Medicare Part B Premium Increase Drives $14B Revenue Boost Amid Rising Costs

Medicare Costs Climb Again in the Coming Year

What Insurance Professionals Need to Know About the New Part B and Part A Increases

Medicare is heading into another year of rising costs, and the latest announcement from the Centers for Medicare & Medicaid Services (CMS) signals a major financial shift for both beneficiaries and the insurance market. CMS has confirmed a sizable increase in Medicare Part B premiums that will generate an estimated $14 billion in additional revenue for the program.

At a time when demographic pressures and post-pandemic healthcare utilization continue to reshape the market, the insurance industry is preparing for widespread implications across Medicare Advantage, Medigap, and employer retiree segments.

“Premium changes like this reflect deep structural pressures in the Medicare system, not just short term cost spikes.”
Attributed to a federal health policy analyst

Why Premiums Are Rising

This year’s increase is rooted in long-term shifts rather than isolated issues. CMS cites several contributing trends: an aging population, higher prevalence of chronic conditions, and sustained increases in outpatient utilization since the pandemic. As a result, Medicare actuaries expect broad cost growth across multiple Part B categories.

Outpatient hospital care and Medicare Advantage are forecast to grow the fastest, at 8.9 percent and 8.7 percent, respectively. Hospitals acquiring physician practices have driven more services into higher priced outpatient settings, while Medicare Advantage continues to face scrutiny over taxpayer costs tied to coding intensity among private plans.

In a notable contrast, spending on physician-administered drugs is projected to fall by nearly 30 percent, likely due to the broader adoption of lower cost biosimilars.

“The shift toward biosimilars is one of the few bright spots in the spending outlook.”
Attributed to a health economics researcher

One Section in Bullet Points

Key Cost and Utilization Trends for the Coming Year

• Outpatient hospital spending projected to grow 8.9 percent

• Medicare Advantage spending expected to grow 8.7 percent

• Physician-administered drug spending forecast to decline nearly 30 percent

• CMS estimating $14 billion in additional revenue from Part B premium increases

• Rising chronic disease rates contributing to sustained utilization pressure

Part A Costs Also on the Rise

It is not just Part B making headlines. Part A premiums, which cover inpatient hospital care and related services, will rise more than 9 percent to $565 per month for those who pay the full premium. Most beneficiaries avoid this cost thanks to work history credits, but higher deductibles and coinsurance for extended hospital stays will directly increase out-of-pocket costs for many enrollees.

These changes land at a time when healthcare affordability remains a national concern. A growing number of U.S. adults report delaying or avoiding care due to cost, and rising Medicare expenses may compound those challenges, particularly for fixed-income households.

Policy Pressures Are Building

The rising cost trajectory has put policymakers on alert. Congress is already weighing potential actions to curb premium spikes in Affordable Care Act marketplace plans, and Medicare’s rising costs add urgency to broader affordability discussions.

CMS intends to step up oversight as well. The agency plans to accelerate Medicare Advantage audits, address review backlogs, and invest in additional technology and coding professionals. These efforts come as lawmakers continue to question the role of pharmacy benefit managers, with renewed reform discussions anticipated after future legislative work.

What This Means for the Insurance Industry

For carriers, brokers, and industry strategists, the environment ahead is defined by volatility and increased regulatory scrutiny. Higher Part B premiums could push more beneficiaries to explore Medicare Advantage plans for perceived cost stability, even as those plans face their own oversight challenges.

Meanwhile, Medigap and employer retiree plans may see growing interest from consumers looking to manage unpredictable medical expenses.

The balance between program solvency, beneficiary affordability, and responsible oversight remains a tightrope for CMS and Congress. The insurance industry will continue to play a central role as seniors navigate these shifting cost structures and look for coverage pathways that fit both their health needs and their budgets.

The coming year will test how well the industry adapts to these converging cost, utilization, and policy pressures within an already complex Medicare landscape.