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CMS Releases Payment Updates for 2025 Medicare Advantage and Medicare Part D Plans

Summary: The Centers for Medicare and Medicaid Services (CMS) has announced that the 2025 Medicare Advantage and Medicare Part D payment rates will increase by an average of 3.7%. However, this increase fell short of carrier’s expectations as expanded drug coverage and recent changes brought upon by Inflation Reduction Act may lead to higher spending for Medicare Part D and Medicare Advantage carriers.  Estimated Read Time: 5 min

Table of Contents:

  1. Medicare Advantage and Part D Payment Announcement
  2. Increase in Pharmaceutical Spending
  3. How Does This Impact Enrollees?
  4. How Carriers Will Respond to The Announcement

The Centers for Medicare and Medicaid Services (CMS) has announced the 2025 Medicare Advantage and Medicare Part D payment rates. According to CMS, this update to the payment rates will help ensure the strength and stability of Medicare Advantage and Medicare Part D plans in 2025.

While the payments for Medicare Advantage and Part D plans will increase in 2025 from 2024, plan carriers are disappointed as the announced payment is lower than they had originally anticipated.

Below, we review the details of the payment announcement as well as the implications it may have on you as an enrollee in 2025.

Medicare Advantage and Part D Payment Announcement

According to the announcement released by CMS in early April 2024, the 2025 Medicare Advantage and Medicare Part D payment rate to insurers will increase by an average of 3.7%. This results in an increase of over $16 billion to carriers from 2024 to 2025.

As stated by CMS, this increase reflects their commitment to supporting private health companies that offer Medicare Advantage coverage. However, the companies carrying these plans do not see the announcement in the same light.

Although the announcement reveals an increase in payment amount to carriers, the announced rates fell short of carrier and analyst’s expectations when compared to the amount insurers will be spending on each individual in 2025. As a result, this underwhelming payment to spending ratio has led to a rapid decline in health insurer stocks following the announcement.

Increase in Pharmaceutical Spending

When combined, several factors contribute to an increase in pharmaceutical spending within Medicare for the 2025 calendar year. The introduction of innovative, yet expensive, therapies, combined with the aging population create the perfect storm for increased drug spending.

However, the recent announcement of Medicare coverage for certain glucagon-like peptide-1 receptor agonists (GLP-1s), particularly Ozempic and Wegovy, play a large role in increased drug costs as well. As coverage for these medications are approved by CMS, Medicare drug spending is expected to drastically increase as these medications can be extremely expensive.

GLP-1s are a class of medications primarily used to treat type 2 diabetes by helping regulate blood sugar levels. Ozempic, a popular drug within this class, has seen a substantial increase in use among Medicare beneficiaries. However, the surge in usage has also led to a corresponding increase in Medicare spending on these medications. Plus, with the recent addition of Medicare coverage for Wegovy, Medicare is expected to see an even higher increase in spending for GLP-1s in the coming year.

The rise in spending on these medications is just one example of increased pharmaceutical spending within the Medicare program.

Additionally, as a result of the Inflation Reduction Act, Medicare enrollees can expect to see lower copayments at the pharmacy in 2025, the elimination of the Donut Hole and Catastrophic Coverage drug phases, as well as a $2,000 out-of-pocket spending cap for the calendar year on all Medicare-covered drugs.

The combination of all these factors lead to an extremely high increase in overall spending for Medicare Part D carriers. An increase which is not supported by the change in payment rate from 2024 to 2025.

How Does This Impact Enrollees?

For insurers that heavily rely on Medicare Advantage or Part D plans as their main revenue stream, this announcement poses a considerable challenge. Reduced reimbursement to spending rates not only impact profitability but also raise concerns about the sustainability of these plans.

As insurance carriers navigate narrow margins, they may become compelled to explore cost-cutting measures or reconsider their participation in the Medicare Advantage and Part D market altogether. Unfortunately, this could lead to a lower number of available plans or even higher premiums for the plans that are still offered.

On the other hand, in 2025, the maximum out-of-pocket limit for drug spending on all plans is capped at $2,000. While this is a great advancement for enrollees, this same landmark achievement is one of the main drivers behind the increased spending on carriers.

How Carriers Will Respond to The Announcement

In response to the lower-than-expected Medicare Advantage and Part D payment rates, health insurance carriers may begin reassessing their priorities.

Some carriers may begin to focus on diversifying their revenue streams by seeking growth opportunities in additional areas of the market. Others may increase their efforts to streamline processes in hopes to combat the financial impact of the lower reimbursement rates.

Additionally, there could be renewed emphasis on enhancing the quality of care and member satisfaction to drive value in new ways to the plans.

However, no one can be sure just yet how each carrier will respond to the new rates. Only time will tell how each carrier decides to come out on the other end of the rate announcement.

At MedicareFAQ, we are dedicated to providing you with the latest industry news and updates. As the Medicare Advantage and Part D landscapes progress into 2025, we will be your trusted outlet to receive the most accurate and up-to date news.


MedicareFAQ is dedicated to providing you with authentic and trustworthy Medicare information. We have strict sourcing guidelines and work diligently to serve our readers with accurate and up-to-date content.

  1. Health insurer stocks slide as final Medicare Advantage rates disappoint, Constantino. Accessed April 2024.
  2. CMS Finalizes Payment Updates for 2025 Medicare Advantage and Medicare Part D Programs, HHS. Accessed April 2024.
  3. Medicare Spending on Ozempic and Other GLP-1s Is Skyrocketing, Cubanski & Nauman . Accessed April 2024.
Kayla Hopkins

Kayla Hopkins

Content Editor
Kayla Hopkins is an accomplished writer and Medicare educator serving as the Editor of MedicareFAQ.com. Upon completing her Communications degree from Ohio University, Kayla dedicated her time to understanding the ever-evolving landscape of healthcare. With her extensive background as a Licensed Insurance Agent, she brings a wealth of knowledge and expertise to her writing.
Ashlee Zareczny

Ashlee Zareczny

Compliance Manager
Ashlee Zareczny is the Compliance Manager for MedicareFAQ. As a licensed Medicare agent in all 50 states, she is dedicated to educating those eligible for Medicare by providing the necessary resources and tools. Additionally, Ashlee trains new and tenured Medicare agents on CMS compliance guidelines. Ashlee is a Medicare expert who specializes in Medicare Supplement, Medicare Advantage, and Medicare Part D education.


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