CMS’ payment increase of 5.03% in 2026 “will likely significantly support the recovery” of Medicare Advantage plans as they continue to face rising medical costs, according to Fitch Ratings.
Increased government scrutiny, reduced base payments and rising utilization in the last couple of years has put pressure on the program, leading plans to reduce benefits or pull back from unprofitable markets. CMS’ rate hike will increase payments to MA plans by more than $25 billion in 2026.
“While the higher 2026 payment rates do not resolve all the challenges facing MA insurers, they help relieve some pressures from increased healthcare utilization in the program,” Fitch analysts wrote April 14. “Depending on the insurer, the higher rates could enable a mix of enhancement of benefits in certain geographies, mitigation of Star Ratings pressure, or partial margin recovery.”
Fitch expects MA to remain a key focus for insurers, and a clearer picture on the success of course correction measures will become available in the next few weeks as Q1 earnings reports are released.
“In 2025, key watch items include improvements in MA performance, Medicaid rate adequacy, the ongoing implications of the new administration’s agenda, and plateauing interest income benefits from higher interest rates,” analysts wrote.
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