2025 CMS Medicare Advantage and Part D Rate Announcement

The 2025 Medicare Advantage and Part D rate announcement holds key changes you need to know about. With a 3.70 percent average payment increase in Medicare Advantage plans and critical Part D policy updates, understanding these developments is essential for managing your healthcare finances.

Here, we detail these changes, helping you navigate and plan for your Medicare coverage in the coming year.


Key Takeaways

  • The 2025 Medicare Advantage and Part D Rate Announcement predicts a 3.70 percent increase in Medicare Advantage payments, alongside an updated risk adjustment model and changes to Part D payment policies, reflecting a focus on payment accuracy and health equity.


  • Beneficiaries will benefit from cost-sharing changes such as a $2,000 cap on out-of-pocket expenses, the elimination of the Part D coverage gap, and expanded supplemental benefits that require plans to offer research-supported services for the chronically ill.


  • The 2025 Rate Announcement affects private health plans by incentivizing quality improvements through adjustments to Star Ratings. It also enhances coordination with Medicaid services for dual-eligible individuals, aiming at better-integrated care models.

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Breaking Down the 2025 Medicare Advantage and Part D Rate Announcement

The 2025 Medicare Advantage and Part D Rate Announcement marks a pivotal moment in healthcare policy. This announcement anticipates a 3.70 percent average increase in payments to Medicare Advantage plans, translating to over $16 billion more than the previous year.

The projection stems from the Centers for Medicare & Medicaid Services’ finalization of the 2025 Rate Announcement, which aims to uphold payment accuracy and preserve the robustness of the Medicare Advantage and Part D programs.


Breaking Down the 2025 Medicare Advantage and Part D Rate Announcement

Medicare Advantage Payments

In 2025, the projected average increase in MA plan payments to Medicare Advantage plans is 3.70 percent. This boost signifies a substantial investment in healthcare, as it’s estimated that the government’s payments to these plans will fall between $500 and $600 billion – an increase of over $16 billion from the previous year.

A key factor driving this increase is the Effective Growth Rate for Medicare Advantage plan payments, set at 2.33 percent for 2025. This rate includes a technical adjustment for medical education costs, signifying a commitment to not just maintaining but improving the quality of healthcare services.


Updated Risk Adjustment Model

In addition to payment increases, the announcement also brings an update to the Medicare Advantage risk adjustment model, reflecting the MA risk score trend. The 2025 update will follow a phased-in approach, blending 67% of the risk score calculated from the 2024 model with 33% from the 2020 model, continuing the implementation started in 2024 and taking into account the risk score trends.

The updated part D risk adjustment model, which includes risk scores, will utilize the latest available fee-for-service payment data and other technical improvements to enhance payment accuracy. This model is designed to account for enrollees’ health status, ensuring fair payment and preventing plans from selectively enrolling only the healthiest beneficiaries.


Part D Payment Policies

The 2025 Rate Announcement also brings changes to Medicare Part D. Influenced by the Inflation Reduction Act, the Medicare Part D prescription drug program will see an out-of-pocket cost cap and the elimination of the coverage gap phase.

As of 2025, Medicare Part D has made the following changes:


  • No cost-sharing for recommended vaccines
  • Introduced an annual out-of-pocket expenditure limit of $2,000 for beneficiaries
  • Changes to Medicare Part D’s Medication Therapy Management program to improve targeting criteria for more consistent and equitable access.


Furthermore, individuals with limited resources are eligible for savings on Medicare Part D drug costs, making healthcare more accessible for all and helping to lower prescription drug costs.

Impact on Beneficiaries: Coverage, Costs, and Supplemental Benefits

Despite the complexity of these policy changes and updates, the beneficiaries are the focus of their impact. We’ll examine the implications of these changes on coverage, costs, and supplementary benefits.


Changes to Cost Sharing and Coverage Phases

Starting in 2025, the Part D coverage gap, often referred to as the ‘donut hole,’ will be eliminated, simplifying the structure to just the deductible, initial coverage, and catastrophic phases. This simplification will help beneficiaries understand their coverage.


What are the HCC changes for 2025


Moreover, beneficiaries will witness several cost-sharing changes, including:


  • An annual cap on out-of-pocket costs at $2,000, significantly reducing prescription drug expenses
  • No cost-sharing is required for enrollees in the catastrophic phase of Part D beginning in 2025, reducing the financial burden on beneficiaries
  • Cost sharing was eliminated for most Part D-covered vaccines
  • Cost sharing is capped at $35 monthly for insulin products


These changes aim to reduce the financial burden on beneficiaries.

Additionally, thanks to the introduction of prescription drug programs, beneficiaries will have the new option to spread out their Part D prescription drug costs using a monthly payment structure throughout the year.


Expanded Supplemental Benefits

The 2025 Rate Announcement also introduces new standards for supplemental benefits for the chronically ill. Medicare Advantage plans are required to ensure that these benefits are supported by research indicating potential health or functional improvement.

In addition, Medicare Advantage plans must conduct an annual health equity analysis of their utilization management policies to ensure equitable access to benefits. Furthermore, Medicare Advantage enrollees must receive personalized mid-year notifications from their plans about any supplemental benefits they have not used.

Lastly, CMS has updated network adequacy standards, which now include an assessment of access to behavioral health care within Medicare Advantage networks.

Effects on Private Health Plans and Medicaid Services

The CY 2025 rate announcement affects beneficiaries as well as private health plans and Medicaid services.

Let’s unpack how.


Adjustments to Star Ratings and Improvement Measures

One of the key effects of the 2025 Rate Announcement is the incentivization of Medicare Advantage plans to improve their performance and services.


Is there a penalty to switch from Medicare Advantage to Original Medicare


Higher quality ratings for Medicare Advantage plans lead to increased plan payment benchmarks and larger rebates. This incentivization ensures that the plans strive for excellence, ultimately benefitting the beneficiaries.


Coordination with Medicaid Services

The 2025 final rule for Medicare Advantage and Part D also includes policies to increase the number of dually eligible Medicare Advantage enrollees who also receive Medicaid services from the same organization, thereby aiming to improve experiences and outcomes.

To promote integrated care models, the rule includes the following changes:


  • Amends the Part D quarterly special enrollment period for dually eligible individuals to a monthly enrollment period
  • Introduces a new special enrollment period for enrolling in integrated dual-eligible special needs plans
  • The bill proposes restrictions on enrollment in certain Dual-Eligible Special Needs Plans (D-SNPs), requiring enrollees to also be enrolled in an affiliated Medicaid Managed Care Organization to enhance interconnected care access.

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The Role of the Federal Government in Medicare Advantage and Part D

The federal government plays a pivotal role in shaping the policies and programs of Medicare Advantage and Part D.

Let’s take a closer look at the government’s involvement.


Final Rule and Advance Notice

Issuing the final rule for Medicare Advantage and Part D is a thorough process that includes the release of an advance notice, allowing for public and industry stakeholders to review and comment. The advance notice period serves as a precursor to the final rule, establishing a preliminary framework for changes to be proposed and discussed.

Public feedback is then solicited from a diverse group of stakeholders, including health plans, providers, and beneficiaries, ensuring various perspectives are considered. CMS reviews all submitted comments and integrates feedback into the final rule to refine policies and address concerns raised during the notice period.


Ensuring Transparency and Compliance

Transparency and compliance are key aspects of the Medicare Advantage and Part D programs, and the 2025 Rate Announcement introduces new policies to increase oversight in these areas. For instance, more transparent compensation guidelines for agents and brokers have been established to discourage steering based on financial incentives.

Moreover, the requirement for Medicare Advantage plans in 2025 includes:


  • Performing an annual health equity analysis of their utilization management policies to ensure transparency and awareness of how these policies affect underserved populations.
  • Maintaining a medical loss ratio of no lower than 85 percent ensures that a majority of the funds are spent on healthcare services rather than administrative costs and profits.


Plans that consistently fail to meet the medical loss ratio may face enrollment prohibitions or termination, maintaining accountability and compliance.

Preparing for the Changes: Resources for Agents, Brokers, and Beneficiaries

Given the impending significant changes, it’s crucial for agents, brokers, and beneficiaries to be prepared to tackle the fresh landscape. Fortunately, numerous resources are on hand to assist.


Training and Education Programs

The CMS National Training Program provides training and education on various healthcare topics, primarily aimed at helping agents and brokers understand Medicare policies and program changes. Agents and brokers have access to a suite of resources through the program, including:


  • Registration & training
  • Information on open enrollment
  • Partnerships for direct enrollment
  • General resources to assist with Medicare policies


These resources are essential for agents and brokers to stay informed and provide the best possible service to their clients.


Support Services for Beneficiaries

Beneficiaries also have access to a range of support services to help them navigate their Medicare coverage choices. One such resource is the State Health Insurance Assistance Programs (SHIPs), which offer personalized, free counseling to help beneficiaries understand Medicare coverage options. Ships are known for unbiased support for a range of issues, aiding both new enrollees and existing beneficiaries, and are facilitated by trained volunteers.

Another valuable resource is MedicareFAQ’s resource center. This online platform offers up-to-date and accurate information on Medicare benefits and options, supported by a team of Medicare experts. MedicareFAQ provides a Medicare rates quoting tool allowing beneficiaries to compare supplemental Medicare options across carriers and states. Moreover, beneficiaries receive ongoing support for their policy’s lifetime from MedicareFAQ’s licensed Medicare agents and Client Care Team.


In summary, the 2025 Medicare Advantage and Part D Rate Announcement brings a host of changes to the healthcare landscape. From increased payments to Medicare Advantage plans in 2025 to updates in the risk adjustment model and new cost-sharing structures, these changes will have a profound impact on beneficiaries, private health plans, and Medicaid services.

As we navigate these changes, resources like the CMS National Training Program and MedicareFAQ’s resource center will play a crucial role in ensuring that all stakeholders are well-equipped to adapt to the new healthcare landscape.

Frequently Asked Questions


How does the elimination of the Part D coverage gap affect beneficiaries?

The elimination of the Part D coverage gap, also known as the ‘donut hole,’ simplifies the prescription drug benefit structure for beneficiaries starting in 2025. This change means that beneficiaries will no longer experience a temporary limit on what the drug plan will cover for prescription drugs. Instead, they will have consistent coverage throughout the year, potentially leading to more predictable and lower out-of-pocket costs for their medications.


→  What changes have been made to the Medicare Advantage risk adjustment model for 2025?

For 2025, the Medicare Advantage risk adjustment model will blend 67% of the risk score from the 2024 model with 33% from the 2020 model. This phased-in approach is expected to change the risk adjustment model.


What is the new out-of-pocket cost cap for Medicare Part D beneficiaries?

The new out-of-pocket cost cap for Medicare Part D beneficiaries is $2,000 annually.


What resources are available for agents and brokers to understand Medicare policies and program changes?

Agents and brokers can access training and education through the CMS National Training Program to better understand Medicare policies and program changes. This program provides valuable resources for staying updated on healthcare topics.


What support services are available for beneficiaries to understand their Medicare coverage options?

Beneficiaries can access personalized, free counseling through State Health Insurance Assistance Programs (SHIPs) and find up-to-date information on Medicare benefits and options from MedicareFAQ’s resource center. These services provide valuable support for understanding Medicare coverage options.

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Russell Noga
( Medicare Expert )

Russell Noga is the CEO of ZRN Health & Financial Services, and head content editor of several Medicare insurance online publications. He has over 15 years of experience as a licensed Medicare insurance broker helping Medicare beneficiaries learn about Medicare, Medicare Advantage Plans, Medigap insurance, and Medicare Part D prescription drug plans.