Medicare Plans’ Administrative Expense in 2025

Slowest Cost Growth in a Decade for Medicare-Focused Plans

PHILADELPHIA--(BUSINESS WIRE)--Medicare-focused plans’ per member administrative costs declined by 0.3% in 2025 versus growth of 3.6% in 2024. This was the slowest growth since 2015. Growth in costs for the cluster of Account and Membership Administration, at 0.5%, was the slowest growth for that cluster since 2021. Median PMPM costs for all products for all reporting Plans was $56.76 PMPM versus $57.21 PMPM last year.

At 8.5% of premium equivalents, health plan administrative costs were lower by 0.8 percentage points from 2024, as premiums grew near double digits.

Administrative costs were affected by a 5.1% decline in staffing ratios, holding product mix constant, an increase in compensation per FTE, an increase in non-labor costs per FTE and a greater propensity to outsource.

The results are summarized in Plan Management Navigator, posted at sherlockco.com/navigator.

This Navigator draws from the 2026 Medicare plan edition of the Sherlock Benchmarks. It analyzes and details results from in-depth surveys of 11 Medicare-focused plans serving 2.1 million Medicare Advantage and Medicare Special Needs Plan members and 15.4 million members in total. Medicare products comprised a median of 35% of plan revenues.

The Sherlock Benchmarks are the health plan industry’s “gold standard” metrics of administrative activities, costs and operational drivers. They reflect 29 consecutive years and more than 1,000 health plan years of experience. Health plans use the Sherlock Benchmarks to determine whether their administrative costs are optimal and to prioritize improvements among numerous specific activities. Other applications include informing strategic corporate planning and cost-benefit analyses.

This year, collectively, Benchmark participants serve 52 million Americans in Medicare and other universes. Other universes include Blue Cross Blue Shield plans, Independent/Provider-Sponsored plans and Medicaid plans. Health plan users of the Sherlock Benchmarks serve nearly 200 million members since June 2023.

Sherlock Company (www.sherlockco.com), based in Gwynedd Valley, Pennsylvania, provides informed solutions for health plan financial management. Since its founding in 1987, Sherlock Company has been known for its impartiality and technical competence in service to its clients.