Medicare Advantage Plans Getting Higher Rates For 2026
The 2026 Medicare Advantage (MA) Final Notice was released this evening by the Centers for Medicare and Medicaid Services (CMS). After the Advance Notice in January, MA plans complained about a paltry rate hike of 2.23%. They asked the Trump administration to intervene and either tweak the risk model change phase-in or the one related to medical education reductions.
Well, the Trump administration didn’t have to really do anything to drive up the 2026 rate. CMS did not change any policies on rates between the advance notice and final one. But the rate hike surged to 5.06% because the rate setting growth factor increased dramatically between the two notices. The change is projected to result in an increase of 5.06%, or over $25 billion, in MA payments to plans in CY 2026.
MA plans and actuaries warned that trends in the program were as high as 9% due to soaring utilization. Indeed, as all of the 2024 claims rolled in (especially Q4) between the first and second notice, the Effective Growth Rate in the rate formula went from 5.93% to 9.04%. The Effective Growth Rate captures per-capita Medicare cost increases. CMS says there is a 10.72% increase in per-capita costs for MA and 8.81% in traditional Medicare.
MA plans have to be happy overall. With the growth rate going up so much, it would have been very hard for the administration to make policy changes in addition to boost the rate higher. It would have been hit with attacks from providers who see either cuts or low hikes. For sure, providers will have issues anyway.
The trend is what the MA plans deserve due to the high cost trends. But, while it is relief, it still means some challenges in 2026 due to robust costs and anticipated further increases.
The development could, though, play a big part in mitigating further benefit reductions, cost-sharing increases, and geographic contractions. As well, it helps smooth financial recovery efforts. A 2.23% hike would have been a disaster for the industry.
Another interesting presentation change: the Biden administration always factored risk score trends at MA plans as part of the overall rate announcement. MA plans hated this as they think it is a recognition of higher risk from year to year — not a true part of a hike. The Trump administration did not include it in its table below (simply noting it in a footnote).
The final notice also stated that CMS will continue adapting the Star Ratings quality measurement and bonus program to the Universal Foundation of measures to streamline measurement across programs. CMS also will preserve the “Health Equity Index” Reward intact but change its name to the “Excellent Health Outcomes for All” Award. Given its effort to expunge diversity, equity, and inclusion from government, some wondered if the Trump administration would simply remove the HEI and leave the Reward Factor in place. The main obstacle was that the HEI as compared with the Reward Factor saves $670M in 2028, growing to $1.08 billion in 2031.
In other news, a new research study finds that intensive coding by MA plans raised enrollees’ risk scores and may have allowed plans to collect $33 billion more in the studied year compared with traditional Medicare. Coding differences that year helped push the average MA enrollee’s risk score 18.5% higher. The researchers found that MA plans also varied widely in their coding intensity and resulting revenue. UnitedHealthcare was singled out as a huge outlier.
I don’t always agree with all these analyses as there are reasons for lower risk scores in FFS tied to physician behavior. But I do think reform is coming and justifiably. The researchers note the impact of health risk assessments and manual chart reviews, which should be reformed.
In addition, the Congressional Budget Office (CBO) estimates that the Medicare Part A Trust Fund’s depletion date is now 2052, seventeen years later than its last report. CBO found that enrollees aren’t seeking hospital care as often as they used to, leading to savings. Medicare’s trustees will release their own findings this spring.
CMS documents: https://www.cms.gov/newsroom/fact-sheets/2026-medicare-advantage-and-part-d-rate-announcement and https://www.cms.gov/newsroom/press-releases/cms-finalizes-2026-payment-policy-updates-medicare-advantage-and-part-d-programs
Additional articles: https://www.fiercehealthcare.com/payers/cms-finalizes-506-medicare-advantage-benchmark-increase and https://insidehealthpolicy.com/daily-news/cms-gives-ma-plans-506-pay-bump-2026-finalizes-phase-risk-adjustment-model and https://www.medpagetoday.com/publichealthpolicy/medicare/115000 and https://www.beckershospitalreview.com/finance/cms-grants-medicare-advantage-25b-funding-increase/ and https://kffhealthnews.org/morning-breakout/medicare-has-enough-in-trust-fund-to-last-an-extra-17-years-cbo-reports/
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#medicareadvantage #star #quality #rates #hei #healthequity #medicare #riskadjustment
https://www.modernhealthcare.com/policy/medicare-advantage-pay-rate-2026
