CMS Medicare Payment Updates for 2025
In the past month, The Centers for Medicare & Medicaid Services (CMS) issued its final updates to Medicare payment policies for 2025, which is anticipated to impact physicians, Medicare Advantage (MA) plans, Part D prescription drug coverage, and home health services. These changes aim to enhance payment accuracy, reduce out-of-pocket costs for beneficiaries, and support healthcare providers in delivering quality care.
Physician Fee Schedule (PFS) Adjustments
For CY 2025, CMS has set the Physician Fee Schedule conversion factor at $32.35, a 2.8% decrease from the 2024 rate of $33.29. This reduction results from the expiration of a temporary 2.9% payment increase in 2024 and a 0% statutory update for 2025, with a minor 0.02% budget-neutrality adjustment CMS. The American Medical Association has expressed concerns that such cuts could hinder physicians’ ability to invest in new equipment, retain staff, and accept new Medicare patients, especially in rural and underserved areas.
Medicare Advantage and Part D Enhancements
CMS projects a 3.7% average increase in payments to Medicare Advantage plans for 2025, translating to over $16 billion in additional funding compared to 2024. This adjustment reflects updated fee-for-service data and continued implementation of an updated risk adjustment model.
In a significant change for Medicare Part D, the Inflation Reduction Act introduces a $2,000 annual cap on out-of-pocket prescription drug costs starting this year. This cap aims to ease the financial burden on beneficiaries and eliminate the coverage gap known as the “donut hole”.
Telehealth Policy Extensions
CMS has extended several telehealth flexibilities through 2025. These include allowing teaching physicians to supervise residents virtually across all settings and permitting providers to use their practice location instead of their home address when delivering telehealth services from home. Additionally, CMS has updated the definition of interactive telecommunications systems to include audio-only communication for Medicare telehealth services furnished to beneficiaries in their homes, provided the beneficiary is unable or unwilling to use video technology.
Home Health Payment Revisions
Also, CMS has finalized a 2.7% net increase in home health payments, accounting for a 3.2% market basket update offset by a 0.5% productivity adjustment. The base 30-day payment rate under the Patient-Driven Groupings Model (PDGM) will rise to $2,057.35 from $2,038.15 in 2024. CMS also reported a cumulative alleged overpayment of $4.46 billion from 2020 to 2023 but has not scheduled collections for 2025. Furthermore, starting January 1, 2027, new assessment items related to Social Determinants of Health, such as living situation and food access, will become mandatory, aligning with CMS’s goal of capturing health determinants across patient populations.
New Services and Coding Initiatives
CMS is introducing new codes and payments for Caregiver Training Services (CTS), including wound care, infection control, and behavior management. These services can be provided via telehealth, enhancing flexibility for caregivers and patients Additionally, CMS is establishing new codes for Advanced Primary Care Management (APCM) services, bundling several existing care management and communication technology-based services. These codes aim to reduce administrative burdens by eliminating time-based thresholds and are organized based on the complexity of the patient’s condition.
Merit-based Incentive Payment System (MIPS) Updates
Physicians participating in MIPS should note that failure to comply with program requirements in 2025 could result in penalties of up to 9% of their Part B Medicare payments. CMS is also issuing a Request for Information to solicit feedback on designing a potential ambulatory specialty care model that would leverage MIPS Value Pathways to increase specialist engagement in value-based care.
Stakeholder Feedback and Future Considerations
The AMA has advocated for CMS to delay implementing new Medicare Economic Index weights until data from the AMA’s Physician Practice Information survey is analyzed. CMS has agreed to defer changes until the survey results are reviewed, aiming to ensure payment updates accurately reflect physician practice expenses.
These finalized policies for 2025 reflect CMS’s ongoing efforts to balance payment accuracy, cost containment, and access to care. Healthcare providers and beneficiaries are encouraged to review these changes thoroughly to understand their implications and prepare accordingly.