Medicare Advantage plans get larger pay bump than proposed

Medicare Advantage plans will receive a 5.06% payment increase next year, the Centers for Medicare and Medicaid Services announced Monday.

The 2026 rate notice is the first Medicare payment policy CMS has enacted since President Donald Trump returned to the White House and prompted the health insurance sector and investors to expect friendlier treatment. On Medicare Advantage payments for 2026, at least, that's what they got.

Related: CMS punts on Medicare Advantage AI prior authorization, marketing

CMS proposed a 4.33% Medicare Advantage rate hike in January while President Joe Biden's team still ran the agency. The Biden administration previously slightly reduced Medicare Advantage payments for 2025.

The higher rates in the final policy for next year are "largely attributable to an increase in the effective growth rate," CMS said in a news release. The agency previously projected a 5.93% effective growth rate but now expects it to be 9.04%.

“CMS is committed to expanding access to affordable, high-quality care through Medicare Advantage, while also implementing measures to safeguard beneficiaries and taxpayers from waste, fraud and abuse. These ongoing improvements support a sustainable program that benefits both current and future Medicare recipients,” the agency said in the news release.

The agency will complete a three-year implementation of its new risk-adjustment system that originated during the Biden administration, which some Medicare Advantage insurers characterize as a pay cut. The industry's dire warnings about premium hikes and benefit cuts have not come to pass, justifying the policy, according to CMS.

The rate notice also spells out that CMS will continue adapting the Star Ratings quality measurement and bonus program to its Universal Foundation, a set of quality benchmarks the agency is applying across programs. CMS also is scrapping the Biden-era Health Equity Index and introducing the “Excellent Health Outcomes for All" award.

In addition, CMS will broaden the scope of natural disasters and emergencies that qualify Medicare Advantage carriers for leniency in quality assessments. GuideWell subsidiary Florida Blue sued CMS in December asserting its star ratings were unfairly reduced after flooding in Broward County hampered operations in 2023.

“This payment rate will provide stability for millions of beneficiaries who have faced plan closures, higher costs and reduced benefits,” Better Medicare Alliance President and CEO Mary Beth Donahue said in a news release.

The 2026 rate notice was hotly anticipated not only for its contents but for what it might signal about the Trump administration's approach to Medicare Advantage after the Biden administration took a firm hand for four years.

There had been little to go on so far. Trump has been back in office for less than three months, Health and Human Services Secretary Robert F. Kennedy Jr. has been on the job for less than two months, and the Senate confirmed Dr. Mehmet Oz as CMS administrator only four days ago.

The administration's actions on Medicare Advantage prior to the rate notice had been relatively minor. For example, the Justice Department has continued to defend several Biden policies in lawsuits against insurance companies.

CMS issued a final rule on Friday making technical changes to the program and dropping Biden's plan to have Medicare and Medicaid cover glucagon-like peptide-1 drugs, or GLP-1s, such as Ozempic for weight loss. The agency punted on finalizing Biden-era proposals to strengthen oversight of Medicare plan marketing, toughen network adequacy requirements and regulate the use of artificial intelligence for prior authorizations.