The Centers for Medicare and Medicaid Services (CMS) recently released the
Calendar Year (CY) 2026 Advance Notice for Medicare Advantage and Part D that would update program payment policies. The proposed policies are projected to result in an average increase of 4.33% – over $21 billion – in Medicare Advantage (MA) rates from 2025 to 2026. However, plan specific rates will vary as the projection factors in several other modifiers, including risk adjustment.
The proposed update would complete CMS’ implementation of the three-year phase-in of its revised payment formula, which includes an updated risk adjustment model and a technical update, aimed at preventing unnecessary payments while ensuring MA beneficiaries can continue to access the care they need. This completed phase-in is projected to save an estimated $10.4 billion in 2026. CMS reports that these changes have not contributed to market instability, noting that MA offerings for Medicare beneficiaries in 2025 remained stable – including premiums, supplemental benefits, and coverage options.
CMS reported that the federal government is projected to spend $9.2 trillion on MA plan payments over the next decade, with $1.3 trillion of that amount allocated to MA rebate dollars for supplemental benefits and premium buy-downs.
The proposal also includes updates to the Part D payment methodology as part of the Inflation Reduction Act (IRA) implementation, and CMS drug price negotiation for the first 10 high-cost drugs starting in 2026. These changes are expected to lower costs for beneficiaries.
Currently, MA plan rates are based on county level fee-for-service (FFS) cost data, which has raised concerns from advocates and stakeholders that this skews MA rates especially as FFS shrinks with increasing MA penetration. In this release, CMS announced that it has been working to calculate the MA risk adjustment model using MA encounter data (which includes demographic, diagnostic, service and other data that informs payment) submitted to CMS by plans and could start phasing in an encounter-based risk adjustment model as early as 2027.
By statute, the rate announcement has to be finalized by the first Monday in April, which is April 7, 2025. Of note, it will be up to the Trump Administration to determine if it will make changes or finalize these proposed policies.
AHCA/NCAL will submit comments on the proposed updates by the official deadline of 11:59pm ET on Monday, February 10, 2025.