Today, the Centers for Medicare & Medicaid Services (CMS) announced that average premiums, benefits, and plan choices for Medicare Advantage and the Medicare Part D prescription drug program are expected to remain stable in 2025. In 2025, people with Medicare will see improvements thanks to the Inflation Reduction Act and other new enhancements to the programs that protect enrollees, promote continual quality improvement, and increase competition – ultimately improving access for people with Medicare. CMS is committed to ensuring people with Medicare continue to have access to robust MA and Part D benefits and offerings and that their choices remain strong.
Medicare Advantage Remains Stable with Ample Choices in 2025
The Medicare Advantage program continues to provide people with Medicare with ample choices and stable premiums and benefit offerings in 2025.
Medicare Advantage enrollment is projected to grow in 2025. Medicare Advantage enrollment in 2025 is projected to be 35.7 million, as indicated in the 2024 Trustees Report, an increase from 2024. This enrollment represents approximately 51% of all people enrolled in Medicare, compared to approximately 50% for 2024.
Average Medicare Advantage premiums are expected to decrease. The average monthly plan premium for all Medicare Advantage (MA) plans, which includes MA plans with prescription drug coverage, is expected to decrease by $1.23 from $18.23 in 2024 to $17.00 in 2025. Approximately 60% of Medicare Advantage enrollees in their current plan will have a zero-dollar premium in 2025. Furthermore, approximately 83% of enrollees will have the same or lower premium in 2025 if they continue in the same plan. Included in that group of enrollees, about 20% of all enrollees will see their premiums decline in 2025 if they stay in their current plans.
There will continue to be ample choice in Medicare Advantage. As with previous years, access to MA plans with prescription drug coverage will remain nearly universal, with about 99% of people enrolled in Medicare having access to at least one Medicare Advantage health plan in their area. In 2025, 98% of people with Medicare will have access to ten or more MA plan choices when including Special Needs Plans (SNPs). Furthermore, the average number of MA plan choices per county remains robust, with 34 plan offerings for non-SNP MA plans with prescription drug coverage and 65 plan offerings in 2025 for all MA plans (including SNPs).
Medicare Advantage benefit offerings, including supplemental benefits, are stable. Medicare Advantage plans that bid below the benchmark receive rebate dollars, which must be used to offer supplemental benefits, reduce cost sharing, reduce Part D basic premiums and/or reduce the Medicare Part B premium on the individual’s behalf. For 2025, the projected rebates received by Medicare Advantage plans are expected to remain stable, with a slight increase, at an average of $210 per member per month. The number of Medicare Advantage plans with vision (99%), hearing (97%), and dental (97%) supplemental benefits remains broad, with widespread access throughout the market. In addition, all plan offerings for 2025 meet CMS’s robust criteria to prevent major year-over-year cost sharing increases for people with Medicare who stay in the same plan (i.e. Total Benefit Cost Threshold).
More Special Needs Plans (SNPs) will be available. Medicare Advantage plans can offer SNPs to people with Medicare with specific health conditions, certain health care needs, or who also have Medicaid. The number of SNP offerings will grow by 9% between 2024 and 2025 and represents about a quarter of total plans. SNP enrollment in 2025 is projected to grow to 7.2 million, or roughly 28% of Medicare Advantage enrollment.
The number of MA plans offering targeted supplemental benefits for the chronically ill will grow. Medicare Advantage plans are permitted to cover special supplemental benefits for the chronically ill, or SSBCI, which are benefits provided only to certain eligible chronically ill enrollees and must have a reasonable expectation of improving or maintaining health or overall function of the enrollee. In 2025, 111 parent organizations will offer at least one SSBCI benefit (compared to 105 parent organizations in 2024).
CMS continues to test the MA Value-Based Insurance Design Model. For CY 2025, the MA Value-Based Insurance Design (VBID) Model has 62 participating Medicare Advantage Organizations (MAOs) testing the model in 48 states, D.C., and Puerto Rico through 967 plan benefit packages.
Lower Average Total Part D Premiums in 2025
CMS previously announced the Medicare Part D bid information for contract year 2025 to help Part D plan sponsors finalize their Part D and Medicare Advantage offerings. This included the Part D base beneficiary premium of $36.78 and the national average monthly bid amount of $179.45 for 2025. CMS also announced a voluntary demonstration to support implementation of the redesigned Part D benefit and improve stability and address premium variation for people with Medicare Part D in 2025.
Average Part D premiums are projected to decrease. The projected average total Part D beneficiary premium is projected to decrease by $7.45 in 2025, from $53.95 in 2024 to $46.50 in 2025. This Part D average premium does not reflect the Part D premium reductions MA plans with prescription drug coverage apply using MA rebate dollars to further decrease the cost of prescription drug coverage in joint MA and Part D plans. The average stand-alone Part D plan total premium is projected to decrease from $41.63 in 2024 to $40.00 in 2025 (a decrease of $1.63).
After the application of MA rebates, which reflects what people in MA plans with prescription drug coverage will actually pay, the average MA plan with prescription drug coverage Part D total premium is projected to decrease from $15.56 in 2024 to $13.50 in 2025 (a decrease of $2.06).
These averages reflect the cost of Part D coverage for people with Medicare who pay full premiums. These numbers do not include the over 14 million people with Medicare who have a $0 premium through the Extra Help program (also referred to as the Low-Income Subsidy program).
Part D enrollees will have ample low-cost choices. People with Medicare will have access to an average of 15 stand-alone Part D plans per region. This is in addition to the average of 34 MA plans with prescription drug coverage offerings available per county. In 2025, approximately 83% of enrollees in MA plans, which are mostly comprised of plans with prescription drug coverage, will have the same or lower total premium if they continue in the same plan. Included in that group of enrollees, about 20% of all enrollees in MA plans will see their premiums decline in 2025 if they stay in their current plans.
Part D drug coverage remains robust. All Part D plan formularies must pass a rigorous review by CMS. When comparing 2025 Part D formularies to 2024, there are no significant decreases in formulary inclusion or changes to tier placement of drugs. Prior authorization and step therapy rates are stable between CY 2024 and CY 2025.
Overall, the average total Part D premium is projected to decline largely for two reasons:
Premium Stabilization: Beginning in 2024, the Inflation Reduction Act provides a mechanism to limit premium increases for people enrolled in Part D. Specifically, the law limits the growth in the base beneficiary premium (used to calculate the plan-specific basic premium) to a 6% annual increase.
Voluntary Premium Stabilization Demonstration: CMS is conducting a voluntary demonstration to test whether additional premium stabilization and revised risk corridors for stand-alone Part D plans increase the efficiency and economy of services under the Medicare Part D program as the benefit improvements and changes to plan liability for beneficiary costs under the Inflation Reduction Act go into effect. CMS observed more variation in the stand-alone Part D plan bids compared to MA plan bids with prescription drug coverage for 2025 due in part to differences in the drivers of Part D costs in each of these two sectors of the Part D market, including a variety of market-based variables such as the overall benefits that they are able to manage and available strategies used to manage Part D costs. The application of MA rebates further reduces premiums for people enrolled in MA plans with prescription drug coverage. Based on the voluntary elections of Part D plan sponsors, approximately 99% of people with Medicare enrolled in a stand-alone Part D plan in 2024 are currently enrolled in a stand-alone Part D plan offered by a plan sponsor that opted into the demonstration for 2025. The voluntary demonstration for stand-alone Part D plans includes three elements: a $15 uniform reduction in the base beneficiary premium, a year-over-year premium increase limit of $35 on a plan’s total Part D premium, and a change to the risk corridors. The demonstration does not affect the premiums of MA plans with prescription drug coverage.
More information on how Part D premiums are calculated can be found here.
Changes to Part D in 2025 to Make Prescription Drugs More Affordable
The Inflation Reduction Act, also known as the prescription drug law, made several improvements to the basic Part D drug benefit that will reduce costs for people with Medicare, including the annual out-of-pocket spending cap of $2,000 that will apply in 2025. According to the Office of the Assistant Secretary for Planning and Evaluation, the Inflation Reduction Act’s redesign of the Medicare Part D benefit will reduce enrollee out-of-pocket spending by about $7.4 billion annually among more than 18.7 million enrollees (36% of Part D enrollees) in 2025 – nearly $400 per person among enrollees who have savings in out-of-pocket costs under the Inflation Reduction Act.
Part D benefit-related updates that will be in place for 2025 include the following:
Out-of-pocket costs for prescription drugs will be capped. In 2025, individual out-of-pocket spending for covered Part D drugs will be capped at $2,000, meaning that beneficiaries will have no cost sharing above that amount. Comparing the 2024 defined standard benefit to the 2025 defined standard benefit, the average out-of-pocket cost for non-employer, non-low-income beneficiaries who reach the catastrophic phase of the benefit in 2025 will be reduced by more than 50%, a reduction of more than $2,000 per year.
People with Medicare will have the option to spread their prescription drug costs throughout the year. Starting in 2025, Part D plan sponsors will provide their enrollees with the option to participate in the Medicare Prescription Payment Plan, which allows them to pay out-of-pocket prescription drug costs in the form of monthly payments over the course of the plan year instead of all at once to the pharmacy. Part D enrollees who select this payment option will pay $0 to the pharmacy for covered Part D drugs, and Part D plan sponsors will then bill program participants monthly for any cost sharing they incur while in the program.
Cost sharing will continue to be capped at $35 for covered insulins and $0 for Part D recommended adult vaccines. Since 2023, people with Medicare Part D coverage have paid no more than $35 for a month’s supply of each covered insulin product. This benefit expanded to Part B coverage on July 1, 2023. Additionally, since 2023, people with Medicare prescription drug coverage have had access to adult vaccines recommended by the Advisory Committee on Immunization Practices and covered under Part D at no cost.
Supplemental Part D benefits count towards individual out-of-pocket costs. People with Medicare enrolled in a Part D plan that offers enhanced supplemental benefits will have the added advantage of these supplemental benefits counting towards their out-of-pocket costs, resulting in their reaching the $2,000 cap for 2025 sooner.
The Manufacturer Discount Program will replace the Coverage Gap Discount Program. The Coverage Gap Discount Program sunsets effective January 1, 2025, and is replaced by the Manufacturer Discount Program. Under the Manufacturer Discount Program, the manufacturer will typically pay a 10% discount for brand-name drugs and biologics in the initial coverage phase. In the catastrophic phase, the manufacturer will typically pay a 20% discount for brand-name drugs and biologics.
Plans will have increased liability in the Part D benefit, offset by a larger upfront government subsidy. The reinsurance payment amount for 2025 for people with Part D will decrease from 80% of the allowable reinsurance costs incurred after the individual exceeds the annual out-of-pocket threshold to 20% for brand-name drugs and biologics or 40% for generics. Amounts that previously would have been paid as reinsurance will, on average, shift to plans’ upfront calculation of costs and the upfront government subsidy. This change incentivizes plan sponsors to consider their benefit package holistically rather than focusing on the pre-catastrophic portion of the benefit.
Improvements to Medicare Advantage for Beneficiaries in 2025
There will also be improvements to the Medicare Advantage program based on changes by the Biden-Harris Administration that were finalized in April 2024 and will go into effect in 2025. Some examples include:
Improved access to behavioral health. Added network adequacy evaluation standards will be required for a new facility-specialty category for “Outpatient Behavioral Health.” Specialists in this new facility-specialty category include marriage and family therapists and mental health counselors, as well as addiction medicine clinicians, opioid treatment providers, and other behavioral health practitioners who regularly furnish addiction medicine and behavioral health counseling or therapy services covered by Medicare. This means starting in 2025, Medicare Advantage enrollees will have improved access to the outpatient behavioral health providers and services they need to receive essential treatments for mental health and substance use disorders.
Increased prior authorization transparency. Starting in 2025, Medicare Advantage plans must include an expert in health equity on the utilization management committees that are required to oversee all prior authorization and utilization management policies and ensure they are compliant with CMS rules. Also, starting in 2025, the committees must conduct an annual health equity analysis of the plans’ prior authorization policies and procedures to identify any disproportionate delay or denial of access to needed care for enrollees with a disability or limited income and resources.
Guardrails for supplemental benefits. There are new guardrails for special supplemental benefits for the chronically ill, or SSBCI, to ensure that these SSBCI offered by a Medicare Advantage plan are supported by evidence that they have a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee. The guardrails also exist in MA plans participating in the VBID Model. These actions ensure that the federal investment of taxpayer dollars in supplemental benefits will meet enrollee needs.
Improved coordination for people with Medicare and Medicaid. For several years, CMS has been working to improve outcomes and experiences for MA enrollees who are dually eligible for Medicare and Medicaid. Several new policies in 2025 will improve coordination with Medicaid and simplify the processes and written materials that dually eligible enrollees rely on to access services.
Also, in 2025, two changes to special enrollment periods (SEP) will simplify choices and reduce aggressive, confusing marketing tactics toward dually eligible individuals throughout the year. First, dually eligible and other Part D low-income subsidy (LIS) enrolled individuals will now have a once-per-month SEP to enroll in a standalone prescription drug plan. Second, dually eligible individuals will also have a once-per-month SEP to elect an integrated dual eligible special needs plan when the individual also receives Medicaid services through an affiliated managed care plan. This will make it easier for dually eligible individuals to get their Medicare and Medicaid services from one organization instead of two.
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