Medicare Advantage Plans Face Narrowing Margins as Health Costs Rise by 9.6%
Medicare Advantage (MA) plans experienced a significant increase in health benefit costs, rising by a median of 9.6% in 2025. This surge in costs occurred while administrative expenses remained largely flat, leading to narrowing margins for these plans. The findings, from Sherlock Company's 2026 Medicare benchmark edition, are based on surveys of 11 Medicare-focused health plans covering 2.1 million MA and Special Needs Plan members. These plans collectively serve 15.4 million members, with Medicare products accounting for a median of 35% of their revenues. The report highlights that MA plans now cover over half of all eligible Medicare beneficiaries in the U.S. The administrative costs per member declined by 0.3% in 2025 on a constant-mix basis, marking the slowest rate of change since 2015. This reduction in the administrative cost ratio was primarily due to near double-digit premium growth, which expanded the denominator while administrative expenses stayed consistent. The health benefit ratio for conti...
