CMS Finalizes Payment Updates for 2025 Medicare Advantage and Medicare Part D Programs

Finalized policies will continue to ensure the strength and stability of Medicare Advantage and Medicare Part D programs

Today, the Centers for Medicare & Medicaid Services (CMS) finalized the Calendar Year (CY) 2025 Rate Announcement for the Medicare Advantage (MA) and Medicare Part D Prescription Drug (Part D) Programs that updates payment policies for these programs and ensures payment accuracy. The Rate Announcement complements policies in the CY 2025 MA and Part D proposed rule that would strengthen protections for the millions of people who rely on MA and Medicare Part D prescription drug coverage, which will be finalized in the coming days. Under this CY 2025 Rate Announcement, payments from the government to MA plans are expected to increase on average by 3.70 percent, or over $16 billion, from 2024 to 2025. The federal government is projected to pay between $500 and $600 billion in Medicare Advantage payments to private health plans in 2025.

CMS is also finalizing improvements to the structure of the Medicare Part D drug benefit for CY 2025 that will result in lower drug costs for millions of people with Medicare through the concurrent release of the Final CY 2025 Part D Redesign Program Instructions. Thanks to the Inflation Reduction Act, President Biden’s lower-cost prescription drug law, annual out-of-pocket costs will be capped at $2,000 for people with Medicare Part D in 2025, leading to even more savings for people with Medicare Part D in CY 2025.

“Thanks to the President's lower cost prescription drug law, the Inflation Reduction Act, millions of people with Medicare Part D will see even lower costs next year. Your out-of-pocket costs for prescription drugs will be limited to no more than $2,000, keeping more of your money in your pocket,” said HHS Secretary Xavier Becerra. “In addition to improving the Part D drug benefit, we are updating payments to Medicare managed care plans for people who rely on these plans. The Biden-Harris Administration will continue to work on lowering health care costs for all Americans, fulfilling a promise the President made.”

“CMS continues to take steps to maintain the stability of the Medicare Advantage and Part D prescription drug programs,” said CMS Administrator Chiquita Brooks-LaSure. “The finalized policies in the Rate Announcement and the Part D Redesign Program Instructions will make improvements to keep Medicare Advantage payments up-to-date and accurate, lower prescription drug costs, and ensure that people with Medicare have access to robust and affordable health care options.”

The Rate Announcement finalizes annual updates to MA payment growth rates and changes to the MA and Part D payment methodologies to improve payment accuracy. The finalized CY 2025 Rate Announcement incorporates the most recent available fee-for-service payment data through quarter 4 of 2023 and includes the continued phase-in of the updated MA risk adjustment model that was first implemented in 2024 and continued phase-in of updates to the calculation of growth rates related to medical education costs, as well as other technical improvements. Last year, CMS finalized CY 2024 technical and clinical updates to the MA risk adjustment model to keep it up-to-date and improve payment accuracy, as well as updates to the calculation of growth rates to better account for medical education costs. For 2024, MA offerings for people with Medicare remained stable—including premiums, supplemental benefits, and choice.

“We are also pleased to finalize guidance on the new $2,000 out-of-pocket cap for prescription drugs under Medicare Part D in 2025, which was enacted in the President’s prescription drug law. This new provision will provide meaningful additional cost savings and relief to enrollees who have been facing high and rising drug costs,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, MD, Ph.D.

The finalized CY 2025 Rate Announcement may be viewed by going to:
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/announcements-and-documents/2025

A fact sheet discussing the provisions of the finalized CY 2025 Rate Announcement, as well as frequently asked questions, can be viewed here: https://www.cms.gov/newsroom/fact-sheets/2025-medicare-advantage-and-part-d-rate-announcement

The Final CY 2025 Part D Redesign Program Instructions can be found at: https://www.cms.gov/files/document/fact-sheet-final-cy-2025-part-d-redesign-program-instructions.pdf

A fact sheet discussing the provisions of the Final CY 2025 Part D Redesign Program Instructions can be viewed here: https://www.cms.gov/files/document/fact-sheet-final-cy-2025-part-d-redesign-program-instructions.pdf