
clarity on a list of items, such as: the timing between the transition from EDS to an updated
model, whether the intention is for CMS to move PACE organizations directly to the 2024
CMS-HCC model or to the 2020 CMS-HCC model first or adopt a blended approach like some
existing CMS Innovation Center models.

Response: CMS thanks the commenters for supporting the start of transitioning PACE
organizations from RAPS to EDS. While we have not specified a timeline for full transition to
EDS submissions, CMS is hopeful that all PACE organizations can submit all risk adjustment
eligible diagnoses for 2025 dates of service consistent with the instructions released by CMS on
January 29, 2024.19 We encourage PACE organizations to begin submitting EDRs or at a
minimum CRRs for services that do not generate a claim to the EDS as soon as possible. For
technical instructions to PACE organizations on the submission of risk adjustment data to the
EDS for services for which a claim is not generated, please refer to the HPMS memo CMS
released on January 29, 2024.20 PACE organizations should note that there is no change in
existing risk adjustment rules (e.g., acceptable sources of data - hospital inpatient, outpatient,
and professional); the change is in the method used to determine which diagnoses are eligible
for risk adjustment from RAPS to encounter data, referred to as encounter data filtering. PACE
organizations should refer to the 2015 HPMS memo regarding encounter data filtering logic for
information about encounter data filtering for professional services.21 We note, the filtering of
risk adjustment eligible diagnoses from professional encounter data uses Current Procedural
Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS), and provider

19 Refer to the January 29, 2024 HPMS memo titled “PACE Organization Risk Adjustment Submissions to the Encounter Data
System.”
20 Refer to the January 29, 2024 HPMS memo titled “PACE Organization Risk Adjustment Submissions to the Encounter Data

System.”
21 Refer to December 22, 2015 HPMS Memo titled “Final Encounter Data Diagnosis Filtering Logic memo.”
 103

specialty (e.g., occupational therapist) is not a component of filtering in encounter data. CMS is
committed to working closely with PACE organizations to support the transition from the
RAPS to the EDS and will continue to provide technical assistance and guidance to support the
successful submission of the necessary data. CMS will take the comments and questions posed
into consideration as we consider future communications.

Attachment IV. Responses to Public Comments on Part D Payment Policy

Section A. Annual Adjustments to Medicare Part D Benefit Parameters in 2025

Comment: Commenters expressed support for CMS’ implementation of the IRA-related changes
to the Part D benefit. Several commenters expressed support for the elimination of the coverage
gap phase of the benefit and the establishment of a $2,000 annual OOP threshold for CY 2025. A
commenter also expressed support for the inclusion of language reminding plans that Advisory
Committee on Immunization Practices (ACIP)-recommended adult vaccines are exempt from
beneficiary cost sharing.

Response: CMS appreciates the commenters’ support.

Comment: Some commenters expressed concern about the impact of the IRA-related changes to
the Part D benefit. A commenter requested that CMS acknowledge that some elements of the
IRA risk creating a series of consequences that could jeopardize access to Part D drugs and
further requested specific relief granted by CMS through existing statutory flexibility or the use
of waiver authority.

Response: CMS understands that the Part D redesign may lead to changes in the Part D market.
We believe that the redesign will improve drug affordability and reduce OOP costs for Part D
beneficiaries. CMS is committed to engaging with interested parties to ensure a successful
implementation of the redesign.

Comment: A commenter expressed concern that lower beneficiary cost sensitivity due to the
IRA-related changes to the Part D benefit could create significant induced utilization and
requested that CMS expand the induced utilization factor to its prescription drug per capita
estimates for CY 2025 and adjust the API for CY 2025.

Response: The API calculation is defined in section 1860D-2(b)(6) of the Act and specifies that
we use the 12-month period ending in July of the previous year. For the CY 2025 Part D benefit
parameters, this is the period from August 2023 through July 2024. While the benefit changes of
the IRA for CY 2025 may have effects on overall utilization, it is not appropriate to consider
them in the API for CY 2025 given that the statutorily defined period does not include CY 2025.
As the IRA impacts are observed in the PDE experience and projected for the periods in future
contract years, we will consider how to account for these possible utilization changes.
 104

Section B. Sunset of the Coverage Gap Discount Program and Establishment of the
Manufacturer Discount Program

No in-scope comments received.

Section C. Part D Premium Stabilization

Comment: A commenter expressed support of the premium stabilization provisions of the IRA
but noted that there is potential for significant beneficiary impacts in plans that incur larger than
average premium increases due to the Part D redesign and encouraged CMS to seek additional
mechanisms to assist Part D sponsors in successfully implementing the redesign.

Response: CMS appreciates the support for the premium stabilization provision. CMS is
committed to engaging with interested parties to ensure successful implementation of the Part D
redesign. CMS acknowledges that premium stabilization functions to phase in the effects of the
IRA on the average basic Part D premium, but that Part D plans may have premium changes
different from the average, particularly in CY 2025 with the implementation of section 11201 of
the IRA. However, the statute does not provide CMS with a mechanism to reduce the variation in
basic Part D premiums around the average across Part D plans.

Comment: A commenter requested that CMS modify the rebate reallocation process to allow for
greater flexibility in rebate changes in response to the redesigned Part D benefit.

Response: CMS notes that the rebate reallocation process is outside the scope of this document.

Section D. Part D Calendar Year EGWP Prospective Reinsurance Amount

Comment: A commenter expressed support for the updated methodology for Part D Calendar
Year EGWP prospective reinsurance payment amounts.

Response: CMS thanks the commenter for their support.

Comment: A commenter expressed opposition to a CY 2025 change in methodology for Part D

Calendar Year EGWP prospective reinsurance payment amounts.

Response: CMS thanks the commenter for their input, and we refer commenters to the Final CY
2025 Part D Redesign Program Instructions22 for additional discussion of the Part D Calendar
Year EGWP prospective reinsurance amount.

22 Refer to CMS’ Final CY 2025 Part D Redesign Program Instructions.

 105

Section E. Part D Risk Sharing

Comment: Many commenters suggested that CMS explore alternative solutions to narrow risk
corridors for 2025 and later years, given the significant changes to the Part D program that will
take effect in 2025. Commenters expressed concern that maintaining the existing risk corridor
thresholds could increase uncertainty and instability in the Part D market and result in upward
pressure on Part D premiums. Most of these commenters recommended that CMS use its
demonstration authority under section 402 of the Act to narrow the risk corridors, stating that
CMS previously proposed a comparable demonstration in 2019 for CY 2020 regarding a
proposed rule modifying safe harbor protection under the Anti-Kickback Statute. In addition, a
commenter noted that on multiple occasions, MedPAC suggested risk corridor adjustments to
temporarily provide plan sponsors with greater protection during a transition to a new benefit
structure.

Response: We appreciate the concerns raised by the commenters. As noted in the CY 2025
Advance Notice, under section 1860D-15(e)(3)(C) of the Act and § 423.336(a)(2)(ii), CMS may
establish a risk corridor with higher threshold risk percentages for Part D risk sharing. However,
the statute does not permit CMS to narrow the corridors relative to the CY 2011 thresholds.
While CMS acknowledges commenters’ suggestions to use demonstration authority under
section 402 of the Act to narrow the risk corridors, we note that doing so is outside of the
authority of this document. Moreover, CMS does not believe that narrowing risk corridors would
reduce or stabilize premiums any more than will already be accomplished by the premium
stabilization provision in the IRA.

Comment: A few commenters expressed support for not widening the risk corridors.

Response: CMS thanks the commenters for their support.

Comment: A commenter requested that CMS widen the risk corridors for CY 2025 to “minimize
the risk to plans.”

Response: Widening the risk corridor would increase the risk associated with providing the Part
D benefit and reduce the risk sharing amounts provided (or recouped) by CMS. CMS does not
believe it is appropriate to widen the risk corridors at this time but will continue to evaluate the
risk sharing amounts each year to determine if wider corridors should be applied for Part D risk
sharing in the future.

Section F. Retiree Drug Subsidy Amounts

No comments received.
 106

Section G. RxHCC Risk Adjustment Model

Comment: Of the commenters who remarked specifically on the proposal to update the RxHCC
model to reflect the IRA Part D redesign, nearly all supported the update. One commenter
expressed concerns that the update could result in financial volatility and recommended that
CMS phase in the model update over a four-year period.

Response: CMS thanks the commenters for supporting the proposed update. As stated in the CY
2025 Advance Notice, the IRA made substantial changes to the Part D benefit for CY 2025,
which is expected to result in increased gross plan liability, and changes in relative costs across
beneficiaries and plans. We believe that a phase-in to the proposed updated RxHCC risk
adjustment model would not be appropriate because the payments to Part D sponsors in CY 2025
would less accurately reflect the expected changes in relative plan costs under the redesigned
benefit. For this reason, CMS is finalizing the policy to update the RxHCC model to reflect the
IRA Part D redesign without a phase-in.

Comment: A few commenters expressed concerns that while the proposed RxHCC model update
is expected to increase risk scores for some populations, such as low-income beneficiaries in
SNPs, the increases would still be insufficient to account for the projected increase in plan
liability under the redesigned benefit. One of these commenters stated that risk scores for low-
income beneficiaries would not increase as much as their expected liability, which would result
in higher bids and require Part D plans serving high proportions of low-income beneficiaries to
use additional rebate dollars to buy down basic Part D premiums to or below the low-income
premium subsidy amount.

Response: We thank the commenters for their questions. While plan liability is increasing across
all groups of beneficiaries, the average Part D risk score remains at 1.0 across the entire Part D
market. Since the goal of risk adjustment is to ensure that payments to plans for beneficiaries
who are expected to cost relatively more than average are higher than for beneficiaries who are
expected to cost less than average, the role of the risk score is to adjust the plan bid in payment
to ensure that the relative payments reflect these differences. Therefore, the 1.0 risk score is set
for the average beneficiary, meaning that this average can increase over time if the average cost
for a beneficiary is expected to increase. Because the average risk score must remain 1.0, even if
plan liability is expected to increase, risk scores change in order to reflect how plan liability
changes relative to the new overall average. Under the updated Part D model, risk scores for low-
income beneficiaries tend to increase while those for non-low-income beneficiaries tend to
decrease. For more information, please refer to slides from our September 2023 user group call,
where we discussed the IRA Part D redesign updates to the RxHCC model. In these slides, we
noted that plan liability is expected to increase overall under the redesigned benefit, but low-
 107

income beneficiaries are expected to see a larger increase than the overall average, resulting in
increased risk scores.23

Comment: Several commenters expressed further concerns about the proposed model’s impact
on low-income beneficiaries, including those enrolled in SNPs. A few of these commenters
further said that because low-income beneficiaries generally have zero or minimal cost sharing,
and many use protected class drugs, plans with high proportions of low-income or dually eligible
beneficiaries have few methods for steering beneficiaries toward cost-efficient drugs. Some of
these commenters asked CMS for additional details about how CMS accounted for SNPs in the
model, with one commenter requesting CMS to phase in the model if SNPs were not
appropriately accounted for in the model calibration.

Response: CMS recognizes the commenters’ concern about the effect of the model update and
the IRA Part D redesign on low-income beneficiaries, particularly those in SNPs. The diagnoses
and costs of all low-income beneficiaries, including those enrolled in SNPs, are included in the
RxHCC model calibration and accounted for with separate low-income segments, so any unique
patterns of costs and utilization due to zero or minimal cost sharing among this group of
beneficiaries will be reflected in the model relative factors. This is the same process that has
been used in calibrating the model in previous iterations as well. Further, we published predictive
ratios in the CY 2025 Advance Notice showing that the model tends to predict well for low-
income beneficiaries across all deciles of risk, including in the highest deciles of predicted risk.

Comment: Several commenters expressed concerns about the model’s impact on beneficiaries
taking high-cost drugs, including specialty drugs. These commenters believed that by estimating
the aggregate average cost, the model will tend to underpredict for beneficiaries who take high-
cost drugs, as well as have a negative impact on populations with high variability in drug costs
depending on potential treatment options. These commenters further said that this could result in
plans adjusting benefits and formularies or increasing premiums to account for beneficiaries
taking high-cost drugs. One commenter specifically noted that EGWP plan designs are
negotiated directly with groups and have less flexibility to mitigate costs, which could result in
higher premiums. Two commenters recommended that CMS incorporate a high-cost threshold
into the model to account for outlier expenditures.

Response: We note that risk adjustment models, including both the CMS-HCC and RxHCC
models, are intended to predict expected relative expenditures across key subgroups of
beneficiaries. As measured by our predictive ratios, the RxHCC model does well at predicting
across levels of risk, meaning beneficiaries broken out into groups based on their predicted drug
costs. The models are not intended to predict the costs of individual beneficiaries, nor are they

23 Refer to CMS’ 2025 Part D Risk Adjustment Model Update User Group Call materials.
 108

intended to have any influence on drug prescribing and uptake. Overall expected costs for a
plan’s expected enrolled population are reflected in the bid, and the risk adjustment model is
intended to ensure that the payments to the plan adequately reflect its expected relative cost,
compared to the national average.

Comment: A few commenters expressed concerns about the changes to relative factors for
specific RxHCCs under the updated model. One commenter remarked that relative risk factors
for some conditions, such as diabetes and rheumatoid arthritis, saw decreases or small increases
for non-low-income enrollees over age 65 under the Part D model update. This commenter said
that these conditions affect a significant portion of Medicare beneficiaries and recommended that
CMS adjust the relative factors for these diseases and others for which the current RxHCC model
underpredicts costs. One commenter expressed concern about the reduction in relative factors for
Alzheimer’s Disease (RxHCC 111) and Dementia, except Alzheimer's Disease (RxHCC 112), as
a result of the Part D model update. This commenter believed that the reduced relative factors
could result in the undervaluing of these conditions among Part D plans, incentivizing plans to
develop more narrow formularies or implement more utilization management. The commenter
asked CMS to clarify the reasons for these reductions.

Response: CMS appreciates the commenters’ concerns. We note in the CY 2025 Advance Notice
that when the RxHCC model is recalibrated to reflect an updated Part D benefit design, it can
result in changes in relative factors of condition categories if the marginal cost attributable to an
RxHCC changes differently than the average beneficiary cost. Given the impact of these relative
changes, even if both non-low-income and low-income beneficiaries are expected to see
increased plan liability, for RxHCCs where the increase for non-low-income beneficiaries is
expected to be less than the corresponding increase for low-income beneficiaries, relative factors
for the non-low-income segments will decrease to reflect their relatively lower plan liability.
This would also occur if the expected marginal plan liability for some RxHCCs would be
expected to increase less than marginal plan liability for other RxHCCs (regardless of what
segments they are in). The RxHCC risk adjustment model is intended to predict relative costs
(plan liability) based on the IRA Part D redesign in order to pay plans adequately across
subgroups of beneficiaries. As with other HCC-based risk adjustment models, it is calibrated in
such a way as to not influence prescribing behavior, formulary structures, or beneficiary
utilization. For further information, please see the slides from our September 2023 user group
call on the updates to the Part D model.24

24 Refer to CMS’ 2025 Part D Risk Adjustment Model Update User Group Call materials.
 109

Comment: One commenter asked CMS to confirm that RxHCCs for Alzheimer’s Disease
(RxHCC 111) and Dementia, except Alzheimer’s Disease (RxHCC 112), were crosswalked to
the most recent available ICD-10 codes in model calibration.

Response: The RxHCC model maps beneficiaries’ diagnoses to RxHCCs for model calibration
using the ICD-10 codes valid in the base year of the model calibration. For example, for a model
calibration using 2021 diagnoses, it would use ICD-10 codes valid in FYs 2021 and 2022 to
cover all diagnoses in CY 2021. For plan payment, beneficiaries’ diagnoses are mapped to
RxHCCs based on ICD-10 codes valid in the data collection year for payment. For example, for
CY 2023 payment, based on CY 2022 diagnoses, beneficiaries’ diagnoses would be mapped
using diagnosis codes valid in FYs 2022 and 2023 to cover all diagnoses in CY 2022.

Comment: One commenter remarked that CMS removed oral-only ESRD drugs that will be
covered under Part B in CY 2025 from the model prior to the publication of the CY 2025 ESRD
PPS Final Rule. This commenter said that it was premature to incorporate this into the model
prior to the publication of the final rule, and the commenter stated that the dialysis provider
community has requested an implementation period for these drugs in CY 2025 such that they
would continue to be provided until CY 2026. Should this implementation period go into effect,
this commenter recommended CMS include expenditures for these drugs in the model calibration
for CY 2025.

Response: CMS appreciates the commenter’s remarks. We calibrate the model based on what the
Part D standard benefit structure is expected to be in the future payment year. Given the
substantial time needed to calibrate the model, this future benefit year structure reflects the
current law at the time of model calibration. As a result, we removed these drugs from the model
for CY 2025 as the current law states that these drugs will be paid under Part B beginning in CY
2025.25

Comment: One commenter suggested that CMS include an RxHCC for chronic kidney disease
stage 3 into the payment model as is done in the CMS-HCC model. This commenter believed
that including this RxHCC would encourage Part D plans to promote early chronic kidney
disease intervention.

Response: CMS appreciates the comment. It is important to note that the RxHCC model
specifically predicts plan costs for prescription drugs, not medical costs. As a result, the list of
RxHCCs may not always match the list of HCCs if the conditions are not strong predictors of
both drug and medical costs, respectively.

25 42 CFR § 413.174(f)(6); see also American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, § 632(b), 126 Stat. 2313, 2354
(2013); Protecting Access to Medicare Act of 2014, Pub. L. No. 113-93, § 217(a)(1), 128 Stat. 1040, 1061 (2014); Stephen Beck,
Jr., ABLE Act of 2014, Pub. L. No. 113-295, div. B, § 204, 128 Stat. 4010, 4065 (2014).
 110

Comment: A few commenters suggested that CMS examine other methods where the underlying
data and structure of the RxHCC model could be modified, such as incorporating prescription
drug claims into the model to supplement medical diagnoses and incorporating concurrent data
markers for drug conditions. One additional commenter suggested that CMS use two years of
prior diagnosis data in order to better account for coding differences between encounter data and
FFS claims. These commenters believed that these changes would improve model accuracy and
better account for beneficiaries with large variability in drug costs.

Response: CMS thanks the commenters for their suggestions but notes that these suggestions are
outside the scope of the information presented in the CY 2025 Advance Notice.

Comment: A few commenters suggested that CMS examine alternative prices for estimating
expenditures, such as net (post-rebate) plan liability, post-POS pharmacy price concessions,
reductions in manufacturer list prices for certain drug categories, or anticipated negotiated drug
prices for 2026 and beyond. These commenters believed that using gross plan liability tends to
overpredict costs for drugs with high rebates or price concessions and underpredicts costs for
drugs with lower rebates or price concessions, and using these alternative prices would better
reflect plan liability.

Response: CMS thanks the commenters for their recommendations. We regularly consider how
to improve the RxHCC model and will continue to examine alternative prices to the extent to
which they are present in available data.

Comment: Several commenters suggested that CMS incorporate expected changes in beneficiary
utilization from the IRA Part D redesign into the Part D model. These commenters said that the
reduced annual OOP threshold, removal of cost-sharing in the catastrophic coverage phase of the
benefit, capped copayments for insulin, and the Medicare Prescription Payment Plan’s
smoothing of OOP costs, could create an incentive for beneficiaries to take more expensive
drugs, which would not be reflected in prior years’ data.

Response: CMS appreciates the commenters’ concerns. Because the model predicts the
association between diagnoses and demographics and plan drug expenditures using historical
data, we believe that modeling future behavior would result in error in the model and inaccurate
predictions of relative cost. Due to this risk, we do not believe that it would be appropriate to
model expected changes in behavior into the model and believe that continuing to calibrate on
the most recent available data, and waiting to account for these changes in future iterations of the
model, is the most prudent approach.

Comment: Of the commenters who commented specifically on the proposal to calibrate the CY
2025 model for Non-PACE organizations using 2021 diagnoses and 2022 expenditures, the
majority were in support of using more recent data. These commenters believed that more recent
 111

data would be more reflective of patterns expected in 2025. A smaller number of commenters
supported the alternative model, calibrated using 2018 diagnoses and 2019 expenditures, citing
concerns about using diagnosis data occurring during the COVID-19 pandemic.

Response: CMS appreciates’ commenters feedback and support. While we understand the
concern with using diagnosis data from during the COVID-19 pandemic, we noted in the CY
2025 Advance Notice that available analysis shows that drug spending was less affected by the
pandemic than medical spending. As a result, we believe that value of more recent data having
utilization and cost patterns closer to those in CY 2025 outweigh concerns about the potential
impact of the pandemic on the model coefficients, so we are finalizing the policy to use the
model calibrated on 2021 diagnoses and 2022 expenditures as proposed in the CY 2025 Advance
Notice.

Comment: Two commenters supported the proposed clinical update of the model for PACE
organizations to use ICD-10 codes and align with the model for Non-PACE organizations. These
commenters asked CMS to provide additional information about the impact of this update on
PACE plans.

Response: CMS thanks commenters for their support of the clinical update to the PACE model.
We believe that this update was necessary in order to align the list of payment RxHCCs for
PACE and Non-PACE organizations along with updating the PACE model to be calibrated on
more recent years of data, which will be important for estimating relative costs for CY 2025 with
more accuracy. As discussed in the CY 2023 Advance Notice, the clinical update for Non-PACE
organizations was originally made to improve the model’s ability to predict drug spending by
accounting for more current drug utilization and spending trends and changing RxHCCs that no
longer predicted costs well. Therefore, we also believe that this update is necessary to improve
predictive power for PACE organizations. Additionally, CMS provided Part D sponsors with
estimated payment year 2022 risk scores under the current and proposed RxHCC models to aid
in evaluation of the model proposal.

Comment: One commenter expressed support for the proposed new constraint for age categories
for both PACE and Non-PACE versions of the RxHCC model. This commenter also suggested
that CMS consider widening existing age ranges or reducing the number of age categories in
future versions of the model. Another commenter requested that CMS provide additional
information about the impact of the constraints, including publishing unconstrained values of the
coefficients.

Response: CMS appreciates these comments. As mentioned in the CY 2025 Advance Notice,
this change was implemented because more age categories would have negative coefficients
under the new model, posing the risk of having more beneficiaries with risk scores of zero if they
did not have any payment RxHCCs. Regarding the impact of these age constraints, the
 112

unconstrained coefficients in the older age categories in the aged (65+) model segments were
initially negative coefficients or low positive coefficients, and the constraints permitted these age
categories to have positive relative factors. CMS has typically applied constraints when a
coefficient is negative, and the general effect is to average the coefficient across the factors that
are being constrained.

Comment: Some commenters asked that CMS allow for a 60-day comment period for the
RxHCC model so that plans have more time to evaluate the methodological changes. One
additional commenter asked CMS to include analyses similar to the ones provided in the
September 2023 user group call into future iterations of the Advance Notice.

Response: CMS thanks the commenters for these suggestions and will take these into
consideration. We acknowledge the commenters’ request for more time to review the policy
proposals. Per section 1853(b)(2) of the Act, the Advance Notice of proposed changes to the
methodology and assumptions used to determine annual MA capitation rates and the risk and
other factors used in adjusting MA capitation rates under section 1853(a)(1)(C) is required to
have a minimum 30-day comment period. Section 1860D-15(c)(1)(D) of the Act requires that
CMS publish the risk adjustment factors for Part D at the time of publication of risk adjustment
factors for Part C, which we propose in the Advance Notice and finalize in the Rate
Announcement for the applicable year, per 423.329(b)(4). The CY 2025 Advance Notice was
released on January 31st, 2024, and comments were accepted through 6 PM Eastern Time on
Friday March 1, 2024 (30 days).

CMS believes that the period provided for comments on the CY 2025 Advance Notice is
sufficient. In setting these timelines, we seek to achieve multiple goals, including providing the
statutory-required amount of time for public comment while also releasing the Advance Notice
using more current data to calculate the risk and other factors used to adjust MA capitation rates
and ensuring that the Rate Announcement is published by the statutory deadline.

Section H. Normalization for the RxHCC Risk Adjustment Models

Comment: Several commenters supported the continued use of the linear slope methodology to
calculate Part D (RxHCC) normalization factors, while other commenters were neutral as to the
methodology used for calculation. A few commenters supported the continued exclusion of risk
scores that were impacted by the COVID-19 pandemic.

Response: CMS appreciates the support and is finalizing the separate MA-PD and PDP RxHCC
normalization factors as proposed in the CY 2025 Advance Notice, which is to use CMS’
historical five-year linear slope methodology and average risk scores from 2018-2022, excluding
2021, for Non-PACE organizations and average risk scores from 2016-2020 for PACE
organizations.
 113

Comment: Some commenters supported the proposal to use two separate normalization factors
for MA-PD plans and PDPs, pointing out that there has been an increasing divide between MA-
PD plans and PDPs with regard to their premiums and enrollment. Commenters in support of the
proposal mentioned several reasons that MA-PD plans are at an advantage, such as MA-PD
plans’ ability to use MA rebates to buy down Part D premiums. One commenter stated that MA
organizations may have higher coding intensity than FFS and may have favorable selection of
healthier enrollees. These commenters agreed with CMS’ analysis of diverging costs and risk
scores between the two sectors and stated that without the new intervention, disparities would
continue and present increased costs and premiums for PDPs relative to MA-PD plans,
threatening the solvency of PDPs and the accessibility of options for beneficiaries. A couple of
commenters believed that this proposal was a good first step, but that CMS should do more to
stabilize the PDP market.

A commenter stated that CMS should continue to monitor the trends in Part D risk scores to
ensure that PDPs remain a viable offering in the Part D market and that systematic differences
between the two sectors do not result in a financial disadvantage to PDPs that undermines the
Part D program’s market-based structure built on competition among private plans.

Response: CMS appreciates the support and is finalizing the separate normalization factors for
MA-PD plans and PDPs that reflect the risk score trend in each sector of the Part D market for
the RxHCC risk adjustment models as proposed. We will continue to monitor MA-PD and PDP
risk score trends.

By using separate normalization factors for MA-PD plans and PDPs, risk scores will more
accurately reflect Part D costs in each of these two sectors of the Part D market that are driven by
a variety of market-based variables, including the overall benefits that they are able to manage,
the lack of an ability of PDPs to affect the submission of diagnoses in FFS, and available
strategies used to manage Part D costs. CMS believes that the proposed policy will best address
growing disparities between MA-PD plans and PDPs in order to ensure a level playing field,
allowing for more fair competition between MA-PD plans and PDPs so that beneficiary options
for Part D coverage are sustained.

Comment: Several commenters suggested that disparity in underlying demographics was the
cause of the increasingly divergent risk scores observed between MA-PD plans and PDPs.
Commenters mentioned that there has been increasing enrollment in SNPs (including D-SNPs)
and decreasing enrollment of low-income beneficiaries in PDPs in recent years, which has the
effect of increasing overall risk scores for MA-PD plans and decreasing overall risk scores for
PDPs, regardless of any differences in coding practices. Commenters asked whether CMS
considered changes in underlying demographic trends and care delivery differences when
developing the proposed methodology. Several commenters were concerned that the proposal for
 114

separate normalization factors for MA-PD plans and PDPs did not properly account for changes
in demographics to both groups, particularly regarding populations with higher Part D utilization
and costs. Another commenter suggested that CMS should control for population changes by
considering the trend in risk scores for members persisting in MA-PD plans and PDPs from year
to year, rather than the total MA-PD and PDP populations without adjustment.

Response: CMS appreciates the feedback and concerns of the commenters about using separate
normalization factors for MA-PD plans and PDPs. The IRA redesign of the Part D benefit in CY
2025 will result in significant changes in plan liability, giving greater importance to direct
subsidy payments to cover costs for which plans are liable, and to the role of risk adjustment in
payment. Given this significant change in the Part D benefit and a trend of growing divergence
in risk scores between MA-PD plans and PDPs, we are finalizing the proposal to apply one
normalization factor to MA-PD plans and another to PDPs for CY 2025.

The normalization factor is a technical adjustment applied to risk scores in the payment year to
account for underlying trends that reflect changes, such as those in coding and population
characteristics, between the denominator year and other years such that the average risk score is
no longer 1.0. The normalization factor serves to maintain a 1.0 average risk score when a model
is used to calculate risk scores for years other than the year used to relativize the model
coefficients (i.e., the denominator year). In developing the proposed methodology, CMS
carefully considered data related to underlying demographics and care delivery differences
between MA-PD plans and PDPs when creating the proposed policy. We found that this increase
in MA-PD plan enrollment combined with the different coding and cost patterns for enrollees in
MA-PD plans and PDPs has resulted in a diverging trend in average MA-PD plan and PDP risk
scores over time, resulting in differing ability of the risk scores to predict costs for MA-PD plans
and PDPs. These differentials put upward pressure on standardized bids for PDPs and, as a
result, create an unlevel playing field that generally inhibits fair competition between MA-PD
plans and PDPs. By using separate normalization factors for MA-PD plans and PDPs, risk scores
will more accurately reflect Part D costs in each of these two sectors of the Part D market that
are driven by a variety of market-based variables, including the overall benefits that they are able
to manage, the lack of an ability of PDPs to affect the submission of diagnoses in FFS, and
available strategies used to manage Part D costs. CMS believes that the proposed policy will best
address growing disparities between MA-PD plans and PDPs in order to ensure a level playing
field, allowing for more fair competition between MA-PD plans and PDPs so that beneficiary
options for Part D coverage are sustained.

Comment: Some commenters believed that because the proposed separate normalization factors
do not distinguish between different types of MA-PD plans, certain plans would be
disproportionately negatively impacted including D-SNPs, I-SNPs, locally-based, not-for-profit
plans, and any plan that disproportionately serves a high-cost group of enrollees, such as those
 115

with serious chronic conditions, dually eligible individuals, and low-income beneficiaries. A
commenter stated their belief that, in addition to serving a higher-cost population, these plans
may work on smaller margins and have limited resources to devote to enhancing coding practices
for the optimization of risk adjustment outcomes. Therefore, the normalization method applied to
all MA-PD plans might not be accurate for these smaller groups and cause further cost pressures
for them. Another commenter pointed out that D-SNPs may have to use higher MA rebates to
buy down Part D premiums compared to non-D-SNPs; this could have the effect of making D-
SNPs less attractive than other MA-PD plan options in the market.

Several commenters suggested that CMS should exclude SNPs from the normalization factor
calculation, with multiple commenters recommending that including beneficiaries in SNPs in the
normalization factor, but not the National Average Monthly Bid Amount (NAMBA), may create
premium distortions because beneficiaries enrolled in SNPs have substantially higher risk scores
than their non-SNP counterparts.

A couple of commenters requested that CMS provide additional information on how the
proposed separation of the Part D model normalization factors into MA-PD and PDP impacts
traditionally high costs populations, such as those dually eligible for Medicare and Medicaid and
low-income subsidy (LIS) versus non-LIS members, and plans that serve higher-cost
beneficiaries, such as D-SNPs, HIDE-SNPs, and FIDE-SNPs.

Response: CMS appreciates the comments. By using separate normalization factors for MA-PD
plans and PDPs, risk scores will more accurately reflect Part D costs in each of these two sectors
of the Part D market that are driven by a variety of market-based variables, including the overall
benefits that they are able to manage, the lack of an ability of PDPs to affect the submission of
diagnoses in FFS, and available strategies used to manage Part D costs. We appreciate the
concerns expressed and note that, as in Part C, normalization is intended to set the average risk
score at 1.0, and our unique use of separate MA-PD and PDP normalization factors is because,
although the statute treats the Part D as one market, these two segments of the market operate
quite differently. We do not anticipate that having two separate normalization factors will alter
the general direction that bids and premiums move in each sector as a result of the new Part D
benefit, and we expect that incentives to compete will continue to play a strong role. We also
want to recognize that the low-income premium subsidy protects low-income beneficiaries from
paying basic Part D plan premiums. Finally, we do not think it is appropriate to exclude any
populations from the calculation of the normalization factors, since the 1.0 is necessarily across
the entire market, regardless of their role in setting the NAMBA.

Comment: Some commenters stated their belief that the proposed update to the Part D
normalization factors is unbalanced, with the negative impact being concentrated among MA-PD
plans, with one commenter stating that this disadvantages MA organizations that offer only MA-
 116

PD plans. Some commenters believed that the proposed policy forces MA-PD plans and their
beneficiaries to absorb costs that would have otherwise been incurred in the standalone PDP
market and it would raise bids (and premiums) for MA-PDs relative to PDPs. Commenters
believe a drop in MA-PD revenue could potentially impact beneficiary access to supplemental
benefits, reduce benefit generosity, increase cost-sharing and premiums, and limit plan
availability particularly in rural areas. A commenter noted their belief that CMS’ proposed policy
seems at odds with CMS’ stated concern about policies favoring one plan type over the other in
the Proposed 2025 MA and Part D Rule.

A few commenters were concerned that the separate normalization factors would cause market
disruption, with several commenters mentioning that this proposal is happening at a time when
the effects of the Part C model phase-in will continue to put additional pressure on revenues for
MA-PD plans.

Response: CMS appreciates the comments. The goal of the proposed normalization factors for
the RxHCC models is not to favor one type of plan over another, but rather to more reasonably
account for the diverging underlying risk score trends that occur between the model denominator
year and the payment year for MA-PD plans and PDPs, in relationship to their respective costs.
Average risk score can vary from a 1.0 average over time for a number of reasons, including
changes in demographic characteristics, health status, and coding practices. As noted in the CY
2025 Advance Notice, MA-PD plans and PDPs are distinct in their cost, coding, and utilization
patterns and there have been shifts in MA-PD and PDP risk scores over the past eight years since
the inclusion of MA-PD plan data in the RxHCC model calibration in 2016. Our analysis showed
that the proposed RxHCC model, updated to reflect the IRA redesign of the Part D benefit,
predicted perfectly at the Part D market level, but the model tended to overpredict MA-PD plan
costs (predictive ratio of 1.106) and underpredict PDP costs (predictive ratio of 0.879).

The RxHCC risk adjustment model is used to help ensure that payments to Part D plans reflect
the plans’ expected drug costs given their enrolled population. The model is used to calculate
beneficiary risk scores, which reflect expected plan liability for drug costs compared to the
average-cost beneficiary. In light of the significant increase in Part D plan liability for CY 2025
due to the IRA’s redesign of the Part D benefit, with direct subsidy payments covering higher
plan liability, the risk adjustment model that is used to calculate such payments is more
important to Part D sponsors’ total revenue. By separating the RxHCC normalization factors by
market segment, CMS is able to more reasonably predict what the average risk score is likely to
be for MA-PD plans versus PDPs by accounting for the distinct risk score trends between the
two market sectors. In so doing, CMS more accurately predicts costs and creates a more level
playing field that promotes fair competition between MA-PD plans and PDPs and beneficiary
choice.
 117

Comment: A commenter questioned whether the PDP normalization factor would apply to 1876
cost plans. The commenter pointed out that risk score to net plan liability relationship in 1876
cost plans is more like a PDP than MA-PD plan, which would make the PDP normalization
factor most appropriate for this population.

Response: CMS appreciates the comment. The normalization factor for MA-PD plans will be
applied to 1876 cost plans. Treatment of 1876 cost plans in this manner is consistent with how
such plans are treated in the growth rates used in the calculation of the MA rates. Although 1876
cost plans do not receive risk-adjusted payments for covering medical services, but instead cost-
reconciled payments, 1876 cost plans, like MA-PD plans, submit diagnoses for beneficiaries
enrolled in their plans whereas diagnoses for beneficiaries enrolled in standalone PDPs are
reported on FFS claims. By using separate normalization factors for MA-PD plans and PDPs,
risk scores will more accurately reflect Part D costs in each of these two sectors of the Part D
market that are driven by a variety of market-based variables, including the overall benefits that
they are able to manage, the lack of an ability of PDPs to affect the submission of diagnoses in
FFS, and available strategies used to manage Part D costs.

Comment: A commenter believed that with CMS not having a 2023 risk score for the RxHCC
normalization factor calculation and not enough data for post-COVID-19 pandemic risk scores
available to evaluate the accuracy of the modeling, there is apt to be distortion in the
normalization factors.

Response: Because CMS incorporates risk scores from MA and FFS in calculation of
normalization factors for the RxHCC models, the availability of risk scores used to calculate
RxHCC model normalization factors are lagged one year relative to CMS-HCC risk scores. This
has long been the case. CMS uses the data available at the time when calculating normalization
factors, which for the RxHCC models for CY 2025 is 2022. We agree with the commenter that
there was a limitation in our ability to model the multiple linear regression methodology that was
proposed for the CMS-HCC model because we do not have a 2023 risk score for the RxHCC
normalization factor calculation. It was for that reason that CMS did not believe it was prudent to
alter the methodology at this time. The proposed methodology for calculating the CY 2025
normalization factors for the RxHCC models is akin to the methodology used for calculating the
CY 2024 normalization factors for the CMS-HCC models when the 2022 risk score was the most
recent data available and results in a reasonable estimate of what the average risk scores are
likely to be in the payment year.

Comment: A couple of commenters had concerns with CMS’ approach and assumptions made in
the proposal for separate MA-PD and PDP normalization factors. Several commenters stated that
CMS assumes that risk score trends observed in the MA-PD and PDP populations under the prior
Part D benefit design will continue in 2025 under the newly redesigned Part D benefit, but they
 118

believe this assumption is not supported by evidence and subject to a large degree of uncertainty,
as the structure of the Part D benefit in 2025 is materially different from the perspective of both
beneficiary and plan liability. A couple of commenters were concerned that there is not enough
evidence to appropriately conclude that different normalization factors between MA-PD plans
and PDPs are justified, or that the factors are accurate.

Several commenters requested that CMS consider alternatives to the proposed approach. For
example, a few commenters suggested CMS should have separate RxHCC models for MA-PD
plans and PDPs, and a commenter believed that the underlying differences between MA-PD and
PDP risk score trends are driven by the discrepancy between the claims data that MA-PD plans
and standalone PDPs have access to for coding and believed that a solution would be to allow
standalone PDPs to have access to more complete and timely data.

Many commenters suggested that CMS should phase in the implementation of separate
normalization factors or delay implementation until the risk score trends under the redesigned
Part D benefit and RxHCC model can be assessed. A commenter requested that going forward,
CMS include more time for policy proposal review and transparency in the data provided to
stakeholders so that they can better analyze the policy proposal in order to take a specific
position on the policy.

Response: CMS appreciates the feedback and concerns of the commenters. As discussed above,
given the much greater importance of risk adjustment in Part D payment due to the significant
change to plan liability under the IRA redesign of the Part D benefit in CY 2025, and a trend of
growing divergence in risk scores between PDPs and MA-PD plans in relationship to their costs,
CMS does not believe that the resulting unlevel playing field that generally inhibits fair
competition between MA-PD plans and PDPs is sustainable.

In regards to whether risk score trends observed in the MA-PD and PDP populations under the
prior Part D benefit design will continue in 2025 under the newly redesigned Part D benefit,
CMS will continue to monitor MA-PD and PDP risk score trends and conduct analyses on the
effects of the changes to the Part C and Part D models and benefit design, to determine the best
approaches to normalization methodology in future years.

CMS acknowledges that there is inherent uncertainty in our normalization factors because they
are projections of the payment year risk scores, and any projection can be imprecise. However,
we base our normalization factors on the data available to us at the time, which was provided in
Tables III-11 through III-13 in the CY 2025 Advance Notice, and whether or not the risk score
projected (i.e., the normalization factor) is a reasonable estimate of the payment year risk score
based on observed historical risk scores.
 119

We do not believe that phasing in the separate MA-PD and PDP normalization factors is
reasonable, given the large change to the Part D benefit and associated plan liability in CY 2025,
and the increased importance of risk adjustment in calculating Part D payment.

We acknowledge the commenters’ request for more time to review the policy proposals. Per
section 1853(b)(2) of the Act, the Advance Notice of proposed changes to the methodology and
assumptions used to determine annual MA capitation rates and the risk and other factors used in
adjusting MA capitation rates under section 1853(a)(1)(C) is required to have a minimum 30-day
comment period. Section 1860D-15(c)(1)(D) of the Act requires that CMS publish the risk
adjustment factors for Part D at the time of publication of risk adjustment factors for Part C,
which we propose in the Advance Notice and finalize in the Rate Announcement for the
applicable year, per 423.329(b)(4). The CY 2025 Advance Notice was released on January 31st,
2024, and comments were accepted through 6 PM Eastern Time on Friday March 1, 2024 (30
days).

CMS believes that the period provided for comments on the CY 2025 Advance Notice is
sufficient. In setting these timelines, we seek to achieve multiple goals, including providing the
statutory-required amount of time for public comment while also releasing the Advance Notice
using more current data to calculate the risk and other factors used to adjust MA capitation rates
and ensuring that the Rate Announcement is published by the statutory deadline.

Comment: Some commenters believed that the proposed separate normalization factors could
create distortions in the market, such as plan steerage or market consolidation. Several
commenters believed that these financial incentives could possibly cause beneficiaries to be
steered towards PDPs, since they may be more profitable there, even when their care options
would be better under an MA-PD plan.

Several commenters had concerns about EGWPs in particular, as well as individual plans that
allow for splitting of coverage between MA-only and PDP. They believed that separate
normalization factors would incentivize groups to split MA and Part D benefits. Commenters
believed that the best overall coordination of care for members is when the medical and drug
benefits are integrated within one plan, and that having split plans would worsen enrollee care
and experience.

The commenters made several suggestions regarding how the normalization factors could be
applied to prevent potential splitting of coverage in EGWPs. One commenter suggested either
applying the PDP factors to all EGWP beneficiaries, or to not apply the PDP factor to EGWP
beneficiaries who also have at least one month of Part C experience during the year. Another
commenter had several suggestions: require EGWP PDPs to use the MA-PD normalization
factor; only have one Part D normalization factor for both MA-PD plans and PDPs; consider
having two completely separate models for PDPs and MA-PD plans; restrict MA-PD EGWPs
 120

from moving to a standalone PDP (EGWPs currently in a PDP should be grandfathered if this
happens); require any MA-PD EGWP who transfers to a PDP to maintain the MA-PD
normalization factor. Another commenter suggested that the Part D normalization factor should
be based on whether a member is in FFS versus MA/MA-PD in the data collection period and
not the plan type for the contract year, and an interim solution at the plan level to apply the MA-
PD normalization factor to the PDP risk scores whenever beneficiaries are enrolled in both an
MA-only plan and a PDP.

Response: CMS appreciates the feedback and concerns of the commenters. Per Section 1860D-
1(a)(1)(B)(ii) of the Act and § 423.30(b), a Medicare-eligible person who is enrolled in an MA
plan may not be simultaneously enrolled in a standalone PDP except in limited circumstances,
such as if the individual is enrolled in a PFFS or MSA plan. CMS also waives this requirement
for EGWPs meeting certain conditions. Therefore, if a non-EGWP MA-PD plan steers a
beneficiary into a PDP owned by the same entity, the entity would be forgoing significant
revenue that it would receive for providing medical coverage in MA. Due to such financial
downsides, CMS believes it unlikely MA-PD plans would be incentivized to steer beneficiaries
to PDPs.

In contrast, an applicable waiver might alter the incentives for EGWPs. Per Chapter 9 of the
Medicare Managed Care Manual and Chapter 12 of the Prescription Drug Benefit Manual, an
employer/union sponsor may enroll their beneficiaries “in both 800-series regional PPO EGWPs
and local coordinated care plan EGWPs and 800-series stand-alone PDPs, provided that separate
medical and prescription drug vendors work closely together with the employer/union sponsor to
provide coordinated care and disease management services between the MA and the PDP portion
of the benefit.” Due to financial incentives, an employer/union sponsor may decide to enroll their
beneficiaries in separate plans for their medical and prescription drug benefits. We emphasize,
however, that as a condition of this waiver, that MA organizations and Part D sponsors are to
work with employers to provide coordinated care and disease management services between the
medical and prescription drug benefits offered by the MA-only EGWP and the stand-alone PDP
EGWP. CMS will continue to monitor trends and conduct analyses to determine if additional
adjustments need to be made to policy.
 121

Section I. Source of Diagnoses for Part D Risk Score Calculation for CY 2025

Please refer to Attachment III, Section O. for comments and responses regarding sources of
diagnoses.

Attachment V. Final Updated Benefit Parameters for the Defined Standard Benefit and
Changes in the Payment Methodology for Medicare Part D for CY 2025

Table V-1. Updated API and CPI for 2025

Annual percentage Prior year API for
trend for 2024 revisions 2025
API 5.46% 2.96% 8.58%
September CPI (all items, U.S. city average) 2.61% -0.11% 2.50%

Table V-2. Updated Part D Benefit Parameters for Defined Standard Benefit, Low-Income
Subsidy (LIS) and Retiree Drug Subsidy
2024 202526
Standard Benefit
Deductible $545 $590
Initial Coverage Limit $5,030 Not Applicable
Out-of-Pocket Threshold $8,000 $2,000
Full Subsidy-Full Benefit Dual Eligible (FBDE) Beneficiaries (2)
Deductible $0.00 $0.00
Copayments for Institutionalized Beneficiaries [category code 3] $0.00 $0.00
Copayments for Beneficiaries Receiving Home and Community-Based
Services] [category code 3] (3) $0.00 $0.00
Maximum Copayments for Non-Institutionalized Beneficiaries
Up to or at 100% Federal Poverty Level (FPL) [category code 2]
Up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug $1.55 $1.60
Other $4.60 $4.80
Between 100% and 150% of FPL [category code 1]
Up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug $4.50 $4.90
Other $11.20 $12.15

26These parameters reflect additional plan coverage required for covered insulin products under section 1860D-2(b)(9) of the
Act, as added by section 11406 of the IRA, and ACIP-recommended adult vaccines under section 1860D-2(b)(8) of the Act, as
added by section 11401 of the IRA.
 122

2024 202526
Full Subsidy-Non-FBDE Beneficiaries (2)
Applied or eligible for QMB/SLMB/QI or SSI, income at or below 150 %
FPL for 2024 and resources ≤ $15,720 (individuals, 2024) or ≤ $31,360
(couples, 2024) [category code 1] (4)
Deductible $0.00 $0.00
Maximum Copayments up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug $4.50 $4.90
Other $11.20 $12.15
Retiree Drug Subsidy Amounts
Cost Threshold $545 $590
Cost Limit $11,200 $12,150

(1) The LIS eligibility categories and corresponding cost-sharing benefits are sometimes
referred to using category codes as follows:
• Category Code 1 – Non-institutionalized FBDE beneficiaries with incomes between 100
percent and 150 percent of FPL and full-subsidy-non-FBDE beneficiaries.
• Category Code 2 – Non-institutionalized FBDE beneficiaries with incomes up to 100
percent of the FPL.
• Category Code 3 – FBDE beneficiaries who are institutionalized or would be
institutionalized if they were not receiving home and community-based services.
• Category Code 4 –Beneficiaries with incomes between 135 percent and 150 percent of the
FPL, who meet the resource standards under either of sections 1860D-14(a)(3)(D) or (E)
of the Act, and who would have been eligible for the partial LIS benefit absent the
enactment of the IRA, will be eligible for the full LIS benefit. Beneficiaries who
previously met the resource requirement for category 4 will be in category 1 in CY 2025.
(2) Per section 1860D-14(a)(1)(D)(i) of the Act, full-benefit dually eligible beneficiaries who
are receiving home and community-based services qualify for zero cost sharing if the individuals
(or couple) would have been institutionalized otherwise.
(3) The resource limits for CY 2025 will be provided via the annual HPMS memo entitled
“2025 Resource and Cost-Sharing Limits for Low-Income Subsidy (LIS)” that is expected to be
released during the usual timeframe after the September 2024 CPI has been made available by the
Bureau of Labor Statistics. Additionally, these amounts are adjusted for beneficiaries that notified
the Social Security Administration of their intent to use a portion of their resources for burial
expenses. The CY 2024 resource limits including $1,500 per person for burial expenses are
$17,220 ($34,360 if married). Also, beneficiaries that would have been eligible for the partial LIS
 123

benefit had the IRA not been enacted will be eligible for the full LIS benefit if they meet the
resource standard described at section 1860D-14(a)(3)(E) of the Act.27

Section A. Annual Percentage Increase in Consumer Price Index (CPI)

Annual Percentage Increase in Consumer Price Index, September (September CPI)

Section 1860D-14(a)(4) of the Act requires CMS to use the annual percentage increase in the
CPI for the 12-month period ending in September 2024 to update the maximum copayments up
to the annual OOP threshold for full-benefit dually eligible beneficiaries with incomes not
exceeding 100 percent of the FPL for CY 2025. These copayments are increased from $1.55 per
generic, preferred drug that is a multi-source drug, or biosimilar, and from $4.60 for all other
drugs in CY 2024 and rounded to the nearest multiple of $0.05 and $0.10 respectively.28

Section B. Calculation Methodology

Annual Percentage Increase in Average Expenditures for Part D Drugs per Eligible
Beneficiary (API)

For contract years 2006 and 2007, the APIs, as defined in section 1860D-2(b)(6) of the Act, were
based on the National Health Expenditure (NHE) prescription drug per capita estimates because
sufficient Part D program data was not available. Beginning with contract year 2008, the APIs
are based on Part D program data. For the CY 2025 benefit parameters, Part D program data will
be used to calculate the annual percentage trend as follows:
𝐴𝑢𝑔𝑢𝑠𝑡 2023−𝐽𝑢𝑙𝑦 2024
= $5,338.49/$5,062.28=1.0546
𝐴𝑢𝑔𝑢𝑠𝑡 2022−𝐽𝑢𝑙𝑦 2023

In the formula, the average per capita cost for August 2022 – July 2023 is calculated from actual
Part D PDE data, and the average per capita cost for August 2023 – July 2024 is calculated based
on actual Part D PDE data for prescription drug claims with service dates from August 2023 –
December 2023 and projected through July 2024.

The 2025 benefit parameters reflect the 2024 annual percentage trend, as well as updates for
revision to prior year estimates for API. Based on updated NHE prescription per capita costs and
PDE data, the annual percentage increases are now calculated as summarized by Table V-3.

27 Effective January 1, 2024, Section 11404 of the IRA expanded eligibility of the full LIS group to individuals with incomes
between 135 and 150 percent of the FPL and who meet the statutory resource standards at either of sections 1860D-14(a)(3)(D)
or (E) of the Act.
28 Per section 1860D-14(a)(4)(A) of the Act, the copayments are increased from the unrounded 2024 values of $1.55 for multi-

source generic or preferred drugs, and $4.65 for all other drugs.
 124

Table V-3. Revised Prior Years’ Annual Percentage Trends

Prior Estimates of
Revised Annual
Year Annual Percentage
Percentage Trend
Trend
2006 7.30% 7.30%
2007 5.92% 5.92%
2008 4.69% 4.69%
2009 3.14% 3.14%
2010 2.36% 2.36%
2011 2.15% 2.15%
2012 2.53% 2.53%
2013 -3.14% -3.14%
2014 10.12% 10.12%
2015 9.89% 9.89%
2016 4.02% 4.02%
2017 1.87% 1.87%
2018 4.05% 4.06%
2019 4.92% 4.92%
2020 5.06% 5.06%
2021 4.69% 4.69%
2022 7.37% 7.36%
2023 6.42% 9.57%

Accordingly, the CY 2025 benefit parameters reflect a multiplicative update of 2.96 percent for
prior year revisions. In summary, the 2024 parameters outlined in Section A are updated by 8.58
percent for 2025, as summarized by Table V-4.
Table V-4. Annual Percentage Increase
Annual percentage trend for July 2024 5.46%
Prior year revisions 2.96%
Annual percentage increase for 2025 8.58%

Note: Percentages are multiplicative, not additive. Values are carried to additional decimal
places and may not agree to the rounded values presented above.

Annual Percentage Increase in Consumer Price Index, September (September CPI)

To ensure that plan sponsors and CMS have sufficient time to incorporate cost-sharing
requirements into the development of the benefit, any marketing materials, and necessary
 125

systems, CMS includes in its methodology to calculate the annual percentage increase in the CPI
for the 12-month period ending in September 2024, an estimate of the September 2024 CPI
based on projections from the President’s FY2025 Budget.

The September 2023 value is from the Bureau of Labor Statistics. The annual percentage trend in
the September CPI for CY 2025 is calculated as follows:
𝑃𝑟𝑜𝑗𝑒𝑐𝑡𝑒𝑑 𝑆𝑒𝑝𝑡𝑒𝑚𝑏𝑒𝑟 2024 𝐶𝑃𝐼
or $315.8/$307.8=1.0261
𝐴𝑐𝑡𝑢𝑎𝑙 𝑆𝑒𝑝𝑡𝑒𝑚𝑏𝑒𝑟 2023 𝐶𝑃𝐼

(Source: President’s FY2025 Budget and Bureau of Labor Statistics, Department of

Labor)

The CY 2025 benefit parameters reflect the CY 2024 annual percentage trend in the September
CPI of 2.61 percent, as well as a -0.11 percent multiplicative correction for the revision to last
year’s estimate. The CY 2024 annual percentage trend in the CPI can be found in Table V-5
below.
Table V-5. Cumulative Annual Percentage Increase in September CPI
Annual percentage trend for September 2024 2.61%
Prior year revisions -0.11%
Annual percentage increase for 2025 2.50%

Note: Percentages are multiplicative, not additive. Values are carried to additional decimal places
and may not agree to the rounded values presented above.

Section C. Annual Percentage Increase in Average Expenditures for Part D Drugs Per
Eligible Beneficiary

Section 1860D-2(b)(6) of the Act defines the API as “the annual percentage increase in average
per capita aggregate expenditures for covered Part D drugs in the United States for Part D
eligible individuals, as determined by the Secretary for the 12-month period ending in July of the
previous year using such methods as the Secretary shall specify.” The following defined standard
Part D prescription drug benefit parameters are updated using the “annual percentage increase”:

For CY 2025, the defined standard deductible amount is updated by multiplying the 2024
amount of $545 by the 2025 API and rounding to the nearest multiple of $5. Under section
1860D-2(b)(4)(B)(i)(VII) of the Act, the annual OOP threshold is statutorily set at $2,000 for CY
2025.
 126

Table V-6. Part D Benefit Parameters for Defined Standard Benefit for CY 2024 and CY
2025 for Non-LIS Beneficiaries29

2024 2025
Deductible
Cost sharing: 100% Cost sharing: 100%
Phase
Deductible: $545 Deductible: $590
Applicable Non-applicable
Initial Drugs Drugs
Coverage Cost sharing: 25%
Phase Cost sharing: Cost sharing:
25% 25%
Initial Coverage Limit: Not
Initial Coverage Limit: $5,030
Applicable
Applicable Non-applicable
Coverage Drugs: Drugs
N/A
Gap Cost sharing: Cost sharing:
25% 25%
Out-of-Pocket Threshold: $8,000 Out-of-Pocket Threshold: $2,000

Section D. Retiree Drug Subsidy Amounts

While the IRA significantly redesigned the Part D benefit for 2025, the IRA did not change the
statutory requirements for retiree drug subsidy plans (as defined in section 1860D-22 of the Act).
Specifically, the IRA did not change the requirements related to the methodology for calculating
the cost limit and threshold for the CY 2025 retiree drug subsidy amounts for retiree drug
subsidy plans.30

Per section 1860D-22(a)(3)(B) of the Act and § 423.886(b)(3), the cost threshold and cost limit
for qualified retiree prescription drug plans are updated using the API, as defined previously in
this document.31 The updated cost threshold is rounded to the nearest multiple of $5 and the
updated cost limit is rounded to the nearest multiple of $50. The cost threshold and cost limit are
defined as $545 and $11,200, respectively, for plans that end in CY 2024, and as $590 and
$12,150 for plans that end in CY 2025, as noted in Table V-7.

29 These parameters reflect additional plan coverage required for covered insulin products under section 1860D-2(b)(9) of the
Act, as added by section 11406 of the IRA, and ACIP-recommended adult vaccines under section 1860D-2(b)(8) of the Act, as
added by section 11401 of the IRA.
30 Please see the Final CY 2025 Part D Redesign Program Instructions published concurrently with this Rate Announcement.
31 The cost threshold is the amount of gross retiree costs that a retiree must incur before the retiree drug subsidy applies. The cost

limit is the maximum amount of gross retiree costs that the retiree drug subsidy will cover after a retiree hits the cost threshold.
 127

Table V-7. Updated Retiree Drug Subsidy Amounts in CY 2025

2024 2025
Retiree Drug Subsidy Amounts
Cost Threshold $545 $590
Cost Limit $11,200 $12,150
 128

Attachment VI. Updates for Part C and D Star Ratings

Part C and D Star Ratings and Future Measurement Concepts

The Part C and D Star Ratings measure the quality of and reflect the experiences of beneficiaries
in MA and Prescription Drug Plans (PDPs or Part D plans), assist beneficiaries in finding the
best plan for their needs, and determine eligibility for MA Quality Bonus Payments. The Star
Ratings support CMS’ efforts to make the patient the focus in all of our programs and to create
incentives to eliminate health disparities.

The methodology for the Star Ratings system for the Part C and D programs is codified at §§
422.160 - 422.166 and 423.180 - 423.186. In the Advance Notice, we provided information and
updates as required by §§ 422.164(c)(2), (d), (e)(2) and (f)(1); 422.166(f)(2); 423.184(c)(2), (d),
(e)(2), and (f)(1); and 423.186(f)(2). We reviewed the comments and will consider them as we
identify future enhancements to the Star Ratings program.

Reminders for 2025 Star Ratings

We provide various datasets and reports to plan sponsors throughout the year. Part C and D
sponsors should regularly review their underlying measure data that are the basis for the Star
Ratings and immediately alert CMS if errors or anomalies are identified so any issues can be
resolved prior to the first plan preview period.

As described at §§ 422.164(h) and 423.184(h), CMS annually sets and announces a deadline for
MA and Part D organizations to request that CMS or the Independent Review Entity (IRE)
review its Part C appeals data or CMS review its Complaints Tracking Module (CTM) data.
CMS is announcing a deadline of June 28, 2024, for all contracts to make their requests for
review of the 2023 appeals and CTM measure data for the 2025 Star Ratings. Sponsoring
organizations can view and monitor their Part C appeals timeliness and effectuation compliance
data on the Medical Appeal Search website. Sponsoring organizations should refer to the May
10, 2019, HPMS memorandum, “Complaints Tracking Module (CTM) File Layout Change and
Updated Standard Operating Procedures,” for instructions on how to submit a Plan Request in
HPMS to request a review of CTM complaint(s).

As a reminder, in the 2024 Rate Announcement, CMS stated that we will remove the question
“In the last 6 months, how often did you see the person you came to see within 15 minutes of
your appointment time?” from the Getting Appointments and Care Quickly measure for the 2025
Star Ratings. As explained in the CY 2024 Rate Announcement, this is a non-substantive change
under § 422.164(d)(1). This will reduce the Getting Appointments and Care Quickly measure to
the following existing two questions for the 2025 Star Ratings:
 129

• In the last 6 months, when you needed care right away, how often did you get care as
soon as you needed?
• In the last 6 months, how often did you get an appointment for a check-up or routine care
as soon as you needed?
Measure Updates for 2025 Star Ratings

The measures that will be used to calculate the 2025 Star Ratings are listed in Table VI-1 with
information about the measure type, weight, and measurement year. As a reminder, starting with
the 2024 measurement year (2026 Star Ratings), the weight of patients’ experience and
complaints and access measures will be reduced to 2.32

Table VI-1. 2025 Star Ratings Measures

Included in
Part C Measure Measure Type Weight Measurement Improvement the 2025 CAI
or D Year Measure
Values

C Breast Cancer Process Measure 1 1/1/2023 – Yes Yes

Screening 12/31/2023
C Colorectal Cancer Process Measure 1 1/1/2023 – Yes Yes
Screening 12/31/2023
C Annual Flu Vaccine Process Measure 1 3/2024 – 6/2024 Yes Yes

C Controlling Blood Intermediate 3 1/1/2023 – Yes Yes

Pressure Outcome 12/31/2023
Measure
C Monitoring Physical Process Measure 1 7/2023 – 11/2023 Yes Yes
Activity

C Special Needs Plan Process Measure 1 1/1/2023 – Yes No

(SNP) Care 12/31/2023
Management

C Care for Older Adults – Process Measure 1 1/1/2023 – Yes No

Medication Review 12/31/2023

C Care for Older Adults– Process Measure 1 1/1/2023 – Yes No

Pain Assessment 12/31/2023

32 Refer to CMS’ CY 2024 Final Rule (CMS-4201-F).

 130

Included in
Part C Measure Measure Type Weight Measurement Improvement the 2025 CAI
or D Year Measure
Values

C Osteoporosis Process Measure 1 1/1/2023 – Yes Yes

Management in 12/31/2023
Women who had a
Fracture

C Diabetes Care – Eye Process Measure 1 1/1/2023 – Yes Yes

Exam 12/31/2023

C Diabetes Care – Blood Intermediate 3 1/1/2023 – Yes Yes

Sugar Controlled Outcome 12/31/2023
Measure

C Reducing the Risk of Process Measure 1 7/2023 – 11/2023 Yes Yes

Falling

C Improving Bladder Process Measure 1 7/2023 – 11/2023 Yes Yes

Control

C Medication Process Measure 1 1/1/2023 – Yes Yes

Reconciliation Post- 12/31/2023
Discharge

C Plan All-Cause Outcome 3 1/1/2023 – Yes Yes

Readmissions Measure 12/31/2023

C Transitions of Care Process Measure 1 1/1/2023 – Yes Yes

12/31/2023

C Follow-up after Process Measure 1 1/1/2023 – Yes Yes

Emergency Room Visit 12/31/2023

C Getting Needed Care Patients’ 4 3/2024 – 6/2024 Yes No

Experience and
Complaints
Measure

C Getting Appointments Patients’ 4 3/2024 – 6/2024 Yes No

and Care Quickly Experience and
Complaints
Measure
 131

Included in
Part C Measure Measure Type Weight Measurement Improvement the 2025 CAI
or D Year Measure
Values

C Customer Service Patients’ 4 3/2024 – 6/2024 Yes No

Experience and
Complaints
Measure

C Rating of Health Care Patients’ 4 3/2024 – 6/2024 Yes No

Quality Experience and
Complaints
Measure

C Rating of Health Plan Patients’ 4 3/2024 – 6/2024 Yes No

Experience and
Complaints
Measure

C Care Coordination Patients’ 4 3/2024 – 6/2024 Yes No

Experience and
Complaints
Measure

C Complaints about the Patients’ 4 1/1/2023 – Yes No

Health Plan Experience and 12/31/2023
Complaints
Measure

C Members Choosing to Patients’ 4 1/1/2023 – Yes No

Leave the Plan Experience and 12/31/2023
Complaints
Measure

C Health Plan Quality Improvement 5 NA No No

Improvement Measure

C Plan Makes Timely Measures 4 1/1/2023 – Yes No

Decisions about Capturing Access 12/31/2023
Appeals

C Reviewing Appeals Measures 4 1/1/2023 – Yes No

Decisions Capturing Access 12/31/2023
 132

Included in
Part C Measure Measure Type Weight Measurement Improvement the 2025 CAI
or D Year Measure
Values

C Call Center – Foreign Measures 4 2/2024 – 5/2024 Yes No

Language Interpreter Capturing Access
and TTY Availability

C Statin Therapy for Process Measure 1 1/1/2023 – Yes Yes

Patients with 12/31/2023
Cardiovascular Disease

D Call Center – Foreign Measures 4 2/2024 – 5/2024 Yes No

Language Interpreter Capturing Access
and TTY Availability

D Complaints about the Patients’ 4 1/1/2023 – Yes No

Drug Plan Experience and 12/31/2023
Complaints
Measure

D Members Choosing to Patients’ 4 1/1/2023 – Yes No

Leave the Plan Experience and 12/31/2023
Complaints
Measure

D Drug Plan Quality Improvement 5 NA No No

Improvement Measure

D Rating of Drug Plan Patients’ 4 3/2024 – 6/2024 Yes No

Experience and
Complaints
Measure

D Getting Needed Patients’ 4 3/2024 – 6/2024 Yes No

Prescription Drugs Experience and
Complaints
Measure

D MPF Price Accuracy Process Measure 1 1/1/2023 – Yes No

9/30/2023
 133

Included in
Part C Measure Measure Type Weight Measurement Improvement the 2025 CAI
or D Year Measure
Values

D Medication Adherence Intermediate 3 1/1/2023 – Yes Yes

for Diabetes Outcome 12/31/2023
Medications Measure

D Medication Adherence Intermediate 3 1/1/2023 – Yes Yes

for Hypertension (RAS Outcome 12/31/2023
antagonists) Measure

D Medication Adherence Intermediate 3 1/1/2023 – Yes Yes

for Cholesterol Outcome 12/31/2023
(Statins) Measure

D MTM Program Process Measure 1 1/1/2023 – Yes Yes

Completion Rate for 12/31/2023
CMR

D Statin Use in Persons Process Measure 1 1/1/2023 – Yes Yes

with Diabetes 12/31/2023

Improvement Measures (Part C & D) for the 2025 Star Ratings

Under §§ 422.164(f) and 423.184(f), improvement measures are calculated using performance
measures that meet specific conditions. Table VI-1 includes information about which measures
will be used to calculate the improvement measures for the 2025 Star Ratings. As stated in §§
422.164(f)(4)(i) and
423.184(f)(4)(i), CMS will only include measures in the improvement calculations at the
contract level if numeric value scores are available for both the current and prior year.

2025 Star Ratings Program and the Categorical Adjustment Index

The methodology for the Categorical Adjustment Index (CAI) is described at §§ 422.166(f)(2)
and 423.186(f)(2), as well as in the annual Medicare Part C & D Star Ratings Technical Notes
available on CMS’ Part C and D Star Ratings website. As finalized at §§ 422.166(f)(2) and
423.186(f)(2), all measures identified as candidate measures will be included in the
determination of the 2025 CAI values. The measure set for the 2025 CAI (for both Part C and D)
is identified in Table VI-1.

In keeping with our commitment to transparency, a summary of the analysis of the candidate
measure set that includes the minimum, median, and maximum values for the within-contract
 134

variation for the low-income subsidy (LIS)/dual eligible (DE) differences are posted with the
2025 CAI values on CMS’ Part C and D Star Ratings website.

Extreme and Uncontrollable Circumstances Policy for the 2025 Star Ratings

Extreme and uncontrollable circumstances such as natural disasters can directly affect
Medicare beneficiaries and providers, as well as the Parts C and D organizations that provide
beneficiaries with important medical care and prescription drug coverage. An affected
contract is identified based on these criteria:

(1) Its service area is within an “emergency area” during an “emergency period” as
defined in section 1135(g)(1) of the Act;

(2) Its service area is within a geographic area designated in a major disaster
declaration under the Stafford Act and the Secretary exercised authority under
section 1135 of the Act based on the same triggering event(s); and

(3) A certain minimum percentage (25 percent or 60 percent) of the enrollees under
the contract must reside in a Federal Emergency Management Agency (FEMA)-
designated Individual Assistance area at the time of the extreme and uncontrollable
circumstance. (See §§ 422.166(i) and 423.186(i).)

We use the start date of the incident period to determine which year of Star Ratings could be
affected, regardless of whether the incident period extends to another calendar year (§§
422.166(i) and 423.186(i)).

Under the 25 percent rules at §§ 422.166(i)(2)–(6) and 423.186(i)(2)–(5), contracts with at

least 25 percent of their service area in a FEMA-designated Individual Assistance area in
2023 will receive the higher of their measure-level rating from the current and prior Star
Ratings years for purposes of calculating the 2025 Star Ratings (thus, for 2025 Star Ratings,
affected contracts will receive the higher of their measure-level ratings from the 2024 rating
or 2025 rating for the applicable measures). The numeric scores for contracts with 60 percent
or more of their enrollees living in FEMA-designated Individual Assistance areas at the time
of the extreme and uncontrollable circumstance are excluded from: (1) the measure-level cut
point calculations for non-CAHPS measures; and (2) the performance summary and variance
thresholds for the reward factor as described at §§ 422.166(i)(9)(i) and (i)(10)(i), and
423.186(i)(7)(i) and (i)(8)(i). As a reminder, starting with the 2026 Star Ratings that covers
the 2024 measurement year for most measures, the 60 percent rule will be removed.33 Table
VI-2 lists the emergency areas affected by emergency declarations first issued in 2023, as

33 Refer to CMS’ CY 2024 Final Rule (CMS-4201-F).

 135

defined in section 1135 of the Act, and the exercise of the Secretary’s authority under section
1135 of the Act.

Table VI-2. List of Section 1135 Waivers Issued in Relation to the FEMA Major Disaster
Declarations

Section
1135 Waiver or Modification
Waiver of Requirements Under FEMA Incident
Date Section 1135 of the Incident Affected Start
Issued Social Security Act Type State Date
March 27, Severe Storms, Straight- Severe Mississippi Mar 24, 2023
2023 Line Winds, and Storms,
Tornadoes Straight-
line Winds,
and
Tornadoes
June 2, Typhoon Mawar Typhoon Guam May 22, 2023
2023 Mawar
August 11, Wildfires Wildfires Hawaii August 8,
2023 2023
August 30, Hurricane Idalia Hurricane Florida August 27,
2023 2023
September Hurricane Idalia Hurricane Georgia August 30,
12, 2023 2023

Table VI-3 lists the states and territories with Individual Assistance designations from the
FEMA major disaster declarations.
 136

Table VI-3. Individual Assistance Counties and County-Equivalents in FEMA Major

Disaster Declared States/Territories
FEMA FEMA Individual Assistance Counties or County-
Declaration State Equivalents
DR-4697-MS Mississippi Carroll, Humphreys, Monroe, Montgomery, Panola,
Sharkey
DR-4715-GU Guam Guam

DR-4724-HI Hawaii Maui

DR-4734-FL Florida Charlotte, Citrus, Columbia, Dixie, Gilchrist,

Hamilton, Hernando, Hillsborough, Jefferson,
Lafayette, Levy, Madison, Manatee, Pasco, Pinellas,
Sarasota, Suwannee, Taylor
DR-4738-GA Georgia Berrien, Brooks, Cook, Glynn, Lowndes

Changes to Existing Star Ratings Measures for the 2025 Measurement Year and Beyond

CMS solicits feedback on new measure concepts as well as measure updates through the annual
Advance Notice and Rate Announcement process. We also provide advance notice regarding
measures considered for implementation as future Star Ratings measures. As codified at §§
422.164(c)(2)(4), 423.184(c)(2)(4), 422.164(d)(2), and 423.184(d)(2), new measures and
measures with substantive specification changes must be added or updated through rulemaking
and must remain on the display page for at least two years prior to becoming a Star Ratings
measure. CMS uses the Advance Notice and Rate Announcement process to announce non-
substantive specification changes as described at §§ 422.164(d)(1) and 423.184(d)(1) and to
remove measures as described at §§ 422.164(e) and 423.184(e). We described a number of
measure concepts and changes in the Advance Notice and summarize significant comments on
those issues here. We encourage interested parties to provide comments directly to measure
developers during their public comment periods. For example, the National Committee for
Quality Assurance (NCQA) and the Pharmacy Quality Alliance (PQA) regularly solicit public
comments on new measures, changes to existing measures, and measure retirements. We
submitted the Initiation and Engagement of Substance Use Disorder Treatment (Part C) and
Initial Opioid Prescribing for Long Duration (IOP-LD) (Part D) measures to the 2023 Pre-
 137

Rulemaking Measure Review (PRMR) process, and we are reviewing the feedback34 as we
consider measures to propose to add to the Star Ratings through future rulemaking.

Future Universal Foundation Star Ratings Measures. As part of the CMS National Quality
Strategy and Medicare Value-Based Care Strategy, CMS is committed to aligning a subset of
measures across all our programs and ensuring we measure quality across the entire care
continuum in a way that promotes the best, safest, and most equitable care for all individuals.
Improving alignment of measures across federal programs and with private payers will reduce
provider burden while also improving the effectiveness and comparability of measures across
quality programs. Across our CMS quality rating and value-based care programs, where
applicable, we are implementing the “Universal Foundation”35 of quality measures which is a
subset of measures that are aligned across programs. This “Universal Foundation” is a building
block to which programs will add additional aligned or program-specific measures. As
discussed in the 2024 Rate Announcement, we will add Depression Screening and Follow-Up
for Adolescents and Adults (Part C) and Adult Immunization Status (Part C)36 to the 2026
display page based on the 2024 measurement year. In the 2024 Advance Notice we solicited
feedback regarding adding the Initiation and Engagement of Substance Use Disorder Treatment
(Part C) measure to the Star Ratings in the future pending rulemaking. We submitted this
measure through the 2023 PRMR process which provides recommendations to HHS on the
selection of quality and efficiency measures for CMS programs. Adding this measure to the Part
C Star Ratings would further align the Part C Star Ratings with the Universal Foundation. We
are working to include all of the Universal Foundation measures37 as part of the Part C and D
Star Ratings pending future rulemaking.

Although there was overall support for the Universal Foundation, some commenters raised data
collection challenges for the Initiation and Engagement of Substance Use Disorder Treatment,
Depression Screening and Follow-up, Social Need Screening and Intervention, and Adult
Immunization Status measures. Some commenters asked for time to prepare for implementation
of these new measures. For the Initiation and Engagement of Substance Use Disorder Treatment
measure, some of the challenges commenters noted include state and federal requirements
regarding disclosure of alcohol and substance use disorder information without written
authorization from the individual. For the Depression Screening and Follow-up measure,

34 Refer to information on the Pre-Rulemaking Measure Review (PRMR) process and the 2023 Final Measures Under
Consideration (MUC) Recommendation Report.
35 Jacobs, D. B., Schreiber, M., Seshamani, M., Tsai, D., Fowler, E., & Fleisher, L. A. (2023). Aligning quality measures across

CMS—the universal foundation. New England Journal of Medicine, 388(9), 776-779.

36 As guidelines develop around COVID-19, respiratory syncytial virus (RSV), and Hepatitis B vaccination, NCQA will assess

and determine the appropriateness of incorporating these vaccine indicators in the Adult Immunization Status measure.
37 The following Part C Star Ratings measures are part of the Universal Foundation: Breast Cancer Screening, Colorectal Cancer

Screening, Controlling Blood Pressure, Diabetes Care – Blood Sugar Controlled, Plan All-Cause Readmissions, and CAHPS
Overall Rating measures.
 138

commenters raised issues about the availability of data needed, and the impact of state laws and
regulations on the ability to share mental health information with primary care providers without
patient consent and the effect this may have on providing follow-up care. Some commenters
asked for more opportunities to provide input regarding which measures are part of the Universal
Foundation, while a few commenters provided suggestions for additional measures such as the
Kidney Health Evaluation measure. We appreciate the feedback as we continue to explore
adding measures to the Star Ratings that are part of the Universal Foundation. As we add Social
Need Screening and Intervention to the 2025 display page and Adult Immunization Status and
Depression Screening and Follow-up to the 2026 display page, we will continue to examine data
quality issues. We shared the feedback we received with NCQA for their consideration as they
make updates to these measures.

Breast Cancer Screening (Part C). The current Breast Cancer Screening measure assesses
screening for members eligible for breast cancer screening aged 50-74. In May 2023, the U.S.
Preventive Services Task Force (USPSTF) released a draft statement that recommends biennial
mammography screening for women aged 40-74 years at average risk of breast cancer. In
October 2023, NCQA sought public comment on revising the measure to assess screening for
members aged 40-49, in addition to those 50-74, for the HEDIS Measurement Year 2024
Technical Update (released April 1, 2024). Commenters and other stakeholders advised NCQA
to implement the proposed measure change after the USPSTF releases its final recommendation
statement sometime in 2024. Thus, after the final recommendation is published, NCQA will
consider adding individuals 40-49 years of age to the measure for all product lines for
measurement year 2025. If this change is approved, NCQA plans to include two age strata – one
for the legacy measure and one that includes the new age group. Adding an age group is a
substantive measure specification change as described at § 422.164(d)(2); thus, the updated
measure will be on the display page for two or more years and proposed through rulemaking
prior to adding it to the Part C Star Ratings. We intend to keep the legacy measure in the Star
Ratings while the new measure is on display.

We received similar comments on the Advance Notice as NCQA received during their public
comment periods. Commenters were supportive of this proposed change, but some noted that it
should follow the release of final recommendations of the USPSTF.

Diabetes Care - Eye Exam (Part C). NCQA is evaluating the administrative codes used to
determine that a diabetic retinal eye exam has been completed following feedback from the
NCQA Geriatric Measurement Advisory Panel that it would be useful to have more specific
codes in this measure. Based on this feedback and NCQA’s strategic goal to move toward digital
measures, NCQA reviewed the measure codes with their Diabetes Measurement Advisory Panel
and plans to include updates for measurement year 2025. This update would be non-substantive
 139

under § 422.164(d)(1)(iii) since it updates the clinical codes with no change to the target
population or the intent of the measure.

Commenters provided mixed feedback on the updates to the codes for this measure, with some
commenters wanting to better understand the coding changes to ensure no unintended
consequences, while other commenters wanted to continue hybrid reporting for this measure,
raising concerns that plans do not always receive claims for all eye exams. We shared the
feedback we received with NCQA for their review.

Statin Therapy for Patients with Cardiovascular Disease (Part C). Over the past several
years, NCQA has received questions related to how members experiencing statin intolerance
might be excluded from this measure. In the absence of coding methods that accurately capture
true statin intolerance, the measure currently excludes members with a diagnosed muscle
condition during the measurement year as a proxy for statin intolerance. However, this exclusion
does not address members who have a history of intolerance to statin medications who no longer
have a qualifying muscle condition during the measurement year. Patients may go through an
arduous statin rechallenging process to be deemed intolerant, which requires close monitoring
and shared decision-making with the managing clinician to weigh the risks against the benefits of
discontinuing statins. To allow the exclusion of such patients with a history of statin intolerance,
NCQA plans to add the exclusion “myalgia or rhabdomyolysis caused by a statin at any time
during the member’s history through December 31 of the measurement year” and create a value
set specifically for this exclusion. This exclusion was supported by members of NCQA’s
Cardiovascular Measurement Advisory Panel. NCQA plans to implement this update for
measurement year 2025 and anticipates no significant impact on performance rates. This update
would be non-substantive under § 422.164(d)(1)(i) because it narrows the population covered
under the measure. NCQA is also planning a re-evaluation of the Statin Therapy for Patients with
Cardiovascular Disease measure for measurement year 2026. Almost all commenters supported
this update.

Plan Makes Timely Decisions about Appeals and Reviewing Appeals Decisions (Part C).
The timeliness measure evaluates the percent of appeals timely processed by the plan
(numerator) out of all the plan’s appeals decided by the Independent Review Entity (IRE)
(includes upheld, overturned, partially overturned and appeals not evaluated by the IRE because
the plan agreed to cover) (denominator). Given the extent to which cases are now submitted
electronically (via the portal) to the IRE, CMS is considering updates to the Maximus Medicare
Health Plan Reconsideration Process Manual Medicare Managed Care Reconsideration Project
 140

(i.e., the IRE Manual)38 to better align when submission of a case file to the IRE is considered
timely with the existing regulations.

First, CMS is considering eliminating the additional days the IRE allows for appeal files that are
submitted electronically. Currently, the IRE includes additional days to make allowances for any
mail delays. Because the IRE now receives over 99 percent of case files electronically via the
portal, CMS is considering updating the language in the IRE Manual to use a deadline for timely
portal (that is, electronic) submission that aligns with the timeliness requirements in § 422.590
for submission of standard, expedited, and Part B drug cases. Section 422.590(a)(2) requires
Medicare health plans to submit an unfavorable standard service reconsideration to the IRE as
expeditiously as the enrollee's health condition requires, or not later than 30 calendar days after
the receipt of a valid reconsideration request, subject to an additional 14-calendar day extension
if in the enrollee's interest, per § 422.590(e). The regulations do not provide any additional time
for mail delays and the IRE does not require Medicare health plans to use overnight delivery for
non-expedited cases. For purposes of defining and calculating timeliness, the IRE currently adds
five calendar days to the timeframes listed above for all appeal file submissions. For example,
the IRE considers a standard service case, without an extension, to be submitted timely if it is
received within 35 calendar days of the valid request for reconsideration; this means that for
electronic submissions by the plan, the plan has an extra five days to submit the file to the IRE
beyond the deadline established in the applicable regulation. CMS is considering eliminating this
5-day period for all cases submitted electronically. CMS believes this change is justified due to
the overwhelming majority of cases being submitted electronically; further, eliminating the 5-day
grace period for electronic submissions aligns this measure with the regulation text. The
timeliness of case files submitted by mail would continue to be subject to the 5-day grace period.
Please note these changes are only in effect for electronic submissions. For hard copies, the IRE
considers a standard service case, without an extension, to be submitted timely if it is received
within 35 calendar days outside of the IRE’s normal business hours.

The second update CMS is considering is to use the electronic system receipt date and time as
the date the appeal was received by the IRE, regardless of whether it is during the IRE’s business
hours, for electronic submissions. Currently, the IRE uses the system receipt date as the date the
appeal was received if it is during the IRE’s normal business hours. If the system receipt date is
outside of the IRE’s normal business hours, the following business day is used as the receipt
date. For example, if the appeal is received on a Sunday when the IRE offices are closed, the
appeal would be considered received on Monday when the offices are open. With this potential
change the receipt date would be Sunday rather than Monday. CMS is considering updating the
IRE Manual and process to allow case files submitted via the portal to be considered received on

38
Refer to the Maximus Medicare Health Plan Reconsideration Process Manual Medicare Managed Care
Reconsideration Project.
 141

the date and time of portal submission, even if it is outside of normal business hours. This means
that cases received up to 11:59 p.m. (Eastern Time) each day via the portal would be considered
received on that day. (However, the processing timeframe for the IRE-level review would not
commence until the following business day.) This update would more closely reflect the
submission of electronic files than current practice. Please note these changes would only affect
electronic submissions. If hard copies are delivered outside of the IRE’s normal business hours,
the following business day is used as the receipt date.

If these changes are made to the IRE Manual, this would impact how timeliness is defined for the
Plan Makes Timely Decisions about Appeals measure. This potential change would also impact
the Reviewing Appeals Decisions measure because the appeals used in this measure are based on
the date in the calendar year the appeal was received by the IRE, and this potential update could
affect the received date. If these changes are made to the IRE Manual, they would be highlighted
on the Maximus website.

These potential changes would result in substantive measure updates under § 422.164(d)(2)
because the IRE’s processes for determining timeliness and the received date would change. In
accordance with § 422.164(d)(2), substantive changes to existing measures will be proposed and
finalized through rulemaking. If these substantive changes to the measures are proposed, the
legacy appeals measures would remain in the Star Ratings until the updated measures have been
on the display page for at least 2 years. Then, the legacy measures would be retired, and the re-
specified appeals measures would move into the Star Ratings pending rulemaking.

The majority of commenters supported eliminating the grace period and using the electronic
system receipt date as the date the appeal was received by the IRE. A couple of commenters
asked for clarification regarding the grace periods for expedited and Part B appeals. Some
commenters wanted a grace period ranging from 1 to 3 days to provide more time to review
appeals cases before they are submitted to the IRE electronically. A few commenters asked that
the Maximus portal indicate whether the appeal is submitted electronically or by mail. We
appreciate the comments we received and will take them into consideration as we consider
proposing changes through the rulemaking process. As we stated in the Advance Notice, CMS is
considering updating the language in the IRE Manual to use a deadline for electronic submission
that aligns with the timeliness requirements in § 422.590 for submission of standard, expedited,
and Part B drug cases; thus, there would be no grace periods for any type of appeal to ensure that
all appeals are resolved in a timely manner.

Cross-cutting: Identifying Chronic Conditions (Part C). NCQA is continuing its reevaluation
of how to identify those with chronic conditions across HEDIS measures with the goals of 1)
updating the claims-based approach that is currently used to identify conditions and 2)
developing a new method that provides directions for how to identify conditions using clinical
 142

data. Measure specifications will be simplified to identify members with a condition if they have
at least two encounters with the diagnosis (in any setting) on different dates of service. The
changes replace the current method which requires at least two visits (e.g., outpatient,
observation, telephone, emergency department, non-acute inpatient encounters) on different
dates of service or at least one inpatient encounter or discharge with a diagnosis. For example,
this method is also planned for a new blood pressure measure under development for HEDIS
measurement year 2025. The planned blood pressure measure also allows for one encounter
diagnosis and a dispensed anti-hypertensive medication. Finally, a method to identify conditions
using clinical data is beginning to be developed and may require at least two encounters with a
diagnosis, or an active diagnosis on the problem list within a specified time period. As this
reevaluation work continues, there may be additional updates to the methods of identifying
conditions that may impact measure denominators and exclusions across HEDIS measures. Most
commenters were supportive of NCQA reevaluating how to identify those with chronic
conditions, but some had additional questions or suggestions. We have shared the feedback we
received with NCQA and will provide more information as NCQA continues to explore these
potential updates in identifying enrollees with chronic conditions.

Cross-cutting: Gender-Affirming Quality Measurement in HEDIS (Part C). NCQA is

expanding on the work they started for measurement year 2024 to evaluate approaches to update
measure specifications where eligible populations are currently defined with gendered language
to ensure inclusive and gender-affirming approaches aligned with measure intent and clinical
evidence. The Star Ratings measures under consideration for potential changes focus on
appropriate statin therapy and osteoporosis treatment. Evaluation of potential updates to
gendered language in the Statin Therapy for Patients with Cardiovascular Disease measure
would be conducted as part of NCQA’s planned evaluation described above. The intent of this
effort is to ensure that all members in need of, or recommended for, care are included in the
eligible population, and to address potential disparities in access and outcomes for transgender
and gender-diverse members. Commenters expressed overwhelming support for this effort. CMS
shared the feedback we received with NCQA and will provide more information as NCQA
continues to explore these potential updates, including the selection of measure(s) for revision.

Care Coordination (Part C). The Care Coordination measure is a composite measure based on
six questions intended to measure the patient’s experience with care coordination. We are
considering updating two of the questions. As noted in the 2024 Rate Announcement, CMS
tested some alternative questions for the Care Coordination measure derived from the CAHPS
survey; the questions focused on how often doctors, nurses, or health care providers explain the
results of tests, how often the explanations were easy to understand, and how often the
information provided about test results was as much as was needed. Among the goals of the 2022
field test were to identify promising new items to (a) replace any existing care coordination items
 143

that were no longer performing well psychometrically, (b) refresh the concept in a way that
might include high performing, recently developed test result items, and (c) not appreciably
increase the number of items on the survey.

Table VI-4 shows the items in the current and potential new composite measures. There are two
items from the existing composite that are not part of the potential new composite. One of these
items (“Did you get the help you needed from your personal doctor’s office to manage care from
different providers and services?”) has response options that deviate from those of other items.
The other is a test results item that is no longer needed given the new test results items we
propose to incorporate. The remaining four items from the existing composite are also part of the
potential new composite. There are two items in the potential new composite that are not part of
the existing composite. Of the six items in the potential new composite, three pertain to test
results and three pertain to other aspects of care coordination. All items on aspects of care
coordination other than test results are in the current composite, although the wording of one of
these items has been slightly modified.

Table VI-4. Care Coordination Items in the Current and Potential New Composite
Current Composite Potential New Composite
In the last 6 months, when your personal doctor N/A
ordered a blood test, x-ray, or other test for you,
how often did you get those results as soon as you
needed them?
In the last 6 months, did you get the help you N/A
needed from your personal doctor’s office to
manage your care among these different providers
and services?
In the last 6 months, when you talked with your In the last 6 months, when you talked with your
personal doctor during a scheduled appointment, personal doctor during a scheduled appointment,
how often did he or she have your medical records how often did he or she have your medical
or other information about your care? records or other information about your care?
In the last 6 months, how often did you and your In the last 6 months, how often did you and your
personal doctor talk about all the prescription personal doctor talk about all the prescription
medicines you were taking? medicines you were taking?
In the last 6 months, how often did your personal In the last 6 months, how often did your personal
doctor seem informed and up to date about the doctor seem informed and up to date about the
care you got from specialists? care you got from specialists?
In the last 6 months, when your personal doctor In the last 6 months, when a doctor, nurse, or
ordered a blood test, x-ray, or other test for you, other health care provider ordered a blood test, x-
how often did someone from your personal ray, or other test for you, how often did you get
doctor’s office follow up to give you those results? your test results?
 144

In the last 6 months, how often did a doctor,

N/A nurse, or other health care provider explain the
results of your blood test, x-ray, or other test?
In the last 6 months, how often did you get as
N/A much information as you needed about your test
results?

The potential six-item composite has a Cronbach’s alpha of 0.77 (indicating good internal
consistency) and contract-level reliability of 0.82 (indicating strong potential to distinguish
contracts from one another).

In a regression analysis predicting overall rating of health plan (scored on a 0-100 scale) from
this potential Care Coordination composite and the standard set of CAHPS case-mix adjustors,
care coordination was a significant predictor, b = 0.283, SD = 0.029, p < 0.001, suggesting good
criterion validity. This is an improvement upon the predictive validity of the current Care
Coordination composite: b = 0.078, SD = 0.001, p < 0.001.

The current and potential new Care Coordination composite measures are strongly correlated at
0.76 – that is, contracts that did well on one typically did well on the other.

In sum, this potential new six-item Care Coordination composite has the following advantages:

• It has very good psychometric properties as demonstrated by the reliability, internal

consistency, and criterion validity discussed above.
• It puts more emphasis on the important concept of test results (moving from two to three
items).
• It does not increase respondent burden.
• We expect that contracts that did well on the current composite would continue to do well
on the revised composite measure.
These changes to the Care Coordination measure would be a substantive update to the Star
Ratings measure under § 422.164(d)(2).

Many commenters were supportive of the changes to the Care Coordination measure but had
suggestions for changes to the language or to the number of questions included in the composite.
Commenters asked for clarification on how the changes would impact scores and on the display
page measure process for substantive updates for CAHPS measures. If these changes are made,
the existing Care Coordination measure would be removed from the Star Ratings while the
updated measure is on the display page for two years. We will take all comments into
consideration as we work to update the Care Coordination measure. These changes to the Care
Coordination measure would be a substantive update to the Star Ratings measure under §
422.164(d)(2).
 145

Initial Opioid Prescribing for Long Duration (IOP-LD) (Part D). As part of CMS’ efforts to
address the national opioid crisis, we have implemented balanced drug utilization review (DUR)
policies and quality measurement strategies to help prevent and reduce prescription opioid
overuse in the Medicare Part D population while maintaining needed access. CMS began
reporting the IOP-LD measure to Part D sponsors through the Patient Safety reports in
measurement year 2020 and has publicly reported the measure on the Part D display page39 since
2023 (2021 data). The PQA is the measure steward. In the 2021 Advance Notice, we solicited
feedback regarding adding the IOP-LD measure to the Star Ratings in the future pending
rulemaking. The measure was included in the 2023 MUC list for the PRMR process40 to inform
the selection of quality and efficiency measures for CMS programs. In the CY 2025 Advance
Notice, we reiterated that we intend to propose to add the IOP-LD measure to the Star Ratings in
future rulemaking.

Some commenters did not support adding this measure to the Star Ratings, while others
supported the change. Several of the commenters were concerned about sufficient measure
exclusions to reduce unintended consequences, alignment with guidelines or policies, or impacts
to prescriber-patient decision making. A commenter suggested that risk adjustment may be
needed; however, the IOP-LD measure is a process measure and process measures generally are
not risk adjusted.41 We will take the feedback we received into consideration as we consider
adding this measure to the Star Ratings. Adding the IOP-LD measure to the Star Ratings must be
proposed and adopted through rulemaking.

Medication Adherence for Diabetes Medications/Medication Adherence for Hypertension

(RAS Antagonists)/Medication Adherence for Cholesterol (Statins)/ Statin Use in Persons
with Diabetes (SUPD)/ Medication Therapy Management (MTM) Program Completion
Rate for CMR (Part D). The Part D Star Ratings Medication Adherence, SUPD, and MTM
measures currently exclude beneficiaries in hospice during the measurement year. Additionally,
the Medication Adherence and SUPD measures exclude beneficiaries with an ESRD diagnosis or
dialysis coverage dates during the measurement year. We proposed to change the data source
used to identify beneficiaries who have elected to receive hospice care or with ESRD status
(using ESRD dialysis coverage dates that overlap with the measurement year), as applicable to
the measure specifications, from the Enrollment Database (EDB) to the Common Medicare
Environment (CME) beginning with the 2024 measurement year.

Accessing this information through the CME will improve data availability for the monthly
Patient Safety Reports for the Medication Adherence and SUPD measures. The CME database

39 Refer to CMS’ Part D display page.

40 Refer to the 2023 MUC list for the PRMR process.
41 Refer to Developing and Testing Risk Adjustment Models for Social and Functional Status-Related Risk Within HealthCare

Performance Measurement Final Technical Guidance – Phase 2 published December 21, 2022.
 146

includes Medicare beneficiary enrollment and demographic data. Furthermore, the CME
integrates different types of beneficiary data from CMS legacy systems; the CME database
receives information from the EDB and contains additional information not available in the
EDB.42,43 CMS did not anticipate any impact on measure calculations due to this update. Based
on our analysis, the CME and EDB data sources aligned very closely on measure exclusions.
This would be a non-substantive update under § 423.184(d)(1)(v) because it only updates the
data source.

Commenters supported updating the data source from the EDB to the CME to identify
beneficiaries in hospice and/or with ESRD status, and some commenters requested more
information on the impact to measure scores based on the change in data source. CMS recently
migrated the beneficiary database, including the EDB and the CME data, to the Amazon Web
Services (AWS Cloud). Equivalent EDB information to identify beneficiaries in hospice and
with ESRD status is available in the CME beneficiary tables from the Integrated Data Repository
(CME IDRC), sourced from the same upstream database. We tested the new process and
obtained information from CMS’ Office of Information Technology (OIT) to ensure an exact
match. We have not observed negative impacts to measure calculations with this change but will
continue to monitor. We will implement the data source change for the 2024 measurement year.

Members Choosing to Leave the Plan (Part C & D). A disenrollment as a result of a move out
of a contract’s service area is considered an involuntary disenrollment for this measure, meaning
it is excluded from the measure numerator. If a member has a disenrollment reason code (DRC)
92, the member is not included in the numerator for this measure since this code captures moves
out of the contract service area. In some cases, moves out of the service area are being recorded
in the CMS systems using codes other than DRC 92, and disenrollees are then excluded from the
numerator using contract service area data to identify where the new contract service area does
not overlap with the old contract service area. Currently, we identify these enrollees by
comparing the service area from the measurement year of the contract the enrollee is leaving
(‘old contract’) to the service area from the measurement year and the following year of the
contract into which the enrollee is enrolling (‘new contract’). CMS plans to adjust the years of
service area data used to identify beneficiaries leaving a contract due to a move out of the
contract service area to better reflect contract service area at the time of the disenrollment. For
disenrollments that occur at the end of the measurement year (December 31 of the measurement
year), we will use the service area for the year following the measurement year for both the old

42 Refer to CCW White Paper Master Beneficiary Summary File (MBSF): Impact of Enrollment Source Data Conversion From
EDB to CME.
43 Refer to SORN 09-70-0502.
 147

and new contracts. For disenrollments that occur before December 31 of the measurement year,
we will use the service area for the measurement year for the old and new contracts.

Applicable Integrated Plans, as defined at § 422.561, are D-SNPs with exclusively aligned
enrollment with a Medicaid managed care organization. Because states may, using the contracts
required by section 1859 of the Act and § 422.107, limit which MA organizations (and MA
contracts) may offer a D-SNP (including a D-SNP that integrates Medicare and Medicaid
coverage for the dually eligible enrollees), a beneficiary switching from an MA plan that is
misaligned with their Medicaid managed care coverage to another MA plan that aligns Medicare
and Medicaid plan enrollment is considered an involuntary disenrollment. CMS plans to exclude
any enrollment into a plan designated as an Applicable Integrated Plan (“new contract”) from the
measure numerator for the contract the enrollee is leaving (“old contract”). There are two
exceptions to this exclusion. If the plan in the old contract is also an Applicable Integrated Plan,
then the enrollment is not excluded from the numerator. Also, any switch between D-SNPs in
Florida is not excluded because all D-SNPs in Florida are directly capitated by the state for
Medicaid services and therefore already provide aligned Medicare and Medicaid coverage.

The move out of the service area measure update is non-substantive as described at §
422.164(d)(1)(ii) because it does not meaningfully impact the numerator of the measure.
Members that move out of a contract service area are already being removed from the numerator
of this measure. This change to more accurately identify members moving out of the contract
service area will only have a minor impact on the number of enrollees removed from the
numerator. The update to exclude movement into an Applicable Integrated Plan is also non-
substantive as it narrows the population covered by this measure as described at §
422.164(d)(1)(i).

All commenters that provided comments related to these updates were supportive. For the move
out of service area update, a couple commenters asked if the DRC would change in these cases.
No DRCs will be changed. Rather, CMS will use contract service area data as described above to
exclude these disenrollments from the numerator of this measure. Annually around mid-July in
an HPMS memo, CMS announces the availability of member level detail files for this measure
for contracts to request. In these detail files, CMS provides information on whether a
disenrollment met an exclusion criterion or was included in the numerator for the measure. These
updates will be implemented beginning with the 2026 Star Ratings.

Retirement of Star Ratings Measures

Care for Older Adults – Pain Assessment (Part C). NCQA is retiring this indicator, which is
part of the Care for Older Adults measure set, for the 2025 measurement year. The indicator is
being retired for the following reasons: 1) pain assessments should be multidimensional, and the
current indicator cannot ensure this, 2) the indicator does not differentiate between acute and
 148

chronic pain, and 3) the indicator does not assess follow up care, and the evidence suggests that
pain assessment alone does not improve quality of care. NCQA’s plans for any new measures
related to pain assessment are described in the Potential New Measure Concepts and
Methodological Enhancements for Future Years section below.

CMS finalized in the April 12, 2023, final rule, “Medicare Program; Contract Year 2024 Policy
and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit
Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly”44 at
§ 422.164(e)(1)(iii) a new rule starting with the 2024 measurement year and 2026 Star Ratings
that would allow CMS to remove a Star Ratings measure, without separate rulemaking, when a
measure steward such as NCQA retires a measure. In the Advance Notice, CMS announced the
removal of the Care for Older Adults – Pain Assessment measure in advance of the measurement
period, as required by § 422.164(e)(2), based on NCQA’s retirement of the measure. Most
commenters supported the retirement of this measure, while a few commenters wanted the
retirement to wait until a new measure was available. We shared these comments with NCQA;
however, we note that NCQA has finalized the retirement of this measure for the 2025
measurement year. Thus, this measure will be removed from the program starting with the 2027
Star Ratings.

Display Measures

Display measures on CMS.gov are published separately from the Star Ratings and include
measures that are transitioned from inclusion in the Star Ratings, new or updated measures
before inclusion into the Star Ratings, and informational-only measures. Organizations and
sponsors have the opportunity to preview the data for their display measures prior to release on
CMS.gov. We anticipate all 2024 display measures will continue to be shown on CMS.gov in
2025 unless noted below.

Follow-Up After Hospitalization for Mental Illness (Part C). NCQA is reevaluating this
measure for measurement year 2025 for continued relevance and alignment with the measure’s
intent, as well as its alignment with the larger suite of HEDIS behavioral health care continuity
measures. NCQA is considering expanding both the measure’s population and options for
follow-up. Regarding the expansion of the measure’s population, NCQA is reviewing additional
mental health-related diagnosis codes for inclusion in the denominator (i.e., anxiety disorders,
phobia disorders, and additional intentional self-harm codes). NCQA is also considering
allowance of acute psychiatric events coded for intentional self-harm in any diagnosis position
on the discharge claim (i.e., rather than the principal position only). Regarding the expansion of

44Refer to the Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly
Final Rule.
 149

follow-up options, NCQA is exploring the possibility of allowing follow-up services by any care
provider if coded for a mental health diagnosis in any position on the claim. NCQA also plans to
assess the inclusion of additional types of services for follow-up (e.g., peer support services,
occupational therapy for mental health). NCQA is in the process of testing the impact of these
revisions and obtaining input from their advisory panels. Most commenters supported NCQA’s
work to update this measure, while a couple of commenters did not support expanding the
denominator to include events with secondary diagnoses. We have shared the feedback we
received on these potential updates with NCQA for their consideration.

Social Need Screening and Intervention (Part C). In the 2023 and 2024 Rate Announcements,
we discussed the Social Need Screening and Intervention measure developed by NCQA as a
potential future Star Ratings measure pending rulemaking. This measure is part of the Universal
Foundation and our efforts to align measures across programs. Currently, a submission is
underway to CMS’ 2024 Pre-Rulemaking Measure Review process. We are adding this measure
to the display page for the 2025 Star Ratings. NCQA also explored the addition of a utilities
insecurity screening rate and intervention rate to the Social Need Screening and Intervention
measure for measurement year 2026. The utilities insecurity screening rate would assess the
percentage of members who had a screening for unmet utility needs. The intervention rate would
assess the percentage of members who received a corresponding intervention within 30 days of
screening positive for an unmet utility need. NCQA conducted qualitative feasibility testing with
select health plans in 2023 to determine the ability to include this domain for reporting by
Medicare health plans in the future. Testing revealed collecting utility insecurity data is possible,
but challenges exist, specifically around data standardization and interoperability of data from
multiple sources. Based on findings from testing and external stakeholder feedback, NCQA is
pausing additional domain development until first year analysis of the current measure is
completed in Summer 2024 to better inform the feasibility of adding domains. Some commenters
were fully supportive of adding utility insecurity data to the Social Need Screening and
Intervention measure, while others recommended further enhancements such as triple weighting
this measure, including an interpersonal violence/safety domain, and improving the alignment
between the use of Logical Observation Identifiers Names and Codes (LOINC), z-codes, and
Current Procedural Terminology (CPT) codes. Other commenters raised concerns about the
collection and reporting of social needs screening and intervention data due to burdens on
providers, resource constraints, and the lack of standardized processes and tools. We have shared
the feedback we received with NCQA for their consideration.

Adult Immunization Status (Part C). The Adult Immunization Status measure focuses on the
percentage of members 19 years of age and older who are up to date on recommended routine
vaccines for influenza; tetanus and diphtheria (Td) or tetanus, diphtheria, and acellular pertussis
(Tdap); zoster; and pneumococcal. NCQA is planning to lower the denominator age from 66 to
 150

65 years for measurement year 2025 for the pneumococcal indicator. When the pneumococcal
indicator was initially developed, NCQA aligned it with ACIP guidelines in place at the time that
recommended administration of multiple doses of the 13-valent pneumococcal conjugate vaccine
(PCV13) and/or 23-valent pneumococcal polysaccharide vaccine (PPSV23) vaccine at least 12
months apart starting at age 65. Because of the need for at least two vaccines, NCQA set the
lower age range in the denominator to 66 to allow time for those who may get their first dose at
age 65 and their second dose after age 66. After ACIP updated their pneumococcal vaccine
recommendations in 202345 to account for new vaccine types, NCQA updated the indicator for
measurement year 2023 to align to these guidelines and assess receipt of at least one dose of any
pneumococcal vaccine. Since the indicator only looks for one vaccine dose given the updated
recommendations, NCQA is updating the lower age range for the denominator to age 65 years
starting with the 2025 measurement year and 2027 Star Ratings display page.

NCQA is also planning to remove the option for receiving a herpes zoster live vaccination from
the zoster indicator starting with measurement year 2025. The live zoster vaccine is no longer
available for use in the United States, and ACIP recommends that adults who previously
received the live zoster vaccine be re-vaccinated with the newer recombinant vaccine.

NCQA is also developing a new indicator for the Adult Immunization Status measure that would
assess Hepatitis B vaccination for adults ages 19-59 for HEDIS measurement year 2025 based on
updated recommendations from ACIP.46

Most commenters supported the proposed changes to the Adult Immunization Status measure,
but support for the measure overall was mixed. Some commenters expressed concerns about
patient refusals and accuracy and availability of vaccine data, while other commenters strongly
supported this measure given the role vaccines play in preventative health. We have shared the
feedback we received with NCQA for their consideration.

Polypharmacy: Use of Anticholinergic Medications in Older Adults (Poly-ACH) (Part D).

The PQA updated the Poly-ACH measure specifications in the 2024 Measure Manual to align
with the American Geriatric Society 2023 Updated Beers Criteria for Potentially Inappropriate
Medication Use in Older Adults.47 The updated Beers Criteria identified 14 medications for
removal due to low usage or medication unavailability in the United States. The following
medications identified for removal are: carbinoxamine, clemastine, dexchlorpheniramine,
protriptyline, trimipramine, loxapine, thioridazine, trifluoperazine, disopyramide,

45 Refer to CDC’s Pneumococcal Vaccine for Adults Aged ≥19 Years: Recommendations of the Advisory Committee on
Immunization Practices, United States, 2023.
46 Refer to CDC’s Universal Hepatitis B Vaccination in Adults Aged 19–59 Years: Updated Recommendations of the Advisory

Committee on Immunization Practices - United States, 2022.

47 Refer to American Geriatrics Society 2023 updated AGS Beers Criteria® for potentially inappropriate medication use in older

Adults.
 151

methoscopolamine, dexbrompheniramine, pyrilamine, belladonna alkaloids, and propantheline.

PQA defined low utilization as less than 4,000 United States Medicare beneficiaries 65 years or
older receiving the medication in 2020 based on data from Medicare Part D Public Use Files.
Less than 4,000 beneficiaries are approximately less than 0.01 percent of the Medicare
population. CMS will align with the Beers Criteria and the PQA’s updated measure
specifications to remove the 14 medications from the Poly-ACH measure for the 2024
measurement year (2026 display page).

All commenters were supportive of this measure specification update to align with the Beers
Criteria. These medications will be removed from the Poly-ACH measure for the 2024
measurement year (2026 display page).

Polypharmacy: Use of Multiple CNS-Active Medications in Older Adults (Poly-CNS) /

Poly-ACH (Part D). Per the PQA’s 2024 Measure Manual updates, the index prescription start
date (IPSD) will be removed from the measure specifications for both Polypharmacy measures.
The intent of the IPSD in the polypharmacy specifications, which required the earliest date of
service for a target medication to occur 30 or more days from the last day of the measurement
year, was to limit and define the eligible population for the Polypharmacy measures to
beneficiaries who can potentially meet the numerator criteria. For example, if the first target
prescription claim is not filled by early December, there are less than 30 days left in the
measurement year to qualify for concurrent therapy use for the numerator.

To more precisely capture this concept, the PQA revised the measure specification to apply to
instances of 2 or more prescription claims for the same target medication on different dates of
service when determining if the earliest date of service for any target medication is 30 or more
days from the last day of the measurement year. CMS will align with these PQA’s measure
clarifications for the 2024 measurement year (2026 display page) and does not anticipate these
clarifications to impact the measure.

Commenters were supportive of this measure specification update to align with the PQA
measure specifications. We will remove the IPSD from both Polypharmacy measures beginning
with the 2024 measurement year (2026 display page).

Use of Opioids at High Dosage in Persons Without Cancer (OHD) / Use of Opioids from
Multiple Providers in Persons Without Cancer (OMP) / Concurrent Use of Opioids and
Benzodiazepines (COB) / Initial Opioid Prescribing for Long Duration (IOP-LD) (Part D).
The PQA is testing an update to exclude beneficiaries more broadly with cancer-related pain
treatment from these opioid-related measures for measurement year 2025 at the earliest. The
revised exclusion would align with the updated 2022 Centers for Disease Control and Prevention
 152

(CDC) Clinical Practice Guideline for Prescribing Opioids for Pain.48 We will also consider
applying the updated measure specifications if implemented by the PQA.

Commenters were supportive of this potential measure specification revision to align with the
updated 2022 CDC Guideline. Therefore, if the PQA updates the measure specifications for
these opioid-related measures to exclude beneficiaries with cancer-related pain treatment, CMS
will also implement the change for measurement year 2025 (2027 display page) at the earliest.

Medication Adherence for HIV/AIDS (Antiretrovirals) (ADH-ARV)/Antipsychotic Use in

Persons with Dementia, Overall (APD)/Antipsychotic Use in Persons with Dementia, in
Long-Term Nursing Home Residents (APD-LTNH)/Use of Opioids at High Dosage in
Persons without Cancer (OHD)/Use of Opioids from Multiple Providers in Persons without
Cancer (OMP)/Initial Opioid Prescribing -Long Duration (IOP-LD) (Part D). As referenced
in the CY 2024 Rate Announcement,49 CMS will align with the PQA measure specifications to
use continuous enrollment (CE) and no longer adjust for member-years (MYs). We received
support from commenters in response to the 2024 Advance Notice for this specification change
to align with the PQA but noted that we would provide more information when the timeline for
these measure changes is finalized. We will apply this change for the 2025 measurement year.

Commenters were supportive of CMS aligning with the PQA measure specifications by
implementing CE and no longer adjusting for MYs. Commenters appreciated that CMS provided
an anticipated timeline for transitioning the remainder of the Part D Patient Safety measures from
MYs to CE. We plan to implement CE for these Part D Patient Safety measures in measurement
year 2025 (2027 display page).

Poly-CNS / Poly-ACH / COB / OHD / OMP (Part D). In the CY 2024 Rate Announcement,
we announced that CMS will align with the PQA measure specifications to use CE for these
display measures and no longer adjust for MYs for the 2024 measurement period. In the draft
2024 PQA Measure Manual, which the PQA shared with CMS noting anticipated changes to
measures, the PQA noted the removal of the anchor date specifications from these measures,
pending approval through the PQA’s consensus-based measure maintenance process. Previously,
the anchor date required an individual to be enrolled and to have a benefit on a specific date.
Additionally, the allowable gap must not have included that date specified in the measure as the
anchor date. The PQA’s Measure Update Panel voted in support of removing the anchor date.
When the CY 2025 Advance Notice was published, we anticipated that the PQA Quality Metrics
Expert Panel (QMEP) would vote on the removal of the anchor date in early 2024 and stated that
if the QMEP votes in support of removing the anchor date, effective measurement year 2024,
then CMS would also not implement the anchor date to the applicable measures. Therefore,

48 Refer to CDC Clinical Practice Guideline for Prescribing Opioids for Pain – United States, 2022.
49 Refer to CMS’ CY 2024 Rate Announcement.
 153

when CMS implements the CE methodology for these measures beginning with the 2024
measurement year, the anchor date specification would be removed.

Subsequent to the release of the CY 2025 Advance Notice, the PQA QMEP voted in support to
remove the anchor date from these measures, effective for measurement year 2024 and included
the change in the 2024 PQA Measure Manual. We received very few comments on this measure
specification update; however, the comments we received were supportive of the removal of the
anchor date. CMS will remove the anchor date when we implement the CE methodology for
these measures beginning with the 2024 measurement year (2026 display page).

OHD/ OMP/Persistence to Basal Insulin (PST-INS)/ADH-ARV/COB/IOP-LD/Poly-

CNS/Poly-ACH (Part D). As mentioned earlier in connection with the Star Ratings Medication
Adherence, SUPD, and MTM measures, we also proposed to remove the EDB as a data source
for these display measures to identify beneficiaries who have elected to receive hospice care
and/or with ESRD status (if applicable to the measure specifications) and instead use the CME
beginning with the 2024 measurement year.

Commenters were supportive of updating the data source from the EDB to the CME to identify
beneficiaries in hospice and/or with ESRD status. We will implement this change for the 2024
measurement year.

Retirement of Display Measures

Antidepressant Medication Management (Part C). NCQA will be retiring this measure
starting with the 2024 measurement year because it only addresses one aspect of depression
treatment (adherence to antidepressants), and other HEDIS depression measures more
comprehensively assess monitoring and outcomes for individuals with depression. Consequently,
CMS will be removing this measure from the 2026 display page. As announced in the 2024 Rate
Announcement, we will be adding the Depression Screening and Follow-Up for Adolescents and
Adults measure to the 2026 display page. All commenters supported the removal of the
Antidepressant Medication Management measure from the 2026 display page.

Use of Opioids from Multiple Providers in Persons Without Cancer (OMP) (Part D). The
PQA may retire the OMP measure due to the very low measure rates, resulting in minimal
opportunity for measure improvement. Additionally, due to the narrow range of the measure
rates, the measure does not effectively discern good versus poor performance. The PQA Measure
Update Panel and QMEP voted in favor of retirement consideration. If the PQA membership
votes in favor of retirement in 2024, CMS will retire the OMP measure from the 2027 display
page (2025 measurement year). We anticipate that the PQA membership vote will occur
sometime in 2024.
 154

All commenters were supportive of retiring the OMP measure from the display page. Therefore,
if the PQA membership votes in favor of retiring the OMP measure in 2024, CMS will also retire
the OMP measure from the 2025 measurement year (2027 display page) to align with the PQA,
the measure steward of the OMP measure.

Potential New Measure Concepts and Methodological Enhancements for Future Years

CMS’ process for adding any new measures to the Star Ratings system includes developing and
testing new measures, soliciting feedback on potential new measures, submitting the measures
for approval under the PRMR process, and undertaking notice and comment rulemaking to
propose and finalize new measures. CMS solicited comments on new measure concepts and
methodological changes to inform future changes to the Star Ratings, as described in §§
422.164(c) and 423.184(c).

Health Outcomes Survey (Part C). CMS continues to explore ways to enhance and refine
existing Health Outcomes Survey (HOS) measures, develop new and methodologically simpler
cross-sectional and longitudinal measures, expand measurement of physical functioning and
mental health, and measure and address health equity. CMS is currently seeking OMB approval
to conduct a field test to evaluate the measurement properties of potential new survey items, the
effects of revised survey content, and the addition of a web-based survey mode to the existing
mixed mode protocol (mail with telephone follow up for mail non-respondents). The results from
the field test will be used to inform decisions on potential changes to HOS content, as well as
survey administration procedures. Potential new measures derived from new HOS items will go
through the PRMR process before potentially being proposed through future rulemaking for
addition to the Star Ratings.

The new survey content to be tested includes the following three key items:

(1) Patient-Reported Outcomes Measurement Information System (PROMIS) Physical

Function Items: The survey questions, taken from the PROMIS Physical Function
and Mobility v2.0 item banks,50,51 evaluate a wider range of functional impairment
among MA enrollees than existing HOS items and may potentially enhance the
Physical Functioning Activities of Daily Living (PFADL) measure.

(2) Generalized Anxiety Disorder 2 (GAD-2) Items: The GAD-2 scale52 measures

50 HealthMeasures, “Search & View Measures.” Accessed on March 10, 2023.

51 Schalet, B.D., Hays, R.D., Jensen, S.E., Beaumont, J.L., Fries, J.F., & Cella, D. (2016). Validity of PROMIS® Physical
Function Measures in Diverse Clinical Samples. Journal of Clinical Epidemiology, 73, 112-118.
52 Wild, B., Eckl, A., Herzog, W., Niehoff, D., Lechner, S., Maatouk, I., ... & Löwe, B. (2014). Assessing generalized anxiety
disorder in elderly people using the GAD-7 and GAD-2 scales: results of a validation study. The American journal of geriatric
psychiatry, 22(10), 1029-1038.
 155

anxiety, a significant mental health concern among both older adults53 and MA
enrollees with disabilities.54 These anxiety measures offer a broader assessment of
mental health than the existing HOS items that measure depression alone.

(3) Health-Related Social Needs (HRSN) Items: These survey questions were developed
by CMS to assess ongoing unmet social needs related to social determinants of
health, such as transportation availability, food insecurity, and housing instability.
The questions differ from the CMS-approved screening questions for MA SNP
health risk assessments that focus on identifying beneficiaries in need, in that the
HOS questions are intended to assess whether plans are addressing beneficiary
needs, and whether there are ongoing unmet needs. The proposed HOS items are
focused on all MA enrollees, and whether the plan or provider’s office asked
enrollees about their needs, whether help was received if needed, and whether the
enrollees have an ongoing unmet need. These questions underscore CMS’
commitment to measuring and addressing the needs of people with Medicare and are
intended to complement the new HEDIS Social Need Screening and Intervention
(SNS-E) measure that assesses both screening for unmet food, housing, and
transportation needs and referral to intervention for those who screen positive by
providing additional data on ongoing unmet needs related to housing instability, food
insecurity, and transportation availability in the MA population.

During the proposed field test, select existing HOS questions will be replaced with new content
in the questionnaires. All questions removed in the field test were done so based on evidence and
relevance. For example, several survey items were removed from the field test survey that do not
have a significant impact on case-mix adjustment. These include whether the survey was
completed by a proxy, type of cancer the respondent had, and whether the respondent lives alone.
Testing of the new, revised, and existing HOS content will provide information needed to
develop a shorter and more effective updated HOS instrument. Going forward, analysis of
quantitative data collected from the field test will determine which questions will be
recommended for future inclusion in the HOS.

Most commenters appreciated CMS’ efforts to refine and update HOS, test the addition of web to
the mixed-mode methodology for survey administration, and add new measures related to
functional status, mental health, and health-related social needs. However, some commenters
noted overlap and redundancy with other measures (e.g., PROMIS Physical Function and
Functional Status Assessment Follow-up; GAD-2 and Depression Screening and Follow-Up; and

53 Koma, W., True, S., Fuglesten Biniek, J., Cubanski, J., Orgera, K., & Garfield, R. (2020). One in four older adults report
anxiety or depression amid the COVID-19 pandemic. KFF-Medicare. Accessed on March 15, 2023.
54 Friedman, C. (2022). The mental health of Medicare beneficiaries with disabilities during the COVID-19
pandemic. Rehabilitation Psychology, 67(1), 20.
 156

HRSN and SNS-E) and questioned whether the HOS is the appropriate vehicle to capture such
data. They cited the length of the survey, reliability concerns due to small sample sizes and low
response rates, and a lack of actionable member-level data for timely follow up with members
who are struggling. A few commenters requested CMS assess the impact of new questions and
survey procedures and provide a comprehensive analysis for public review and input following
the field test.

CMS acknowledges similarities between the PROMIS, GAD-2, and HRSN items being field
tested and new measures under development that focus on screening and follow-up for ECDS
reporting. However, the intent of the proposed HOS questions is to gather patient-reported
information. For example, the proposed HRSN items are not intended to replace the annual
Health Risk Assessments (HRAs) conducted by plans or the SNS-E measure. Rather, the HOS
items are intended to complement the electronic reporting of the SNS-E measure that assesses
screening for unmet food, housing, and transportation needs and intervention referral if needed,
by providing additional patient-reported data on ongoing unmet needs in the MA population to
measure overall plan performance in addressing enrollees’ social needs.

HOS quality measures used for Part C and D Star Ratings are not designed to identify the needs
of individual enrollees for follow-up, but rather to measure plan performance across contracts for
accountability. The purpose of blind data is to support objective, comparable assessment of plan
performance. Comprehensive quality improvement approaches go beyond using HOS data to
address concerns in specific enrollees and instead use the information to devise approaches that
improve health outcomes for all members. HOS data may point to issues that plans need to
explore more carefully, but the results should not substitute for information plans should be
collecting and monitoring for quality improvement. We encourage plans to use their aggregated
Baseline results to identify contract-level priorities and their two-year Follow-Up results to track
progress and improvement. Clinical data, including HRAs, are better used to screen for and
address patient-level needs as part of an ongoing quality improvement process.

Finally, recent enhancements to the HOS intended to improve reliability include increasing the
minimum denominator from 30 to 100 and changes in the case-mix methodology. Oversampling
is available to plans that have sufficient enrollment. CMS remains committed to transparency
and will share field test results when they are available.

Blood Pressure Control for Patients with Hypertension (Part C). NCQA is exploring the
development of a new blood pressure control measure that utilizes the capabilities of digital
quality measures and leverages standardized electronic clinical data. The current Controlling
High Blood Pressure measure from HEDIS assesses the percentage of members 18-85 years of
age with hypertension whose blood pressure was adequately controlled (<140/90 mmHg).
NCQA tested this new measure which expands upon the current denominator method by
 157

including members with at least one claims-based diagnosis and at least one dispensed anti-
hypertensive medication. Additionally, NCQA tested a lower evidence-based blood pressure
control threshold (<130/80 mmHg). The proposed new measure leverages structured electronic
clinical data for assessing the last reading in the measurement period using two separate rates of
control: <140/90 mmHg and <130/80 mmHg. The new measure concept is being proposed for
HEDIS for measurement year 2025. If a new HEDIS measure is introduced, CMS would
consider adding it to the Star Ratings as a replacement for the existing Controlling Blood
Pressure measure pending rulemaking.

Commenters raised a number of potential challenges with the proposed new measure, including
lowering the threshold which could increase fall risk, dehydration, and overprescribing of
hypertensive medications. Other commenters were concerned that the last reading may be
unreliable or an outlier reading. There was mixed support for electronic data collection, and
some commenters recommend keeping the existing blood pressure thresholds or considering
exclusions. We shared the feedback we received with NCQA for their consideration as they
continue to explore this new measure.

Breast Cancer Screening Follow-Up (Part C). NCQA is developing two new measures for
HEDIS measurement year 2025 that expand the current Breast Cancer Screening measure to
assess documentation and follow-up of abnormal mammogram results: Document Breast
Imaging Reporting and Data System (BI-RADS) Assessment After Mammogram and Follow-up
After Abnormal Breast Cancer Assessment. These measures would use the HEDIS Electronic
Clinical Data Systems (ECDS) reporting method. Field testing results indicated challenges for
health plans in reporting the measures, including lack of mature electronic health record data
feeds to access necessary clinical data and inconsistent capture of data in structured fields.
Despite these challenges, NCQA panels highlighted the importance of the measures and
suggested that including the measures in HEDIS and other programs would incentivize plans to
capture and exchange data needed to report the measures and drive increased quality of care.
Most commenters supported the development of a new measure to assess documentation and
follow-up of abnormal mammogram results, but several commenters asked for additional
information about the potential new measure. Some commenters expressed concern about ECDS
reporting, the feasibility of accessing clinical data in electronic health records, and under coding.
We have shared this feedback with NCQA as they continue to work on developing measures in
this area.

Social Connection Screening and Intervention (Part C). NCQA explored development of a
new measure for measurement year 2026 or beyond that would assess the percentage of members
aged 65 and older who were screened, using prespecified instruments, at least once during the
measurement year for social isolation, loneliness, or inadequate social support and received a
corresponding intervention if they screened positive. The proposed measure would have two
 158

indicators, one for social connection screening and one for social connection intervention. This
measure would be reported using electronic clinical data, including data from electronic health
records, registries, case management systems, and administrative claims. This measure was
brought to NCQA’s Committee on Performance Measurement (CPM) for consideration for
public comment in January 2024. Although the CPM agreed this was an important concept, the
measure was not approved for public comment due to concerns around lack of evidence-based
interventions, feasibility of data, and provider burden. NCQA has paused measure development
work related to the concept until first year analysis of the SNS-E is conducted in the summer of
2024. NCQA will explore alternative avenues to contribute to the research related to this
concept. Commenters had mixed reaction to this measurement concept, with some commenters
raising challenges related to lack of appropriate coding and monitoring mechanisms. We have
shared this feedback with NCQA for their consideration.

Chronic Pain Assessment and Follow-Up (Part C). NCQA explored development of a new
measure that would assess chronic pain and follow-up in Medicare members aged 65 and older.
The measure would assess the percentage of members screened for pain, percentage of members
who screened positive for pain who had a documented comprehensive assessment, and
percentage of members with pain who had follow-up. This measure would be reported using
electronic clinical data, including data from electronic health records, registries, case
management systems, and administrative claims. Measure testing identified significant
challenges, including lack of mature electronic health record data feeds to access the necessary
clinical data; inconsistent capture of data in structured fields mapped to standard terminology;
inconsistent use of standardized, validated screening and assessment tools; and lack of use of
comprehensive assessment tools in clinical care. NCQA’s Committee on Performance
Measurement did not approve moving the measure forward at this time due to reporting
feasibility concerns as well as concerns with the measure concept and potential unintended
consequences. NCQA has paused further measure development work at this time and will
continue to monitor guidelines, evidence, and data availability to inform any potential future
measures of chronic pain assessment. Commenters expressed mixed reaction to this
measurement concept, including raising challenges around encouraging overprescribing of
opioids, issues with electronic data collection, and whether the measure should include all MA
enrollees. We have shared this feedback with NCQA for their consideration.

Tobacco Use Screening and Cessation Intervention and Lung Cancer Screening (Part C).
NCQA is exploring the development of two new measures related to tobacco use screening and
lung cancer screening. One measure is looking to assess whether adolescents and adults received
a screening for current tobacco use and were provided with cessation strategies if currently using
tobacco. The second measure is looking to assess whether individuals who meet screening
criteria received an annual screening for lung cancer. The measure will target adults aged 50-80
 159

who are current or former smokers. Both measures under development are being developed for
the ECDS reporting method. These new HEDIS measures would be available to use no earlier
than measurement year 2026. CMS is considering proposing these measures as Star Ratings
measures in the future through rulemaking. Most commenters supported these measurement
concepts, with some commenters noting how critical it is to detect lung cancer early. Some
commenters wanted more information about the potential measures, including how the
denominator for the lung cancer screening measure would be identified and which patients
would be excluded from both measures. Other commenters made various suggestions such as
including vaping, considering how the cost of scans impact the measure, and listing the accepted
cessation strategies as part of the measure specifications. We have shared this feedback with
NCQA as they continue their measure development efforts.

Functional Status Assessment Follow-Up (Part C). NCQA is exploring the development of a
new measure to assess follow-up after a Functional Status Assessment. The new measure would
focus on the follow-up and be specified for ECDS reporting. Any potential new measure is
currently planned for implementation in measurement year 2026 at the earliest. Most
commenters supported this effort, but asked for additional information such as whether this
measure would be targeted at a specific population such as SNPs or the general population. We
have shared this feedback with NCQA as they continue their measure development efforts.

Medicare Plan Finder Drug Pricing Measure (Part D). We are considering a new measure to
evaluate the accuracy of sponsors’ pricing data displayed on the Medicare Plan Finder (MPF)
tool. Beneficiaries depend on the display of accurate data on MPF to compare their plan options.
CMS currently has an MPF Price Accuracy measure as a part of the Part C and D Star Ratings.55
This measure is calculated by comparing the MPF price to the Prescription Drug Event (PDE)
price and determining the magnitude and frequency of differences found when the PDE price
exceeds the MPF price. Additionally, there is a display measure that follows similar
methodology, but that measure flags cases when the MPF price exceeds the PDE price.

One limitation of the current measures is that only MPF and PDE data from January 1-
September 30 of a plan year are evaluated. Every October 1st, the MPF tool shifts to support the
Medicare Annual Enrollment Period (AEP) by highlighting sponsors’ projected health and drug
costs for the following plan year. (Costs for the current plan year are no longer updated;
therefore, we cannot fairly compare PDEs filled after September 30th.) It is important for
Medicare beneficiaries to have reliable price comparisons to base their plan selections on for the
upcoming year.

55 Refer to the Star Ratings Technical Notes.

 160

We are concerned that some plans may be submitting artificially high or low prices to display on
the MPF during AEP. Plans may be submitting MPF pricing data that are lower during AEP than
prices during the plan year to encourage beneficiaries to sign up for their plan, or conversely,
plans may be submitting MPF pricing data that is higher during AEP than prices during the plan
year to discourage certain beneficiaries from signing up for the plan.

We are interested in developing a new measure that would assess whether Part D sponsors are
engaging in these pricing tactics by evaluating whether plans are substantially increasing or
decreasing the MPF prices for drugs following AEP. Once developed, and before the
measurement period, we would announce in a future Advance Notice when we would add the
measure to the display page along with more specific details on the specifications. Public
reporting of this information would provide transparency and highlight any contract-level
outliers. After monitoring contracts’ performance on this measure for at least two years, we may
consider proposing to add it to the Star Ratings through rulemaking as a companion measure to
the current MPF Price Accuracy measure.

We sought initial comment on this general measure concept. CMS also solicited feedback on the
following:

• During each biweekly MPF submission, a plan sponsor can submit different unit costs for
a particular drug (specific to the contract/plan/segment/pharmacy/ pharmacy service
type/days of supply combination56). How should CMS calculate a plan sponsor’s MPF
prices during AEP for the purpose of comparing to prices during the plan year? We have
considered the following possibilities:
o As an average of prices displayed from October through December
o As a weighted average of prices displayed from October through December, with
greater weight given to data displayed during MPF’s higher web-traffic weeks
• When comparing a drug’s price between AEP and the plan year, should pricing data be
aggregated to a single price for a drug prior to comparison? As described previously, a
plan sponsor can submit different MPF unit costs for a given drug at a retail pharmacy,
versus a mail order pharmacy.
• Is it more important that AEP prices are stable (as in, relative to a sponsor’s prices
displayed on MPF during the plan year) or reliable (as in, compared to a sponsor’s PDEs
during the plan year)?
o If the former - Should we compare a sponsor’s MPF prices throughout the plan
year as a rolling average, quarterly snapshot, or by each biweekly posting period?
o If the latter – Should we compare sponsors’ PDE data averaged across the plan
year? Or alternatively, similar to how we currently calculate the MPF accuracy

56 Refer to the 2024 Pricing Data Guidelines.

 161

measure, we could assign an AEP MPF price to each PDE throughout the plan
year and then calculate the magnitude and frequency of differences.
• To account for industry-wide price changes, could CMS:
o Compare plans’ price changes to changes in wholesale acquisition cost (WAC),
average wholesale price (AWP), and/or average unit price changes across plan
sponsors? For example, if a price difference was found between AEP and the plan
year, should the difference only be counted if it exceeds the change in WAC over
the same time period?
o Utilize a methodology to identify outlier contracts, instead of defining allowed
thresholds for price changes?
• Should CMS calculate plan price changes using percent or a dollar value? CMS currently
calculates the MPF accuracy measure using a two cent ($0.02) threshold.57
• Should CMS continue to separately evaluate MPF price increases and decreases, like the
current MPF Price Accuracy measures used for Star Rating and display measures?

Additionally, we recognize that this new measure concept is similar to the MPF - Stability
display measure, which evaluates the stability in a plan’s point of sale prices by comparing
quarter to quarter PDE prices. We hope in the future to measure price stability in the MPF tool in
a more nuanced way. As we work to refine the new measure concept, we plan on retiring the
MPF - Stability display measure.

CMS received mixed support from commenters on the general measure concept. Supporters
agreed that it is important for Medicare beneficiaries to have accurate data on MPF to compare
their plan options for the upcoming year and for CMS to identify plans displaying inaccurate
pricing during AEP. Those opposed cited market fluctuations may result in volatility of some
drug prices outside of plan control or expressed concerns that the current MPF Price Accuracy
measure specifications would also negatively impact this proposed measure. Some commenters
suggested that this type of plan behavior would be best addressed through CMS audits and
compliance actions. Several commenters provided information on the specific questions posed.
We appreciate the comments we received as we consider future development of MPF pricing
data analyses and performance measures. CMS would provide additional information and more
detailed specifications to support any proposal for a new display measure in a future Advance
Notice. A measure would go through the PRMR process before potentially being proposed
through future rulemaking for addition to the Star Ratings.

57 Refer to the Star Ratings Technical Notes.

 162

Attachment VII. Economic Information for the CY 2025 Rate Announcement

Below, we provide the economic information for significant provisions in the Rate
Announcement. Provisions not specifically addressed below are intended to represent a
continuation of the policies established for CY 2024 and, as a result, do not have an impact
associated with them.

Section A. Changes in the Payment Methodology for Medicare Advantage and PACE for
CY 2025

A1. Medicare Advantage and PACE non-ESRD Ratebook

The FFS growth percentage for the 2025 MA non-ESRD rates is estimated to be 2.33 percent,
and the MA growth percentage for the 2025 MA non-ESRD rates is estimated to be 2.31 percent.
The MA non-ESRD ratebook impact summarized here is calculated by comparing 2025 Part C
expenditures reflecting these growth rate assumptions to the expected 2025 Part C expenditures
assuming the MA non-ESRD ratebook remains unchanged from that finalized for 2024. The net
impact on the Medicare Trust Funds for CY 2025 is expected to be $8.8 billion. This figure
accounts for the impact of the benchmark rate cap, MA rebate, and MA EGWP policies, as well
as the portion of the difference between benchmarks and bids that the government retains, and
the portion of the program costs covered by Part B premiums.

The MA growth percentage, used to calculate the 2025 PACE non-ESRD rates as well as in
development of the applicable amount used in setting MA non-ESRD rates, is estimated to be
2.31 percent. The PACE non-ESRD ratebook impact is calculated by comparing the 2025 PACE
expenditures reflecting this growth rate assumption to the expected 2025 PACE expenditures
assuming that the PACE non-ESRD ratebook remains unchanged from the CY 2024 PACE non-
ESRD ratebook. The net impact on the Medicare Trust Funds for CY 2025 for the PACE
ratebook change is expected to be $60 million. This figure accounts for the portion of the
program costs covered by Part B premiums.

The net impact on the Medicare Trust Funds for CY 2025 of implementing the zero-claims
adjustment in Puerto Rico is expected to be $260 million.

A2. Medicare Advantage and PACE ESRD Ratebooks

The FFS growth percentage for the 2025 MA ESRD rates is estimated to be 1.76 percent. The
impact on the MA and PACE ESRD ratebooks is calculated by comparing projected 2025 Part C
expenditures with this growth rate assumption to the expected 2025 Part C expenditures with the
assumption that the MA and PACE ESRD ratebooks would have been unchanged from those
finalized for 2024. The net impact on the Medicare Trust Funds for CY 2025 is expected to be
 163

$550 million. This figure accounts for the portion of the program costs covered by Part B
premiums.

A3. CMS-HCC Risk Adjustment Model

For CY 2025 CMS is calculating risk scores for Non-PACE Part C organizations as a blend of 33
percent of the 2020 CMS-HCC risk adjustment model and 67 percent of the 2024 CMS-HCC
model. The CY 2025 impact on MA risk scores of the blended Part C CMS-HCC models,
relative to the blend in CY 2024, is projected to be -2.45 percent, which represents a $9.2 billion
net savings to the Medicare Trust fund in 2025. The 2020 CMS-HCC model (2015 denominator)
and the 2024 CMS-HCC model (2020 denominator) have different denominator years (i.e.,
number of years of risk score trend). Therefore, risk scores under the models are not comparable
when determining impacts due to the different number of years of risk score trend. In order to
isolate the impact of the model updates, the risk scores being compared were each appropriately
normalized to remove the impact of FFS risk score trend. When estimating the impact of the
proposed model, the impact takes into account the portion of the difference between benchmarks
and bids that the government retains, and the portion of the program costs covered by Part B
premiums.

A4. ESRD Risk Adjustment Model

For CY 2025, CMS is continuing the use of the ESRD risk adjustment models implemented in
CY 2024. Therefore, no economic impact is applicable.

A5. Frailty Adjustment for FIDE SNPs

For CY 2025, CMS is calculating frailty scores for FIDE SNPs as a blend of 33 percent of the
frailty score calculated with the 2020 CMS-HCC model frailty factors and 67 percent of the
frailty score calculated with the 2024 CMS-HCC model frailty factors, consistent with the blend
that is being proposed for the Part C risk adjustment model. Additionally, CMS is using only the
full Medicaid frailty factors to calculate FIDE SNP frailty scores for FIDE SNP enrollees to
align with the requirement that FIDE SNPs must have exclusively aligned enrollment, meaning
that enrollment in FIDE SNPs will be limited to full-benefit dually eligible individuals,
beginning in 2025. The CY 2025 impact of transitioning to frailty scores calculated using the 33
percent/67 percent blend, and using full Medicaid frailty factors only, relative to CY 2024, is a
change in frailty scores of 1.9 percent, which represents a net cost of less than $10 million
dollars to the Medicare Trust Funds in 2025. This impact takes into account the portion of the
difference between benchmarks and bids that the government retains, and the portion of the
program costs covered by Part B premiums.
 164

A6. MA Coding Pattern Difference Adjustment

For CY 2025, we will continue to apply the statutory minimum coding pattern difference
adjustment (5.90 percent). There is no change in policy from CY 2024, and we applied the same
factor for CY 2024, therefore the year-over-year impact is zero.

A7. Part C Normalization

The normalization factors serve to offset the trend in risk scores and maintain a 1.0 average FFS
risk score for the CMS-HCC models. For CY 2025, for all CMS-HCC risk adjustment models,
CMS is calculating the normalization factors using a five-year multiple linear regression
methodology and average historical FFS risk scores from 2019 through 2023. Since
normalization is applied to risk scores to maintain the same average risk score year-over-year,
the impact of normalization is zero.

Section B. Changes in the Payment Methodology for Medicare Part D for CY 2025

B1. Annual Percentage Increase for Part D Parameters

The methodology for updating other Part D parameters for CY 2025 generally remains
unchanged from that used for CY 2024. However, statutory changes, including the lowering of
the annual OOP threshold to $2,000 and the change in the benefit structure from four phases to
three phases, may result in potential payment impacts for CY 2025. At this time, the impact on
the Medicare Trust Fund is uncertain since the impact of such parameter updates is generally
dependent on the behavior and bid assumptions of Part D plan sponsors.

B2. Part D Risk Adjustment Model

For CY 2025, we are proposing to implement an updated version of the RxHCC risk adjustment
model. We focused on updating the model to reflect the statutory changes in the Part D benefit
structure for CY 2025. As described in Attachment V, CMS is finalizing a model calibrated on
2021 diagnoses and 2022 expenditures for Non-PACE organizations and a model calibrated on
2018 diagnoses and 2019 expenditures for PACE organizations. In order to calculate risk scores
for payment, the dollar coefficients must be denominated to create relative factors. The
denominator is the average predicted per capita expenditure predicted by the payment model for
a given year. To calculate the denominator, we use the recalibrated model and diagnosis data for
Medicare beneficiaries enrolled in both MA-PDs and PDPs, which results in an average risk
score for the enrolled Part D population in the denominator year of 1.0. Recalibration of the
RxHCC model can result in changes in risk scores for individual beneficiaries and for plan level
risk scores; however, the average risk score in the denominator year remains a 1.0, and the
application of the normalization factor functions to maintain the 1.0 in the payment year. Since
 165

the average risk score is 1.0 under the existing model and the recalibrated model, the economic
impact of the recalibrated model is zero.

B3. Part D Normalization

The normalization factors serve to offset the trend in risk scores and maintain a 1.0 average risk
score across the Part D program (MA-PD plans and PDPs) for the RxHCC models. For CY 2025,
for the RxHCC models, CMS is calculating separate normalization factors for MA-PD plans and
PDPs using the long-standing five-year linear slope methodology and average historical risk
scores from 2018 through 2022, excluding 2021 for the model proposed for Non-PACE
organizations, and from 2016 through 2020 for the model proposed for PACE organizations.
Since normalization is applied to risk scores to maintain the same average risk score year-over-
year, the impact of normalization is zero.
 166

Attachment VIII. RxHCC Risk Adjustment Factors and Predictive Ratio Tables

Table VIII-1. 2025 RxHCC Model Relative Factors for Continuing Enrollees (2021/2022 calibration,
HCPCS-based filtering logic)

Community, Community,
Community, Community,
Non-Low Low
Variable Description Label Non-Low Low Income, Institutional
Income, Income,
Income, Age≥65 Age<65
Age<65 Age≥65
Female
0-34 Years - 0.260 - 0.625 2.503
35-44 Years - 0.333 - 0.776 1.889
45-54 Years - 0.335 - 0.729 1.554
55-59 Years - 0.226 - 0.503 1.435
60-64 Years - 0.168 - 0.308 1.059
65-69 Years 0.098 - 0.338 - 1.177
70-74 Years 0.078 - 0.048 - 0.926
75-79 Years 0.011 - 0.048 - 0.654
80-84 Years 0.011 - 0.048 - 0.426
85-89 Years 0.011 - 0.048 - 0.255
90-94 Years 0.011 - 0.048 - 0.069
95 Years or Over 0.011 - 0.048 - 0.069
Male
0-34 Years - 0.221 - 0.673 2.137
35-44 Years - 0.238 - 0.656 1.799
45-54 Years - 0.225 - 0.548 1.432
55-59 Years - 0.218 - 0.447 1.133
60-64 Years - 0.223 - 0.318 0.892
65-69 Years 0.175 - 0.334 - 0.916
70-74 Years 0.144 - 0.249 - 0.716
75-79 Years 0.119 - 0.165 - 0.495
80-84 Years 0.012 - 0.056 - 0.373
85-89 Years 0.012 - 0.056 - 0.228
90-94 Years 0.012 - 0.056 - 0.089
95 Years or Over 0.012 - 0.056 - 0.005
Originally Disabled Interactions with Sex
Originally 0.021 - 0.282 - 0.265
Disabled Female
Originally - - 0.165 - 0.265
Disabled Male
Disease Coefficients
RXHCC1 HIV/AIDS 7.940 9.314 8.449 8.505 5.905
RXHCC5 Opportunistic Infections 0.436 0.463 0.548 0.231 0.246
RXHCC15 Chronic Myeloid 4.702 3.945 13.318 19.171 8.852
Leukemia
 167

Community, Community,
Community, Community,
Non-Low Low
Variable Description Label Non-Low Low Income, Institutional
Income, Income,
Income, Age≥65 Age<65
Age<65 Age≥65
RXHCC16 Multiple Myeloma and 12.844 12.971 11.996 11.592 4.719
Other Hematologic
Cancers
RXHCC17 Secondary Cancer of 4.702 3.945 10.176 9.240 4.151
Bone and Kidney
RXHCC18 Secondary Cancer of 2.623 2.196 3.764 3.346 1.098
Lung, Liver, Brain, and
Other Sites
RXHCC19 Leukemias and Other 2.623 2.196 3.764 3.346 1.098
Hematologic Cancers
RXHCC20 Lung, Kidney, and Other 0.517 0.431 1.108 0.796 0.337
Cancers; Secondary
Cancer of Lymph Nodes
and Other Sites
RXHCC21 Lymphomas and Other 0.412 0.091 0.454 0.304 0.137
Hematologic Cancers
RXHCC22 Prostate, Breast, Bladder, 0.112 0.079 0.350 0.304 0.137
and Other Cancers and
Tumors
RXHCC30 Diabetes with 0.586 0.674 1.111 1.655 0.837
Complications
RXHCC31 Diabetes without 0.247 0.276 0.493 0.673 0.378
Complication
RXHCC40 Alpha-1-Antitrypsin 2.709 6.949 6.836 9.245 1.604
Deficiency
RXHCC41 Lysosomal Storage 4.566 13.205 5.618 19.652 0.171
Disorders
RXHCC42 Acromegaly and Other 1.710 4.262 2.300 4.484 1.008
Endocrine and Metabolic
Disorders
RXHCC43 Pituitary, Adrenal Gland, 0.008 0.056 - 0.019 -
and Other Endocrine and
Metabolic Disorders
RXHCC44 Thyroid Disorders 0.061 0.127 0.135 0.299 0.145
RXHCC47 Disorders of Lipoid - - 0.037 0.102 0.027
Metabolism
RXHCC54 Chronic Viral Hepatitis C 0.225 0.323 0.267 0.111 0.467
RXHCC55 Acute or Unspecified 0.225 0.323 0.267 0.111 0.467
Viral Hepatitis C
RXHCC56 Chronic Viral Hepatitis B 0.282 0.532 1.185 0.727 0.292
and Other Specified
Chronic Viral Hepatitis
RXHCC59 Primary Biliary Cirrhosis 0.929 1.063 1.143 1.724 1.201
RXHCC65 Chronic Pancreatitis 0.358 0.568 0.695 0.993 0.737
RXHCC66 Pancreatic Disorders and 0.220 0.568 0.583 0.993 0.353
Intestinal Malabsorption,
Except Pancreatitis
RXHCC67 Inflammatory Bowel 0.549 0.865 1.364 3.863 0.382
Disease
RXHCC80 Aseptic Necrosis of Bone 0.134 0.184 0.181 0.273 0.203
 168

Community, Community,
Community, Community,
Non-Low Low
Variable Description Label Non-Low Low Income, Institutional
Income, Income,
Income, Age≥65 Age<65
Age<65 Age≥65
RXHCC81 Psoriatic Arthropathy 0.809 0.601 6.162 9.014 3.214
RXHCC82 Systemic Sclerosis 0.759 0.895 1.426 2.345 0.522
RXHCC83 Rheumatoid Arthritis and 0.205 0.229 1.394 2.345 0.522
Other Inflammatory
Polyarthropathy
RXHCC84 Systemic Lupus 0.087 0.115 0.279 0.364 0.102
Erythematosus and Other
Systemic Connective
Tissue Disorders
RXHCC87 Osteoporosis, Vertebral 0.044 0.197 0.213 0.404 -
and Pathological
Fractures
RXHCC95 Sickle Cell Anemia - - - 1.586 -
RXHCC96 Acquired Hemolytic, 0.775 - 0.769 0.792 0.050
Aplastic, and
Sideroblastic Anemias
RXHCC98 Hereditary Angioedema 10.759 57.648 10.067 46.574 6.070
and Other Defects in the
Complement System
RXHCC99 Immune Disorders 0.503 0.474 0.726 1.207 0.414
RXHCC100 Immune 0.334 0.245 1.749 2.108 1.517
Thrombocytopenic
Purpura
RXHCC111 Alzheimer's Disease - - - - -
RXHCC112 Dementia, Except - - - - -
Alzheimer's Disease
RXHCC130 Schizophrenia and Other 0.187 0.224 0.689 1.373 0.298
Psychosis
RXHCC131 Bipolar Disorders 0.187 0.086 0.539 0.724 0.298
RXHCC132 Depression 0.023 - 0.053 0.183 0.082
RXHCC133 Anxiety and Other 0.005 - 0.012 0.086 -
Psychiatric Disorders
RXHCC146 Profound or Severe 0.638 0.279 0.423 0.213 -
Intellectual
Disability/Developmental
Disorder
RXHCC147 Moderate Intellectual 0.638 - 0.249 0.086 -
Disability/Developmental
Disorder
RXHCC148 Mild or Unspecified 0.638 - 0.112 - -
Intellectual
Disability/Developmental
Disorder
RXHCC153 Myasthenia Gravis and 1.533 3.295 1.978 3.830 0.352
Other Myoneural
Disorders
RXHCC154 Amyotrophic Lateral 1.054 1.757 0.933 2.172 0.214
Sclerosis and Other
Motor Neuron Disease
RXHCC155 Spinal Cord Disorders 0.037 0.163 - 0.143 0.074
 169

Community, Community,
Community, Community,
Non-Low Low
Variable Description Label Non-Low Low Income, Institutional
Income, Income,
Income, Age≥65 Age<65
Age<65 Age≥65
RXHCC157 Chronic Inflammatory 4.327 8.466 5.878 8.531 0.832
Demyelinating
Polyneuritis
RXHCC158 Inflammatory and Toxic - - - - 0.030
Neuropathy
RXHCC159 Multiple Sclerosis 1.486 1.714 3.757 6.295 1.992
RXHCC160 Huntington Disease 1.944 1.579 4.803 6.517 3.579
RXHCC161 Parkinson Disease 0.434 0.748 0.514 0.898 0.582
RXHCC163 Intractable Epilepsy 0.179 0.404 0.452 2.454 0.033
RXHCC164 Epilepsy and Other - - - 0.069 -
Seizure Disorders,
Except Intractable
Epilepsy
RXHCC166 Migraine Headaches 0.081 0.165 0.374 0.525 0.489
RXHCC168 Trigeminal and 0.052 0.101 0.224 0.335 0.142
Postherpetic Neuralgia
RXHCC183 Pulmonary Arterial 1.368 5.024 1.927 6.799 0.697
Hypertension
RXHCC184 Pulmonary Hypertension, 0.210 0.334 0.273 0.453 0.302
Except Arterial, and
Other Pulmonary Heart
Disease
RXHCC186 Heart Failure 0.183 0.117 0.273 0.254 0.190
RXHCC187 Hypertension 0.049 0.010 0.114 0.094 0.047
RXHCC188 Coronary Artery Disease 0.064 0.029 0.198 - -
RXHCC191 Ventricular Septal Defect 0.125 0.517 0.128 - 0.271
and Major Congenital
Heart Disorders
RXHCC193 Atrial Arrhythmias 0.511 0.187 0.518 0.204 0.448
RXHCC207 Spastic Hemiplegia 0.161 0.037 0.064 0.173 -
RXHCC215 Venous 0.398 0.370 0.394 0.444 0.348
Thromboembolism
RXHCC225 Cystic Fibrosis 8.025 29.472 4.007 38.624 4.455
RXHCC226 Idiopathic Pulmonary 4.538 3.168 5.695 4.279 1.441
Fibrosis and Systemic
Sclerosis with Lung
Involvement
RXHCC227 Pulmonary Fibrosis, 0.336 0.426 0.418 0.837 0.344
Except Idiopathic
RXHCC228 Severe Persistent Asthma 0.897 0.669 2.554 2.824 1.216
RXHCC229 Chronic Obstructive 0.186 0.097 0.371 0.280 0.344
Pulmonary Disease,
Bronchiectasis, and
Other Asthma
RXHCC243 Glaucoma, Open-Angle 0.147 0.256 0.396 0.498 0.277
or Moderate/Severe
Stage
RXHCC244 Other Non-Acute 0.010 0.059 0.064 - 0.031
Glaucoma
RXHCC260 Kidney Transplant Status - - - - 0.132
 170

Community, Community,
Community, Community,
Non-Low Low
Variable Description Label Non-Low Low Income, Institutional
Income, Income,
Income, Age≥65 Age<65
Age<65 Age≥65
RXHCC261 Dialysis Status, Including - - - - -
End Stage Renal Disease
RXHCC262 Chronic Kidney Disease - - - - -
Stage 5
RXHCC263 Chronic Kidney Disease - - - - -
Stage 4
RXHCC311 Chronic Ulcer of Skin, 0.137 0.113 0.106 0.128 0.026
Except Pressure
RXHCC314 Pemphigus, Pemphigoid, 0.261 0.288 0.534 1.568 0.329
and Other Bullous Skin
Disorders
RXHCC316 Psoriasis, Except with 0.181 0.360 1.758 3.202 0.992
Arthropathy
RXHCC317 Discoid Lupus 0.043 0.115 - - -
Erythematosus
RXHCC355 Narcolepsy and 0.762 1.736 1.657 3.818 0.843
Cataplexy
RXHCC395 Stem Cell, Including 4.362 2.964 5.584 3.663 2.177
Bone Marrow,
Transplant
Status/Complications
RXHCC396 Heart, Lung, Liver, - - - - 0.132
Intestine, or Pancreas
Transplant Status
Non-Aged Disease Interactions
NonAged_RXHCC1 NonAged * HIV/AIDS - - - - 1.313
NonAged_RXHCC130 NonAged * - - - - 0.828
Schizophrenia and Other
Psychosis
NonAged_RXHCC131 NonAged * Bipolar - - - - 0.744
Disorders
NonAged_RXHCC132 NonAged * Depression - - - - 0.394
NonAged_RXHCC133 NonAged * Anxiety and - - - - 0.050
Other Psychiatric
Disorders
NonAged_RXHCC159 NonAged * Multiple - - - - 2.518
Sclerosis
NonAged_RXHCC163 NonAged * Intractable - - - - 0.406
Epilepsy

NOTE: The Part D Denominator used to calculate relative factors is $2,708.40. This Part D Denominator is based on the combined
PDP and MA-PD populations.

SOURCE: RTI Analysis of 100% 2021-2022 Medicare Enrollment Data, 2022 Prescription Drug Event (PDE) Data, 2021
Professional Claims (Carrier), 2021 Inpatient Claims, 2021 Outpatient Claims, and 2021 Medicare Advantage Encounter Data.
 171

Table VIII-2. 2025 RxHCC Model Relative Factors for New Enrollees, Non-Low Income
(2021/2022 calibration, HCPCS-based filtering logic)

Not Concurrently Concurrently ESRD, Not Concurrently Concurrently

Variable ESRD, Not Not Originally ESRD, Originally ESRD, Originally
Originally Disabled Disabled Disabled Disabled
Female
0-34 Years 1.337 1.337 - -
35-44 Years 1.337 1.337 - -
45-54 Years 1.098 1.098 - -
55-59 Years 1.098 1.098 - -
60-64 Years 1.098 1.098 - -
65 Years 0.356 1.230 1.010 1.230
66 Years 0.377 1.230 1.010 1.230
67 Years 0.401 1.230 1.010 1.230
68 Years 0.428 1.230 1.045 1.230
69 Years 0.438 1.230 1.045 1.230
70-74 Years 0.481 1.230 1.045 1.230
75-79 Years 0.548 1.230 0.700 1.230
80-84 Years 0.463 1.230 0.463 1.230
85-89 Years 0.463 1.230 0.463 1.230
90-94 Years 0.403 1.230 0.403 1.230
95 Years or Over 0.403 1.230 0.403 1.230
Male
0-34 Years 1.162 1.162 - -
35-44 Years 1.162 1.162 - -
45-54 Years 1.162 1.162 - -
55-59 Years 1.164 1.164 - -
60-64 Years 1.164 1.164 - -
65 Years 0.481 1.495 1.064 1.495
66 Years 0.518 1.495 1.064 1.495
67 Years 0.539 1.495 1.064 1.495
68 Years 0.575 1.495 1.169 1.495
69 Years 0.588 1.495 1.169 1.495
70-74 Years 0.637 1.495 1.169 1.495
75-79 Years 0.749 1.495 0.834 1.495
80-84 Years 0.834 1.495 0.834 1.495
85-89 Years 0.834 1.495 0.834 1.495
90-94 Years 0.727 1.495 0.727 1.495
95 Years or Over 0.727 1.495 0.727 1.495

NOTES:
1. The Part D Denominator used to calculate relative factors is $2,708.40. This Part D Denominator is based
on the combined PDP and MA-PD populations.
 172

2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of
ESRD status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2021-2022 Medicare Enrollment Data, 2022 Prescription Drug Event (PDE)
Data, 2021 Professional Claims (Carrier), 2021 Inpatient Claims, 2021 Outpatient Claims, and 2021 Medicare
Advantage Encounter Data.
 173

Table VIII-3. 2025 RxHCC Model Relative Factors for New Enrollees, Low Income (2021/2022
calibration, HCPCS-based filtering logic)

Not
Not Concurrently Concurrently ESRD, Concurrently Concurrently
Variable ESRD, Not Not Originally ESRD, ESRD, Originally
Originally Disabled Disabled Originally Disabled
Disabled
Female
0-34 Years 1.929 2.050 - -
35-44 Years 2.710 2.710 - -
45-54 Years 2.710 2.710 - -
55-59 Years 2.285 2.364 - -
60-64 Years 2.141 2.141 - -
65 Years 1.189 2.059 1.815 2.059
66 Years 0.862 2.059 1.128 2.059
67 Years 0.783 2.059 1.058 2.059
68 Years 0.774 2.059 1.058 2.059
69 Years 0.774 2.059 1.058 2.059
70-74 Years 0.774 2.059 1.058 2.059
75-79 Years 0.774 2.059 0.966 2.059
80-84 Years 0.736 2.059 0.736 2.059
85-89 Years 0.736 2.059 0.736 2.059
90-94 Years 0.412 2.059 0.412 2.059
95 Years or Over 0.412 2.059 0.412 2.059
Male
0-34 Years 1.485 2.396 - -
35-44 Years 2.090 2.090 - -
45-54 Years 2.090 2.090 - -
55-59 Years 1.953 2.086 - -
60-64 Years 1.817 2.008 - -
65 Years 1.140 2.008 1.614 2.008
66 Years 0.833 2.008 1.161 2.008
67 Years 0.811 2.008 1.029 2.008
68 Years 0.744 2.008 0.766 2.008
69 Years 0.720 2.008 0.720 2.008
70-74 Years 0.720 2.008 0.720 2.008
75-79 Years 0.643 2.008 0.643 2.008
80-84 Years 0.643 2.008 0.643 2.008
85-89 Years 0.558 2.008 0.558 2.008
90-94 Years 0.441 2.008 0.441 2.008
95 Years or Over 0.239 2.008 0.239 2.008

NOTES:
1. The Part D Denominator used to calculate relative factors is $2,708.40. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
 174

3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2021-2022 Medicare Enrollment Data, 2022 Prescription Drug Event (PDE) Data, 2021
Professional Claims (Carrier), 2021 Inpatient Claims, 2021 Outpatient Claims, and 2021 Medicare Advantage Encounter
Data.
 175

Table VIII-4. 2025 RxHCC Model Relative Factors for New Enrollees, Institutional (2021/2022
calibration, HCPCS-based filtering logic)

Variable Not Concurrently ESRD Concurrently ESRD

Female
0-34 Years 3.361 2.723
35-44 Years 3.361 2.723
45-54 Years 2.750 2.723
55-59 Years 2.482 2.723
60-64 Years 2.413 2.723
65 Years 2.478 2.723
66 Years 2.478 2.723
67 Years 1.728 2.723
68 Years 1.728 2.723
69 Years 1.728 2.723
70-74 Years 1.431 2.723
75-79 Years 1.431 2.723
80-84 Years 1.167 2.723
85-89 Years 0.977 2.723
90-94 Years 0.776 2.723
95 Years or Over 0.424 2.723
Male
0-34 Years 2.692 2.141
35-44 Years 2.692 2.141
45-54 Years 2.660 2.141
55-59 Years 2.136 2.141
60-64 Years 2.000 2.141
65 Years 2.055 2.141
66 Years 2.055 2.141
67 Years 1.545 2.141
68 Years 1.545 2.141
69 Years 1.545 2.141
70-74 Years 1.545 2.141
75-79 Years 1.417 2.141
80-84 Years 1.103 2.141
85-89 Years 1.103 2.141
90-94 Years 0.782 2.141
95 Years or Over 0.782 2.141

NOTES:
1. The Part D Denominator used to calculate relative factors is $2,708.40. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2021-2022 Medicare Enrollment Data, 2022 Prescription Drug Event (PDE) Data, 2021
Professional Claims (Carrier), 2021 Inpatient Claims, 2021 Outpatient Claims, and 2021 Medicare Advantage Encounter
Data.
 176

Table VIII-5. 2025 RxHCC Model Relative Factors for Continuing Enrollees (2018/2019
calibration, specialty-based filtering logic)

Community, Community, Community,

Community,
Non-Low Non-Low Low
Variable Description Label Low Income, Institutional
Income, Income, Income,
Age≥65
Age≥65 Age<65 Age<65
Female
0-34 Years - 0.193 - 0.455 2.183
35-44 Years - 0.295 - 0.636 2.509
45-54 Years - 0.333 - 0.647 1.904
55-59 Years - 0.294 - 0.503 1.571
60-64 Years - 0.230 - 0.306 1.316
65-69 Years 0.118 - 0.281 - 1.395
70-74 Years 0.110 - 0.034 - 1.073
75-79 Years 0.085 - 0.034 - 0.776
80-84 Years 0.008 - 0.034 - 0.535
85-89 Years 0.008 - 0.034 - 0.343
90-94 Years 0.008 - 0.034 - 0.178
95 Years or Over 0.008 - 0.034 - 0.010
Male
0-34 Years - 0.160 - 0.545 2.284
35-44 Years - 0.204 - 0.590 2.056
45-54 Years - 0.262 - 0.531 1.766
55-59 Years - 0.279 - 0.436 1.359
60-64 Years - 0.271 - 0.323 1.056
65-69 Years 0.169 - 0.292 - 1.060
70-74 Years 0.146 - 0.213 - 0.772
75-79 Years 0.063 - 0.061 - 0.628
80-84 Years 0.063 - 0.061 - 0.448
85-89 Years 0.063 - 0.061 - 0.267
90-94 Years 0.063 - 0.061 - 0.100
95 Years or Over 0.063 - 0.061 - 0.100
Originally Disabled Interactions with Sex
Originally Disabled 0.042 - 0.303 - 0.223
Female
Originally Disabled - - 0.174 - 0.223
Male
Disease Coefficients
RXHCC1 HIV/AIDS 7.892 9.639 8.371 8.825 5.550
RXHCC5 Opportunistic Infections 0.364 0.490 0.547 0.426 0.450
RXHCC15 Chronic Myeloid 5.641 4.765 13.820 18.727 9.360
Leukemia
RXHCC16 Multiple Myeloma and 12.750 14.284 11.113 11.848 4.053
Other Hematologic
Cancers
RXHCC17 Secondary Cancer of 5.641 4.765 9.083 8.220 4.053
Bone and Kidney
RXHCC18 Secondary Cancer of 2.138 1.919 3.057 2.979 0.986
Lung, Liver, Brain, and
Other Sites
RXHCC19 Leukemias and Other 2.138 1.919 2.960 2.733 0.986
Hematologic Cancers
RXHCC20 Lung, Kidney, and Other 0.444 0.328 0.921 0.659 0.267
Cancers; Secondary
 177

Community, Community, Community,

Community,
Non-Low Non-Low Low
Variable Description Label Low Income, Institutional
Income, Income, Income,
Age≥65
Age≥65 Age<65 Age<65
Cancer of Lymph Nodes
and Other Sites
RXHCC21 Lymphomas and Other 0.323 0.114 0.308 0.229 0.118
Hematologic Cancers
RXHCC22 Prostate, Breast, Bladder, 0.116 0.114 0.250 0.229 0.118
and Other Cancers and
Tumors
RXHCC30 Diabetes with 0.549 0.595 1.058 1.592 1.040
Complications
RXHCC31 Diabetes without 0.200 0.184 0.380 0.535 0.410
Complication
RXHCC40 Alpha-1-Antitrypsin 3.589 8.320 7.252 9.938 1.324
Deficiency
RXHCC41 Lysosomal Storage 2.720 12.743 2.316 17.837 0.169
Disorders
RXHCC42 Acromegaly and Other 1.801 3.471 2.459 5.541 0.650
Endocrine and Metabolic
Disorders
RXHCC43 Pituitary, Adrenal Gland, 0.041 0.125 - 0.075 0.040
and Other Endocrine and
Metabolic Disorders
RXHCC44 Thyroid Disorders 0.068 0.152 0.145 0.275 0.134
RXHCC47 Disorders of Lipoid - - 0.044 0.131 0.071
Metabolism
RXHCC54 Chronic Viral Hepatitis C 0.633 0.750 0.891 0.716 0.996
RXHCC55 Acute or Unspecified 0.633 0.750 0.891 0.716 0.996
Viral Hepatitis C
RXHCC56 Chronic Viral Hepatitis B 0.324 0.629 1.146 0.734 0.317
and Other Specified
Chronic Viral Hepatitis
RXHCC59 Primary Biliary Cirrhosis 0.987 1.317 1.226 1.888 1.226
RXHCC65 Chronic Pancreatitis 0.314 0.574 0.532 0.840 0.529
RXHCC66 Pancreatic Disorders and 0.214 0.574 0.438 0.840 0.304
Intestinal Malabsorption,
Except Pancreatitis
RXHCC67 Inflammatory Bowel 0.472 0.544 1.131 2.784 0.419
Disease
RXHCC80 Aseptic Necrosis of Bone 0.184 0.170 0.133 0.247 0.133
RXHCC81 Psoriatic Arthropathy 0.855 0.652 5.016 8.003 2.731
RXHCC82 Systemic Sclerosis 0.871 0.535 1.634 2.090 0.479
RXHCC83 Rheumatoid Arthritis and 0.242 0.304 1.224 2.090 0.479
Other Inflammatory
Polyarthropathy
RXHCC84 Systemic Lupus 0.089 0.194 0.207 0.281 0.100
Erythematosus and Other
Systemic Connective
Tissue Disorders
RXHCC87 Osteoporosis, Vertebral 0.050 0.180 0.203 0.381 -
and Pathological
Fractures
RXHCC95 Sickle Cell Anemia - 0.541 - 1.613 -
 178

Community, Community, Community,

Community,
Non-Low Non-Low Low
Variable Description Label Low Income, Institutional
Income, Income, Income,
Age≥65
Age≥65 Age<65 Age<65
RXHCC96 Acquired Hemolytic, 0.694 0.497 0.732 0.874 0.196
Aplastic, and
Sideroblastic Anemias
RXHCC98 Hereditary Angioedema 11.691 55.996 16.581 51.681 0.530
and Other Defects in the
Complement System
RXHCC99 Immune Disorders 1.035 0.637 1.525 1.334 0.884
RXHCC100 Immune 0.293 0.152 1.350 1.524 0.849
Thrombocytopenic
Purpura
RXHCC111 Alzheimer's Disease - - - - -
RXHCC112 Dementia, Except - - - - -
Alzheimer's Disease
RXHCC130 Schizophrenia and Other 0.196 0.216 0.604 1.232 0.264
Psychosis
RXHCC131 Bipolar Disorders 0.196 0.104 0.489 0.631 0.264
RXHCC132 Depression 0.057 0.041 0.159 0.236 0.133
RXHCC133 Anxiety and Other 0.027 0.041 0.059 0.152 0.052
Psychiatric Disorders
RXHCC146 Profound or Severe 0.592 0.128 0.358 0.333 -
Intellectual
Disability/Developmental
Disorder
RXHCC147 Moderate Intellectual 0.592 - 0.163 0.100 -
Disability/Developmental
Disorder
RXHCC148 Mild or Unspecified 0.592 - 0.034 - -
Intellectual
Disability/Developmental
Disorder
RXHCC153 Myasthenia Gravis and 0.976 2.282 1.546 2.300 0.372
Other Myoneural
Disorders
RXHCC154 Amyotrophic Lateral 0.716 1.381 0.385 1.519 0.089
Sclerosis and Other
Motor Neuron Disease
RXHCC155 Spinal Cord Disorders 0.065 - 0.034 - -
RXHCC157 Chronic Inflammatory 3.651 6.556 5.215 7.679 1.784
Demyelinating
Polyneuritis
RXHCC158 Inflammatory and Toxic 0.058 0.119 0.009 0.190 0.145
Neuropathy
RXHCC159 Multiple Sclerosis 3.439 5.034 4.938 8.697 2.618
RXHCC160 Huntington Disease 2.952 3.684 3.215 5.255 3.199
RXHCC161 Parkinson Disease 0.484 0.762 0.500 0.731 0.471
RXHCC163 Intractable Epilepsy 0.270 0.425 0.694 2.548 0.360
RXHCC164 Epilepsy and Other 0.049 - 0.017 0.138 -
Seizure Disorders,
Except Intractable
Epilepsy
RXHCC166 Migraine Headaches 0.082 0.110 0.246 0.277 0.367
RXHCC168 Trigeminal and 0.086 0.253 0.237 0.361 0.256
Postherpetic Neuralgia
 179

Community, Community, Community,

Community,
Non-Low Non-Low Low
Variable Description Label Low Income, Institutional
Income, Income, Income,
Age≥65
Age≥65 Age<65 Age<65
RXHCC183 Pulmonary Arterial 1.077 3.729 1.559 5.876 0.590
Hypertension
RXHCC184 Pulmonary Hypertension, 0.170 0.302 0.211 0.377 0.242
Except Arterial, and
Other Pulmonary Heart
Disease
RXHCC186 Heart Failure 0.135 0.051 0.211 0.139 0.242
RXHCC187 Hypertension 0.061 0.012 0.115 0.088 0.079
RXHCC188 Coronary Artery Disease 0.052 - 0.181 - -
RXHCC191 Ventricular Septal Defect 0.139 0.655 0.439 0.308 0.206
and Major Congenital
Heart Disorders
RXHCC193 Atrial Arrhythmias 0.400 0.110 0.352 0.116 0.290
RXHCC207 Spastic Hemiplegia 0.158 0.113 0.152 - -
RXHCC215 Venous 0.325 0.315 0.365 0.400 0.333
Thromboembolism
RXHCC225 Cystic Fibrosis 3.607 19.938 2.053 24.025 1.088
RXHCC226 Idiopathic Pulmonary 4.486 3.371 4.577 3.764 1.354
Fibrosis and Systemic
Sclerosis with Lung
Involvement
RXHCC227 Pulmonary Fibrosis, 0.347 0.462 0.469 1.126 0.388
Except Idiopathic
RXHCC228 Severe Persistent Asthma 0.783 0.556 1.758 1.730 1.228
RXHCC229 Chronic Obstructive 0.208 0.087 0.449 0.355 0.388
Pulmonary Disease,
Bronchiectasis, and
Other Asthma
RXHCC243 Glaucoma, Open-Angle 0.186 0.219 0.417 0.498 0.367
or Moderate/Severe
Stage
RXHCC244 Other Non-Acute 0.054 - 0.078 - 0.028
Glaucoma
RXHCC260 Kidney Transplant Status - - - - -
RXHCC261 Dialysis Status, Including - - - - -
End Stage Renal Disease
RXHCC262 Chronic Kidney Disease - - - - -
Stage 5
RXHCC263 Chronic Kidney Disease - - - - -
Stage 4
RXHCC311 Chronic Ulcer of Skin, 0.164 0.142 0.191 0.313 0.068
Except Pressure
RXHCC314 Pemphigus, Pemphigoid, 0.316 1.015 0.474 0.980 0.303
and Other Bullous Skin
Disorders
RXHCC316 Psoriasis, Except with 0.178 0.190 1.274 2.441 0.842
Arthropathy
RXHCC317 Discoid Lupus 0.077 0.157 - - -
Erythematosus
RXHCC355 Narcolepsy and 0.994 2.221 1.340 3.299 0.762
Cataplexy
RXHCC395 Stem Cell, Including 4.116 2.064 5.597 3.362 2.178
Bone Marrow,
 180

Community, Community, Community,

Community,
Non-Low Non-Low Low
Variable Description Label Low Income, Institutional
Income, Income, Income,
Age≥65
Age≥65 Age<65 Age<65
Transplant
Status/Complications
RXHCC396 Heart, Lung, Liver, - - - - -
Intestine, or Pancreas
Transplant Status
Non-Aged Disease Interactions
NonAged_RXHCC1 NonAged * HIV/AIDS - - - - 2.371
NonAged_RXHCC130 NonAged * - - - - 0.695
Schizophrenia and Other
Psychosis
NonAged_RXHCC131 NonAged * Bipolar - - - - 0.746
Disorders
NonAged_RXHCC132 NonAged * Depression - - - - 0.365
NonAged_RXHCC133 NonAged * Anxiety and - - - - 0.022
Other Psychiatric
Disorders
NonAged_RXHCC159 NonAged * Multiple - - - - 3.224
Sclerosis
NonAged_RXHCC163 NonAged * Intractable - - - - 0.651
Epilepsy

NOTE: The Part D Denominator used to calculate relative factors is $2,282.44. This Part D Denominator is based on the
combined PDP and MA-PD populations.

SOURCE: RTI Analysis of 100% 2018-2019 Medicare Enrollment Data, 2019 Prescription Drug Event (PDE) Data, 2018
Professional Claims (Carrier), 2018 Inpatient Claims, 2018 Outpatient Claims, and 2018 Medicare Advantage Encounter
Data.
 181

Table VIII-6. 2025 RxHCC Model Relative Factors for New Enrollees, Non-Low Income
(2018/2019 calibration, specialty-based filtering logic)

Not Concurrently Concurrently ESRD, Not Concurrently Concurrently

Variable ESRD, Not Not Originally ESRD, Originally ESRD, Originally
Originally Disabled Disabled Disabled Disabled
Female
0-34 Years 0.969 0.969 - -
35-44 Years 1.217 1.217 - -
45-54 Years 1.217 1.217 - -
55-59 Years 1.217 1.217 - -
60-64 Years 1.217 1.217 - -
65 Years 0.383 1.228 1.072 1.228
66 Years 0.413 1.228 1.072 1.228
67 Years 0.425 1.228 1.072 1.228
68 Years 0.447 1.228 1.072 1.228
69 Years 0.479 1.228 1.072 1.228
70-74 Years 0.505 1.228 1.034 1.228
75-79 Years 0.575 1.228 0.779 1.228
80-84 Years 0.564 1.228 0.564 1.228
85-89 Years 0.564 1.228 0.564 1.228
90-94 Years 0.442 1.228 0.442 1.228
95 Years or Over 0.442 1.228 0.442 1.228
Male
0-34 Years 1.145 1.145 - -
35-44 Years 1.145 1.145 - -
45-54 Years 1.145 1.145 - -
55-59 Years 1.155 1.155 - -
60-64 Years 1.155 1.155 - -
65 Years 0.488 1.518 1.003 1.518
66 Years 0.515 1.518 0.986 1.518
67 Years 0.543 1.518 0.986 1.518
68 Years 0.554 1.518 0.967 1.518
69 Years 0.554 1.518 0.967 1.518
70-74 Years 0.635 1.518 0.967 1.518
75-79 Years 0.719 1.518 0.719 1.518
80-84 Years 0.719 1.518 0.719 1.518
85-89 Years 0.719 1.518 0.719 1.518
90-94 Years 0.399 1.518 0.399 1.518
95 Years or Over 0.399 1.518 0.399 1.518

NOTES:
1. The Part D Denominator used to calculate relative factors is $2,282.44. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2018-2019 Medicare Enrollment Data, 2019 Prescription Drug Event (PDE) Data, 2018
Professional Claims (Carrier), 2018 Inpatient Claims, 2018 Outpatient Claims, and 2018 Medicare Advantage Encounter
Data.
 182

Table VIII-7. 2025 RxHCC Model Relative Factors for New Enrollees, Low Income (2018/2019
calibration, specialty-based filtering logic)

Not
Not Concurrently Concurrently Concurrently Concurrently
Variable ESRD, Not ESRD, Not ESRD, ESRD, Originally
Originally Disabled Originally Disabled Originally Disabled
Disabled
Female
0-34 Years 1.620 1.898 - -
35-44 Years 2.395 2.395 - -
45-54 Years 2.395 2.395 - -
55-59 Years 2.007 2.251 - -
60-64 Years 1.934 2.063 - -
65 Years 1.114 2.020 1.625 2.020
66 Years 0.804 2.020 1.091 2.020
67 Years 0.748 2.020 1.091 2.020
68 Years 0.748 2.020 1.091 2.020
69 Years 0.748 2.020 0.975 2.020
70-74 Years 0.748 2.020 0.894 2.020
75-79 Years 0.707 2.020 0.707 2.020
80-84 Years 0.707 2.020 0.707 2.020
85-89 Years 0.707 2.020 0.707 2.020
90-94 Years 0.443 2.020 0.443 2.020
95 Years or Over 0.443 2.020 0.443 2.020
Male
0-34 Years 1.373 1.927 - -
35-44 Years 1.957 1.957 - -
45-54 Years 1.957 1.957 - -
55-59 Years 1.770 1.957 - -
60-64 Years 1.627 2.013 - -
65 Years 1.117 2.124 1.419 2.124
66 Years 0.787 2.124 0.907 2.124
67 Years 0.735 2.124 0.893 2.124
68 Years 0.735 2.124 0.893 2.124
69 Years 0.655 2.124 0.655 2.124
70-74 Years 0.655 2.124 0.655 2.124
75-79 Years 0.647 2.124 0.647 2.124
80-84 Years 0.647 2.124 0.647 2.124
85-89 Years 0.647 2.124 0.647 2.124
90-94 Years 0.349 2.124 0.349 2.124
95 Years or Over 0.349 2.124 0.349 2.124

NOTES:
1. The Part D Denominator used to calculate relative factors is $2,282.44. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2018-2019 Medicare Enrollment Data, 2019 Prescription Drug Event (PDE) Data, 2018
Professional Claims (Carrier), 2018 Inpatient Claims, 2018 Outpatient Claims, and 2018 Medicare Advantage Encounter
Data.
 183

Table VIII-8. 2025 RxHCC Model Relative Factors for New Enrollees, Institutional (2018/2019
calibration, specialty-based filtering logic)

Variable Not Concurrently ESRD Concurrently ESRD

Female
0-34 Years 3.742 2.625
35-44 Years 3.580 2.625
45-54 Years 3.501 2.625
55-59 Years 2.870 2.625
60-64 Years 2.838 2.625
65 Years 2.721 2.625
66 Years 2.721 2.625
67 Years 2.721 2.625
68 Years 1.755 2.625
69 Years 1.755 2.625
70-74 Years 1.617 2.625
75-79 Years 1.617 2.625
80-84 Years 1.269 2.625
85-89 Years 0.948 2.625
90-94 Years 0.741 2.625
95 Years or Over 0.554 2.625
Male
0-34 Years 3.304 2.521
35-44 Years 2.931 2.521
45-54 Years 2.813 2.521
55-59 Years 2.718 2.521
60-64 Years 2.280 2.521
65 Years 2.366 2.521
66 Years 2.366 2.521
67 Years 1.764 2.521
68 Years 1.764 2.521
69 Years 1.764 2.521
70-74 Years 1.764 2.521
75-79 Years 1.578 2.521
80-84 Years 1.158 2.521
85-89 Years 0.968 2.521
90-94 Years 0.968 2.521
95 Years or Over 0.968 2.521

NOTES:
1. The Part D Denominator value used to calculate relative factors is $2,282.44. This Part D Denominator is based on
the combined PDP and MA-PD populations.
2. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
status—dialysis, transplant, or functioning graft.

SOURCE: RTI Analysis of 100% 2018-2019 Medicare Enrollment Data, 2019 Prescription Drug Event (PDE) Data, 2018
Professional Claims (Carrier), 2018 Inpatient Claims, 2018 Outpatient Claims, and 2018 Medicare Advantage Encounter
Data.
 184

Table VIII-9. 2025 RxHCC Model with Disease Hierarchies (previously published in the 2023
Rate Announcement58)

…Then drop the

RxHCC If the Disease Group is listed in this column… RxHCC(s) listed
in this column
RxHCC Model Hierarchical Condition Category Label
15 Chronic Myeloid Leukemia 17, 18, 19, 20, 21, 22
16 Multiple Myeloma and Other Hematologic Cancers 17, 18, 19, 20, 21, 22
17 Secondary Cancer of Bone and Kidney 18, 19, 20, 21, 22
18 Secondary Cancer of Lung, Liver, Brain, and Other Sites 19, 20, 21, 22
19 Leukemias and Other Hematologic Cancers 20, 21, 22
20 Lung, Kidney, and Other Cancers; Secondary Cancer of Lymph Nodes 21, 22
and Other Sites
21 Lymphomas and Other Hematologic Cancers 22
30 Diabetes with Complications 31
40 Alpha-1-Antitrypsin Deficiency 43
41 Lysosomal Storage Disorders 43
42 Acromegaly and Other Endocrine and Metabolic Disorders 43
54 Chronic Viral Hepatitis C 55
65 Chronic Pancreatitis 66
81 Psoriatic Arthropathy 83, 84, 316
82 Systemic Sclerosis 83, 84
83 Rheumatoid Arthritis and Other Inflammatory Polyarthropathy 84
84 Systemic Lupus Erythematosus and Other Systemic Connective Tissue 317
Disorders
111 Alzheimer's Disease 112
130 Schizophrenia and Other Psychosis 131, 132, 133
131 Bipolar Disorders 132, 133
132 Depression 133
146 Profound or Severe Intellectual Disability/Developmental Disorder 147, 148
147 Moderate Intellectual Disability/Developmental Disorder 148
157 Chronic Inflammatory Demyelinating Polyneuritis 158
163 Intractable Epilepsy 164
183 Pulmonary Arterial Hypertension 184, 186, 187
184 Pulmonary Hypertension, Except Arterial, and Other Pulmonary Heart 186, 187
Disease
186 Heart Failure 187
225 Cystic Fibrosis 229
226 Idiopathic Pulmonary Fibrosis and Systemic Sclerosis with Lung 227, 229
Involvement
227 Pulmonary Fibrosis, Except Idiopathic 229
228 Severe Persistent Asthma 229
243 Glaucoma, Open-Angle or Moderate/Severe Stage 244
260 Kidney Transplant Status 261, 262, 263, 396
261 Dialysis Status, Including End Stage Renal Disease 262, 263
262 Chronic Kidney Disease Stage 5 263

NOTES:

1. This table applies to all of the RxHCC models in the CY 2025 Rate Announcement.

How Payments are Made with a Disease Hierarchy:

58 Refer to CMS’ CY 2023 Rate Announcement.

 185

EXAMPLE: If a beneficiary triggers RxHCCs 163 (Intractable Epilepsy) and 164 (Epilepsy and Other Seizure Disorders,
Except Intractable Epilepsy), then RxHCC 164 will be dropped. In other words, payment will always be associated with the
RxHCC in column 1 if an RxHCC in column 3 also occurs during the same collection period. Therefore, the organization’s
payment will be based on RxHCC 163 rather than RxHCC 164.

SOURCE: RTI International.

 186

Table VIII-10. 2025 RxHCC Model Predictive Ratios by Deciles of Predicted Risk (sorted low to
high): Continuing Enrollee Model Segments, 2021/2022 calibration sample (HCPCS-filtered
diagnoses)

Community, Community,
Non-Low Non-Low Community, Community,
Income, Income, Low Income, Low Income,
Deciles Age≥65 Age<65 Age≥65 Age<65 Institutional
Entire sample 1.000 1.000 1.000 1.000 1.000
First (lowest) decile 0.569 1.217 0.662 1.102 0.690
Second decile 1.175 1.296 1.249 1.429 0.943
Third decile 1.513 0.976 1.172 1.194 1.014
Fourth decile 1.361 1.071 1.045 1.075 1.042
Fifth decile 1.047 0.977 1.020 1.029 1.049
Sixth decile 0.971 0.987 1.025 0.976 1.035
Seventh decile 0.978 0.996 0.996 0.975 1.025
Eighth decile 0.936 0.954 0.972 0.919 1.015
Ninth decile 0.955 0.995 0.962 0.969 0.995
Tenth (highest) 1.011 0.995 0.999 1.000 0.981
Top 5% 1.016 1.009 1.003 1.018 0.982
Top 1% 1.028 0.992 1.018 1.046 1.007
Top 0.1% 0.955 1.023 1.014 1.017 1.013
 187

Table VIII-11. 2025 RxHCC Model Predictive Ratios by Deciles of Predicted Risk (sorted low to
high): New Enrollee Model Segments, 2021/2022 calibration sample (HCPCS-filtered diagnoses)

Non-Low
Deciles Income Low Income Institutional
Entire sample 1.000 1.000 1.000
First (lowest) decile 0.928 1.002 0.998
Second decile 0.988 0.969 1.014
Third decile 1.043 1.030 1.025
Fourth decile 1.173 0.961 0.965
Fifth decile 0.963 1.008 0.996
Sixth decile 0.965 1.141 1.010
Seventh decile 1.037 0.995 0.999
Eighth decile 1.057 1.028 1.028
Ninth decile 1.001 0.963 0.979
Tenth (highest) 1.004 1.001 0.993
Top 5% 0.998 0.911 1.005
Top 1% 1.017 1.137 0.971
Top 0.1% 1.001 1.332 0.971
 188

Attachment IX. 2024 CMS-HCC Model Predictive Ratio Tables

Table IX-1. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Non-Dual, Aged
(Age >=65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.968 1.000 -
First (lowest) decile 0.968 0.902 0.977
Second decile 0.983 0.938 0.981
Third decile 0.996 0.940 1.026
Fourth decile 0.989 0.958 1.003
Fifth decile 1.003 0.977 0.995
Sixth decile 1.002 0.970 0.993
Seventh decile 1.005 0.983 0.996
Eighth decile 1.003 0.982 0.996
Ninth decile 1.003 0.987 1.006
Tenth (highest) 1.003 0.963 1.003
Top 5% 1.000 0.942 1.000
Top 1% 0.984 0.917 0.987
Top 0.1% 0.959 0.879 0.967
 189

Table IX-2. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Non-Dual,
Disabled (Age <65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.979 1.000 -
First (lowest) decile 1.090 1.100 0.932
Second decile 0.959 0.975 0.990
Third decile 0.982 0.964 0.983
Fourth decile 0.982 0.977 1.011
Fifth decile 0.952 0.968 0.955
Sixth decile 0.997 0.965 0.997
Seventh decile 0.983 0.972 0.997
Eighth decile 1.008 1.004 1.002
Ninth decile 1.028 1.013 1.022
Tenth (highest) 1.001 0.959 1.004
Top 5% 0.991 0.935 0.998
Top 1% 0.999 0.922 0.981
Top 0.1% 0.979 0.874 0.960
 190

Table IX-3. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Full Benefit Dual,
Aged (Age >=65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 1.002 1.000 -
First (lowest) decile 0.969 0.949 0.996
Second decile 1.006 0.980 1.029
Third decile 0.988 1.012 1.015
Fourth decile 0.994 0.996 0.983
Fifth decile 1.006 1.017 0.986
Sixth decile 1.000 1.006 0.997
Seventh decile 1.004 1.012 0.992
Eighth decile 1.003 1.014 1.002
Ninth decile 1.002 1.009 1.002
Tenth (highest) 1.001 0.991 1.003
Top 5% 1.004 0.983 1.002
Top 1% 0.978 0.938 0.979
Top 0.1% 0.915 0.844 0.919
 191

Table IX-4. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Full Benefit Dual,
Disabled (Age <65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.988 1.000 -
First (lowest) decile 1.076 1.008 0.967
Second decile 1.016 1.004 1.053
Third decile 0.893 0.869 0.904
Fourth decile 0.940 0.957 0.970
Fifth decile 0.992 0.985 1.005
Sixth decile 0.999 1.010 1.005
Seventh decile 1.020 0.995 1.013
Eighth decile 1.019 0.999 0.996
Ninth decile 1.008 1.014 1.016
Tenth (highest) 1.002 0.983 1.002
Top 5% 0.996 0.974 0.995
Top 1% 0.984 0.954 0.983
Top 0.1% 0.873 0.986 1.007
 192

Table IX-5. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Partial Benefit
Dual, Aged (Age >=65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.992 1.000 -
First (lowest) decile 0.998 0.942 1.000
Second decile 0.998 0.987 1.023
Third decile 0.977 0.933 0.999
Fourth decile 0.987 0.992 1.001
Fifth decile 0.999 0.989 0.976
Sixth decile 1.004 1.016 0.983
Seventh decile 1.003 1.013 1.006
Eighth decile 1.006 1.017 1.000
Ninth decile 1.006 1.021 1.009
Tenth (highest) 0.999 0.968 1.000
Top 5% 0.994 0.951 1.000
Top 1% 0.999 0.931 0.985
Top 0.1% 0.981 0.870 0.981
 193

Table IX-6. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Partial
Benefit Dual, Disabled (Age <65) Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.988 1.000 -
First (lowest) decile 0.935 0.878 0.989
Second decile 1.020 1.023 0.896
Third decile 0.988 0.955 1.045
Fourth decile 0.979 0.991 1.002
Fifth decile 0.982 0.979 0.996
Sixth decile 0.999 0.988 1.003
Seventh decile 1.011 1.012 0.999
Eighth decile 1.025 1.032 0.996
Ninth decile 1.010 1.019 1.022
Tenth (highest) 0.996 0.963 1.000
Top 5% 0.989 0.944 0.997
Top 1% 1.002 0.939 0.981
Top 0.1% 1.076 0.932 0.968
 194

Table IX-7. Predictive Ratios by Deciles of Predicted Risk (sorted low to high): Institutional
Continuing Enrollee

2014/2015 Sample 2018/2019 Sample

Improvement in
2020 Model 2020 Model 2024 Model
Deciles Predictive Risk
Entire sample 1.000 0.951 1.000 -
First (lowest) decile 0.858 0.788 0.824
Second decile 0.959 0.877 0.932
Third decile 0.995 0.928 0.977
Fourth decile 1.000 0.949 1.011
Fifth decile 1.022 0.968 1.029
Sixth decile 1.023 0.976 1.035
Seventh decile 1.026 0.982 1.028
Eighth decile 1.020 0.975 1.028
Ninth decile 1.015 0.970 1.014
Tenth (highest) 0.989 0.952 0.992
Top 5% 0.984 0.939 0.978
Top 1% 0.967 0.900 0.918
Top 0.1% 0.954 0.865 0.859

NOTES:
1. “Improvement in Predictive Risk” compares the distance the predictive ratios are from 1.0 for
the 2024 model and 2020 model with a 2018 – 2019 sample.
2. For example, a green arrow indicates that the predictive ratio for any specific decile for the 2024
model is closer to 1.0 than the predictive ratio for the 2020 model with a 2018 – 2019 sample,
and vice-versa.