In January, the Biden administration proposed a 2.23% effective growth rate for Medicare Advantage benchmark payments in 2026, compared to a 0.16% cut from 2024 to 2025. Overall, CMS estimates payment rates will increase by 4.33%, or $21 billion, to MA plans in 2026. The agency will also complete its three-year phase-in of risk adjustment changes.
According to AHIP, a preliminary review of CMS growth rate estimates for 2026 suggests that medical costs for MA enrollees will rise approximately 9% next year.
Becker’s sat down with Dr. Goodrich to discuss Medicare Advantage trends on the Payer Issues podcast, an episode that will air later this month.
Question: By the beginning of April, the Trump administration will issue a final rate notice to determine payment rates for Medicare Advantage plans over the next year. The previous administration outlined a 2.23% payment increase for Medicare Advantage plans. Is that rate notice sufficient for Humana?
Dr. Goodrich: Humana serves more than 6 million seniors who depend on Medicare Advantage coverage. We know that overwhelmingly, seniors like their MA plan, with recent surveys showing that about 95% of beneficiaries are satisfied with their MA plan.
We certainly were happy to see that the advanced rate notice did include a modest funding increase. We’ll have to see what the new administration does, but we also know that over the last few years, we have seen a really significant increase in medical cost trends, and that’s just the cost of treating patients from one year to the next. According to PwC, the medical cost trend increased by 8% in 2023, 7.5% in 2024, and is expected to jump another 8% in 2025, so we’re definitely continuing to see that increase.
We want to be able to continue to provide seniors with the benefits that they need to be able to have the best possible care. So we do have a concern that this increase, after a couple of years of rate cuts, does not fully account for the fact that medical costs and utilization have continued to rise substantially. We think that we’d like to see the rates stabilize and be able to account for that significant increase. I think there’s a lot of work that needs to be done to understand what’s driving all of those increases. We are committed to engaging with the new administration and Congress and working with them to ensure that we have a strong and stable final rate. We believe strongly that the Medicare Advantage program is best for seniors and that seniors need to have a choice between MA plans and also traditional Medicare.
