Medicare Advantage plans are getting a 5% payment increase, which is above the anticipated 4.3% released in the Advance Notice.
The Centers for Medicare and Medicaid Services issued the rate announcement this week as part of the Medicare Advantage Part C and Part D Payment Policies for 2026.
CMS said it received a wide variety of comments in response to the proposed 2026 MA and Part D Advance Notice.
"We considered applicable comments as we finalized the policies contained in the CY 2026 Rate Announcement," CMS said. "The final policies in the CY 2026 Rate Announcement are projected to result in an increase of 5.06%, or over $25 billion, in MA payments to plans in CY 2026."
WHY THIS MATTERS
The 5% bump is welcome news to insurers that have reported financial headwinds in recent quarters due to high medical utilization, a decrease in payment and fewer bonuses due to lower MA star ratings.
Medicare Advantage star ratings bonus payments are expected to remain the same as last year at -0.69%, according to CMS.
Star ratings updates include providing the list of eligible disasters for adjustment, CMS said.
The Part C and Part D Star Ratings program continues to evolve and align with the Universal Foundation quality measures, CMS said. The agency said it asked for and will consider comments on ways to simplify and refocus the measure set to focus more on clinical care, outcomes and patient experience.
Risk scores are expected to increase by 2.1% due to the underlying coding trend.
Each year for the rate announcement, CMS updates the growth rates to be based on the most current estimate of per capita costs. The effective growth rate for 2026 is 9.04%, compared with 5.93% in the 2026 Advance Notice. This rate reflects the current estimate of the growth in benchmarks that are largely driven by Medicare fee-for-service per capita costs, as estimated by the Office of the Actuary.
Included in the 2026 growth rate estimate is a technical adjustment to the per capita cost calculations related to indirect and direct medical education costs associated with services furnished to MA enrollees. CMS said it would complete the phase-in of this technical adjustment and apply 100% of the adjustment in 2026.
CMS finalized an updated Part C Risk Adjustment Model for the Program of All-Inclusive Care for the Elderly (PACE) Organizations. This affects risk scores.
In the 2025 rate announcement released April 1, 2024, CMS said it would assist PACE organizations to fully transition to encounter data submissions to implement the same CMS-HCC (Hierarchical Condition Category) coding model used for MA organizations.
In January 2024, CMS released technical instructions to PACE organizations on the submission of risk adjustment data to the Encounter Data System (EDS) to begin transitioning all PACE organizations to submitting risk adjustment data to the EDS rather than the Risk Adjustment Processing System (RAPS).
CMS is finalizing a blended risk score for 2026 to further support the transition. For 2026, CMS is beginning this transition by calculating risk scores for PACE organizations as a blend of 10% of the risk score calculated using the 2024 CMS-HCC model and 90% of the risk score calculated using the 2017 CMS-HCC model.
A full transition will further increase payment accuracy and reduce data submission burden on PACE organizations, CMS said.
CMS also finalized an updated Part C Risk Adjustment Model for organizations other than PACE. CMS is completing the three-year phase-in of the 2024 CMS-HCC risk adjustment model. The agency is now calculating 100% of the risk scores using only the 2024 CMS-HCC model.
THE LARGER TREND: REACTION
"We applaud the Trump administration for protecting seniors and fully funding Medicare Advantage," said Mary Beth Donahue, president and CEO of the Better Medicare Alliance. "After two years of Medicare Advantage cuts, this payment rate will provide stability for millions of beneficiaries who have faced plan closures, higher costs, and reduced benefits."
Email the writer: SMorse@himss.org