New study sheds light on impact of CMS’s Medicare Advantage changes

The Centers for Medicare and Medicaid Services (CMS) recently released its outlook on 2025 Medicare Advantage (MA) premium and plan offerings. Meanwhile a new report sheds light on the impact of the CMS’s recent changes to the program, including the three-year phase in of the risk adjustment model.

The report, from Berkeley Research Group (BRG), shows that MA payments are declining compared to Fee-For-Service (FFS) spending, when the implementation of CMS’s new risk adjustment model is applied based on their analysis. 

Additionally, the analysis questions Medicare Payment Advisory Commission’s (MedPAC) annual MA and FFS spending ratio calculation that uses an approach applying MA risk adjustment to both MA payments and FFS spending. MedPAC’s ratio suggests that MA and FFS are at cost parity. However, the study by BRG raises questions about this approach during phase-in of the new risk adjustment model, particularly with this model being applied to MA payments but not to FFS spending.

“The phase-in of the new risk adjustment model will have definite effects on MA plans that we know do not apply to FFS payments,” said BRG Director Ruth E. Tabak. “This research is designed to help policymakers better understand the impact of these changes and provides an alternative methodology.”

BRG’s report found that, under the new risk adjustment model, MA plans would receive 97 cents compared to each dollar spent in Medicare FFS in 2024, and the number could decline to 91 cents by 2026. This results in a 3% payment decrease for MA plans in 2024 and a 9% decrease in 2026 compared to Medicare FFS.

With CMS’s three-year phase-in of the MA risk adjustment model underway, the study highlights how focusing on MedPAC’s MA to FFS ratio does not necessarily tell the whole story.

Read the study and find out more about BRG’s findings.