US boosts Medicare payments to insurers by over $25 billion

Ike Swetlitz and John Tozzi, Bloomberg News on Apr 7, 2025

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The U.S. government will pay private Medicare Advantage plans more money next year than it originally proposed in January, a major win for insurance companies that have faced increasing scrutiny in Washington.

The shares of insurers surged on the decision. UnitedHealth Group Inc. stock rose as much as 6.2%, CVS Health Corp. stock jumped as much as 8.5% and Humana Inc. stock soared as much as 16% after markets closed in New York.

Medicare Advantage plans will see payments increase by an average of 5.06%, more than double the rate the government proposed in January. The increase means the government will pay private Medicare insurers at least $25 billion more next year than current rates. That’s a huge improvement over rates first proposed in the final days of the Biden administration.

The industry has been awaiting Monday’s decision about payment rates as an early look at the White House’s approach to the program. President Donald Trump has been seen as more favorable to Medicare Advantage, but his nominee to run the Centers for Medicare and Medicaid Services, Mehmet Oz, said at a Senate hearing in March that some plans were engaging in fraud to boost payments.

Health insurance companies had been pushing for higher levels, with a lobbying group writing in February that the proposed reimbursement rates didn’t keep up with the rise in health care costs.

In the past two years, the U.S. has tightened payments to Medicare Advantage plans and tried to restrict some tactics that insurers use to boost their revenue. Some health insurers have slashed benefits and retreated from less profitable markets in response.

Over half of Medicare patients, or more than 30 million people, are enrolled in private Medicare Advantage plans, and the government paid them about $494 billion last year. Watchdogs and regulators have accused companies of inflating payments by saying patients are sicker than they actually are. The Medicare Payment Advisory Commission, a nonpartisan congressional adviser, estimates the program will cost $84 billion more this year than it would cost to cover the patients in traditional Medicare.