Medicare Advantage in 2025: Policy Outlook Under the Trump Administration
January 16, 2025 – Medicare Advantage (MA), the private insurance alternative under Medicare, is set to be a major policy focus in 2025 and beyond as the Trump Administration takes office. Our recently released 2025 policy outlook explores key health policy developments expected this year.
The new administration will first need to finalize technical policies and payment rates for 2026. Once this initial phase is complete, the Trump Administration may shift its focus to a long-term strategy for MA. This could involve addressing key issues raised by the Biden Administration and other stakeholders over the past few years.
MA enrollment has surged in recent years, now covering over 50% of total Medicare beneficiaries. This rapid expansion has drawn attention to payment and policy reforms, particularly under the Biden Administration. For instance, the 2025 Final Rate Notice, issued on April 1, 2024, implemented a 0.16% reduction in MA base payments for 2025. Some MA plans warned that this reduction could force them to cut supplemental benefits for enrollees.
However, a shift may be on the horizon. Last week, the Centers for Medicare & Medicaid Services (CMS) released the 2026 Advance Notice, proposing an increase in base payments for 2026. CMS estimates that these updates could boost MA revenue by 4.33% in 2026, translating to a $21 billion increase in MA plan payments compared to 2025.
Despite the proposed increase, stakeholders have differing opinions on its impact. While CMS projects a revenue boost, some argue that the actual base payment rate increase is only 2.23% when factoring in MA risk score trends. Since risk scores vary based on the populations MA plans serve, some industry experts contend that these trends do not necessarily guarantee higher payments across all MA plans.
| Impact | 2025 Rate Announcement | 2026 Advance Notice |
|---|---|---|
| Effective Growth Rate | +2.33% | +5.93% |
| Rebasing/Repricing | +0.07% | TBD |
| Change in Star Ratings | -0.11% | -0.69% |
| MA Coding Pattern Adjustment | 0% | 0% |
| Risk Model Revision and FFS Normalization | -2.45% | -3.01% |
| Base Payments (sum of the factors above) | -0.16% | +2.23% |
| MA Risk Score Trend | +3.86% | +2.10% |
| Expected Average Change in Revenue | +3.70% | +4.33% |
It remains unclear how the incoming Trump Administration will handle the Advance Notice and whether these policies and payment rates will be implemented for 2026. CMS has advised against reversing certain proposed policies, including a risk adjustment model that has been phased in over recent years. Adjustments to medical education costs for MA enrollees are also under scrutiny, with potential budgetary impacts of $7 billion if delayed.
Given the fast-approaching deadlines—February 10, 2025 for public comments and April 7, 2025 for the final notice—the new administration must act quickly. This transition presents a unique scenario where an outgoing administration has proposed policy changes that the new administration must finalize.
Beyond immediate policy decisions, the Trump Administration may need to address broader concerns regarding MA’s sustainability. Stakeholders have raised issues about overpayments to MA plans compared to traditional Medicare. The Medicare Payment Advisory Commission (MedPAC) estimated that Medicare spends 22% more per MA enrollee than it would for fee-for-service (FFS) beneficiaries, amounting to $83 billion in 2024.
Additional scrutiny surrounds MA’s use of health risk assessments (HRAs) to boost risk-adjusted payments. A 2024 report from the Office of the Inspector General (OIG) found that $7.5 billion in risk-adjusted payments were linked to HRAs without supporting medical records, raising concerns about payment accuracy and patient care.
The issue of prior authorization has also drawn attention. In 2022, MA plans received over 46 million prior authorization requests, denying or partially denying 7.4% of them. A January 2024 regulation under the Biden Administration sought to streamline the process by requiring faster responses and greater transparency.
Legislation like the Improving Seniors’ Timely Access to Care Act may be reintroduced in the 119th Congress, aiming to codify these protections. However, it remains to be seen whether the Trump Administration will prioritize these reforms or favor increased flexibility for MA plans.
The Trump Administration faces crucial decisions that will shape the future of Medicare Advantage. While it may lean toward policies that increase MA plan flexibility and enrollment, previous efforts to reduce government spending could influence regulatory decisions. In its Fiscal Year 2021 Budget, the prior Trump Administration proposed accelerating risk adjustment model changes, projecting $41 billion in savings over 10 years.
As the administration navigates these complex issues, the long-term sustainability and impact of Medicare Advantage will be at the forefront of policy discussions. Stay tuned for updates on how these decisions unfold in 2025 and beyond.
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