CMS will increase payments to Medicare Advantage plans by more than $25 billion in 2026.
The agency published the final rate announcement for MA plans April 7. According to CMS, MA plans can expect a payment increase of 5.06% in 2026, more than double what the previous administration proposed.
In the final days of the Biden administration, CMS proposed a 2.23% funding increase for plans. The payment hike is significantly more than Medicare Advantage plans received in 2023 and 2024, which insurers said amounted to a cut in rates.
Insurers said the proposed increase was not high enough to offset rising medical costs among the MA population.
The agency will continue the final year of the phase-in of risk-adjustment changes in 2026. The changes shift MA’s diagnosing coding from ICD-9 to ICD-10 and remove certain codes from the hierarchical condition categories model.
The boost in payments is primarily due to an increase in the effective growth rate for MA costs in 2025, according to an April 7 CMS news release. The effective growth rate in the final notice is 9.04%, up from 5.93% in the advance notice.
The new growth rate incorporates fee-for-service expenses and numbers from the fourth quarter of 2024 that were not available when the advance notice was published, the agency said.
Share prices for major MA insurers, including Humana, UnitedHealth Group and CVS Health, rose after the rate announcement, Bloomberg reported.
Insurer groups praised the decision. Mary Beth Donahue, president of the pro-MA Better Medicare Alliance, said, “We applaud the Trump administration “for protecting seniors and fully funding Medicare Advantage.”
“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,” Ms. Donahue said.
Ceci Conolly, president of the Alliance of Community Health Plans, said the group is “pleased” CMS will complete the phase-in of risk adjustment changes.
“The Alliance of Community Health Plans commends the Trump administration for finalizing policies in the 2026 Medicare Advantage and Part D rate notice that reflect higher care delivery costs and for taking another step toward reining in aggressive risk adjustment to boost competition,” Ms. Connolly said in an April 7 statement.
