Fact Sheet
February 5, 2021

Medicare Advantage Rate Setting Process

Key Facts:
• The Centers for Medicare & Medicaid Services (CMS) issues annual payment updates to rates for Medicare Advantage and Medicare Prescription Drug plans (Part D).
• Medicare Advantage payment rates are mainly based on spending trends in Traditional Fee-For-Service (FFS) Medicare.
• Payment policies are also specified in the annual Medicare Advantage Advance Notice and Rate Announcement.
• The rates and policy changes inform the development of Medicare Advantage plan bids which include each plan’s benefits and beneficiary cost-sharing for the upcoming contract year.
BMA Recommendation:
A stable rate environment ensures plans have the financial resources and payment policies to cover all guaranteed benefits for all enrollees, develop and implement innovative benefit design and care delivery, offer varied health plan choices, offer low beneficiary premiums and out-of-pocket costs, and provide high-quality, coordinated affordable care for the millions of beneficiaries in Medicare Advantage across the country.

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