The move comes after criticism from insurance groups and Democratic lawmakers who feared the fallout from trimming benefits for seniors in a difficult midterm election year.
CMS had proposed a 1.9 percent rate cut in February. But on Monday, agency officials said that changed estimates allowed for them to reverse the cut.
CMS in a statement said that the rate changes would "ensure beneficiaries will continue to have access to a wide array of high quality, high value, and low cost options while making certain that plans are providing value to Medicare and taxpayers."
But critics said it was just the latest unilateral change or delay to the administration's health policies following the botched rollout of healthcare.gov and President Obama's broken promise that consumers could keep current insurance plans despite new regulations.
CMS said the proposed changes would help boost benefits for consumers, while keeping medical costs low.
“The policies announced today will provide improved benefits in Medicare Advantage and the Prescription Drug Plans while keeping costs low for Medicare beneficiaries,” said CMS principal deputy administrator Jonathan Blum.
The Obama administration had sought to save funds for the alternative to the traditional Medicare plan in order to help fund the president's health care reform law.
CMS said that since Obamacare passed, Medicare Advantage premiums had fallen by 10 percent, while enrollment had increased by 30 percent.